Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698754665449.pdf (New Zealand)
Section EX 50(8)(a): substituted (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 94(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EX 50(8)(b): substituted (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 94(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EX 50(8)(c): substituted (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 94(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EX 50(8)(d): substituted (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 94(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
The list of deﬁned terms was amended, as from 1 April 2007, by section 75(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “cost method”, “exempt income”, “fair dividend rate method”, “qualifying trust”, “settlor”, “superannuation scheme”, and “trustee”.
EX 51 Consequences of changes in method (1) Changes between cost-based methods and look-through methods Subsection (2) applies if a person holding an attributing inter- est in a FIF changes the calculation method for calculating FIF income or loss from the interest— 1109 Part E s EX 51 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) from 1 of the 4 cost-based calculation methods (the comparative value method, or the deemed rate of re- turn method, or the fair dividend rate method, or the cost method) to either of the look-through calculation methods (the accounting proﬁts method or the branch equivalent method): from either of the look-through calculation methods to 1 of the 4 rust-based calculation methods.
Treatment as sale for market value The person is treated as having— (a) disposed of the interest to an unrelated person imme- diately before the start of the ﬁrst accounting period to which the new method applies; and reacquired it immediately after the start of the period; and received for the disposal and paid for the reacquisition an amount equal to the interest’s market value at the time.
(b) (c) Changes from comparative value method or fair dividend rate method to cost method or deemed rate of return method If a person holding an attributing interest in a FIF changes from either of the comparative value method and the fair dividend rate method to either of the cost method and the deemed rate of return method for calculating the FIF income or loss from the interest, the person is treated as having— (a) disposed of the interest to an unrelated person immedi- ately before the start of the ﬁrst income year to which the new method applies; and reacquired the interest immediately after the start of the income year; and received for the disposal and paid for the reacquisition an amount equal to the market value of the interest at the time of the disposal.
(b) (c) Changes from cost method or deemed rate of return method to comparative value method or fair dividend rate method If a person holding an attributing interest in a FIF changes from either of the cost method and the deemed rate of return method to either of the comparative value method and the fair dividend (2) (3) (4) 1110 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EX 51 rate method for calculating the FIF income or loss from the interest, the person is treated as having— (a) disposed of the interest to an unrelated person immedi- ately before the start of the ﬁrst income year to which the new method applies; and reacquired the interest immediately after the start of the income year; and received for the disposal and paid for the reacquisition an amount equal to,— (i) (b) (c) if the person changes from the cost method, what would have been the interest’s opening value under section EX 45B if the person had applied the cost method for the income year; or if the person changes from the deemed rate of return method, the interest’s closing book value under section EX 45(7) for the preceding income year.
(ii) (5) Changes between comparative value method and fair dividend rate method If a person holding an attributing interest in a FIF changes from either of the comparative value method and the fair dividend rate method to the other of the comparative value method and the fair dividend rate method for calculating the FIF income or loss from the interest, the person is treated as having— (a) disposed of the interest to an unrelated person immedi- ately before the start of the ﬁrst income year to which the new method applies; and reacquired the interest at the start of the income year; and received for the disposal and paid for the reacquisition an amount equal to the market value of the interest at the time of the disposal.
(b) (c) Deﬁned in this Act: accounting period, accounting proﬁts method, amount, at- tributing interest, branch equivalent method, calculation method, comparative value method, cost method, deemed rate of return method, fair dividend rate method, FIF, FIF income, income year, loss, market value Compare: 1994 No 164 s CG 24 Subsection (1)(a) and (b) was substituted, as from 1 April 2007, by section 76(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
See section 76(4) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.

1111 Part E s EX 52 Income Tax Act 2004 Reprinted as at 29 August 2011 Subsections (3) and (4) were substituted, as from 1 April 2007, by section 76(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

See section 76(4) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
Section EX 51(4)(c)(ii): amended (with effect from 1 April 2007), on 19 De- cember 2007, by section 95(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EX 51(5) heading: added (with effect from 1 April 2007), on 19 De- cember 2007, by section 95(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EX 51(5): added (with effect from 1 April 2007), on 19 December 2007, by section 95(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

The list of deﬁned terms was amended, as from 1 April 2007, by section 76(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “cost method” and “fair dividend rate method”.
Cases of entry into and exit from FIF rules EX 52 Migration of persons holding FIF interests Leaving New Zealand Subsection (2) applies if a person— (a) (b) (c) ceases to be resident in New Zealand; and holds an attributing interest in a FIF at the time; and for the period before the change of residence, calculates FIF income or loss from the interest using— the comparative value method: (i) the deemed rate of return method: (ii) the fair dividend rate method: (iii) the cost method.
(iv) Treatment as sale at market value The person is treated as— (a) having sold the interest immediately before the change of residence for an amount equal to its market value at the time; and not holding the interest when not resident in New Zealand (unless they become resident again and sub- sections (3) and (4) apply).
(b) Coming to New Zealand Subsection (4) applies if a person— (a) is a non-resident or a transitional resident; and (1) (2) (3) 1112 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EX 52 (ab) becomes a New Zealand resident who is not a transi- (b) (c) tional resident; and holds an attributing interest in a FIF at the time; and for the period after the change of residence or status, calculates FIF income or loss from the interest using— (i) (ii) (iii) (iv) the comparative value method: the deemed rate of return method: the fair dividend rate method: the cost method.
(4) (5) (6) Treatment as purchase at market value The person is treated as— (a) (b) having bought the interest immediately after the change of residence or status for an amount equal to its market value at the time; and not holding it when the person is a transitional resident or not a New Zealand resident (unless they had previ- ously ceased being resident and subsections (1) and (2) applied).
Look-through calculation method: relevance of income interest rules Subsection (6) applies if a person— (a) ceases to be— (i) (ii) (iii) a New Zealand resident who is not a transitional resident, and becomes a non-resident: a non-resident, and becomes a New Zealand resi- dent who is not a transitional resident: a transitional resident, and becomes a New Zealand resident who is not a transitional resi- dent; and (b) (c) holds an attributing interest in a FIF at the time; and for the accounting period in which the change occurs, uses the accounting proﬁts method or branch equivalent method to calculate FIF income or loss from the interest.
Income interest rules The income interest rule in section EX 16 is relevant to the calculation of the amount of FIF income or loss for the period.
Deﬁned in this Act: accounting period, accounting proﬁts method, amount, at- tributing interest, branch equivalent method, calculation method, comparative value method, cost method, deemed rate of return method, fair dividend rate 1113 Part E s EX 52 Income Tax Act 2004 Reprinted as at 29 August 2011 method, FIF, FIF income, income interest, loss, market value, New Zealand, New Zealand resident, non-resident, resident in New Zealand, , transitional resi- dent Compare: 1994 No 164 ss CG 16(4), CG 23(2), (3) Subsection (1)(c) was substituted, as from 1 April 2007, by section 77(1) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
See section 77(8) of that Act for the application of this amendment for in- come years beginning on or after 1 April 2007.

Subsection (3)(a) was substituted, as from 1 October 2005, by section 100(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year cor- responding to the 2005–06 tax year.
See section 100(5) and (6) of that Act as to the application of this amendment.

Subsection (3)(ab) was inserted, as from 1 October 2005, by section 100(1) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corres- ponding to the 2005–06 tax year.

See section 100(5) and (6) of that Act as to the application of this amendment.
Subsection (3)(c) was amended, as from 1 October 2005, by section 100(2) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3) by substituting “change of residence or status” for “change of residence” with application for: a person who becomes a transi- tional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year.

See section 100(5) and (6) of that Act as to the appli- cation of this amendment.
Subsection (3)(c) was substituted, as from 1 April 2007, by section 77(2) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

See section 77(8) of that Act for the application of this amendment for in- come years beginning on or after 1 April 2007.
Subsection (4)(a) was amended, as from 1 October 2005, by section 77(3)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “residence or status” for “residence” with application as from the 2005-06 income year.
Subsection (4)(b) was amended, as from 1 October 2005, by section 77(3)(b) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “when the person is a transitional resident or not a New Zealand resident” for “when not resident in New Zealand” with application as from the 2005-06 income year.
Subsection (5)(a) was substituted, as from 1 October 2005, by section 100(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year cor- responding to the 2005–06 tax year.

See section 100(5) and (6) of that Act as to the application of this amendment.
Subsection (5)(c) was amended, as from 1 April 2005, by section 77(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by 1114 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EX 53 substituting “branch equivalent method” for “deemed rate of return method” with application as from the 2005-06 income year.
The list of deﬁned terms was amended, as from 1 October 2005, by section 100(4)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Mis- cellaneous Provisions) Act 2006 (2006 No 3) by inserting “New Zealand resi- dent” with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year.

See section 100(5) and (6) of that Act as to the application of this amend- ment.
The list of deﬁned terms was amended, as from 1 October 2005, by section 100(4)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Mis- cellaneous Provisions) Act 2006 (2006 No 3) by inserting “non-resident” with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year.

See section 100(5) and (6) of that Act as to the application of this amendment.
The list of deﬁned terms was amended, as from 1 October 2005, by section 100(4)(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Mis- cellaneous Provisions) Act 2006 (2006 No 3) by omitting “resident of New Zealand” with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year.

See section 100(5) and (6) of that Act as to the application of this amendment.
The list of deﬁned terms was amended, as from 1 October 2005, by section 100(4)(d) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscel- laneous Provisions) Act 2006 (2006 No 3) by inserting “transitional resident” with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year.

See section 100(5) and (6) of that Act as to the application of this amendment.
The list of deﬁned terms was amended, as from 18 December 2006, by section 77(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “branch equivalent method” with application as from the 2005-06 income year.

The list of deﬁned terms was amended, as from 1 April 2007, by section 77(6) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “cost method” and “fair dividend rate method”.
EX 53 Changes in application of FIF exemptions (1) Exemptions ceasing to apply Subsections (2) to (4) apply if a person— (a) (b) holds rights in 1 of the categories of rights described in section EX 30(2) to (4); and either— (i) the rights become an attributing interest in a FIF because 1 of the exemptions in sections EX 32 to EX 37 ceases to apply; or 1115 Part E s EX 53 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) the person starts having FIF income or loss from the rights because they incur a cost on an at- tributing interest in a FIF and exceed the $50,000 threshold in sections CQ 5(1)(d) or (db) (When FIF income arises) and DN 6(1)(d) or (db) (When FIF loss arises).
Market value for cost-based methods If the person uses the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method to calculate FIF income or loss from the rights for the period following the change, the person is treated as having— disposed of the rights to an unrelated person immedi- (a) ately before the change; and reacquired them immediately after the change; and received for the sale and paid for the repurchase an amount equal to their market value at the time.
(b) (c) Calculation of reduction in FIF income or loss If the change occurs during an accounting period of the FIF and the person uses the accounting proﬁts method or the branch equivalent method to calculate FIF income or loss from the rights for that period, the FIF income or loss is reduced by subtracting the amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) FIF income or loss is the FIF income or loss of the per- son from the rights for the period before allowing for the reduction: days before change is the number of complete days in the period before the change occurs: days in period is the number of days in the period.
(b) (c) Exemptions applying Subsections (6) to (8) apply if a person— (a) (b) holds an attributing interest in a FIF; and either— (2) (3) (4) (5) 1116 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EX 53 (i) (ii) the interest ceases to be an attributing interest in a FIF because 1 of the exemptions in sections EX 32 to EX 37 starts to apply; or the person ceases having FIF income or loss from the interest because they dispose of an attribut- ing interest in a FIF and fall below the $50,000 threshold in sections CQ 5(1)(d) or (db) (When FIF income arises) and DN 6(1)(d) or (db) (When FIF loss arises).
(6) (7) (8) Market value for cost-based methods If the person uses the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method to calculate FIF income or loss from the interest for the period before the change, the person is treated as having— (a) disposed of the interest to an unrelated person immedi- ately before the change; and reacquired it immediately after the change; and received for the sale and paid for the repurchase an amount equal to its market value at the time.
(b) (c) Calculation of reduction in FIF income or loss If the change occurs during an accounting period of the FIF and the person uses the accounting proﬁts methods or the branch equivalent method to calculate FIF income or loss from the interest for that period, the FIF income or loss is reduced by subtracting the amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) (b) FIF income or loss is the FIF income or loss of the per- son from the interest for the period before allowing for the reduction: days after change is the number of complete days in the period after the change occurs: (c) days in period is the number of days in the period.
Deﬁned in this Act: accounting period, accounting proﬁts method, amount, at- tributing interest, branch equivalent method, comparative value method, cost 1117 Part E s EX 53 Income Tax Act 2004 Reprinted as at 29 August 2011 method, deemed rate of return method, fair dividend rate method, FIF, FIF in- come, loss, market value Compare: 1994 No 164 s CG 23(7), (8) Subsection (1) was amended, as from 1 April 2005, by section 78(1)(a) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “Subsections (2) to (4)” for “Subsections (2) and (3)” with application as from the 2005-06 income year.
Subsection (1)(b)(ii) was amended, as from 1 April 2007, by section 78(1)(b)(i) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “or (db)” after “CQ 5(1)(d)”.

See section 78(10) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
Subsection (1)(b)(ii) was amended, as from 1 April 2007, by section 78(1)(b)(ii) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “or (db)” after “DN 6(1)(d)”.

See section 78(10) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
Subsection (2) before paragraph (a) was amended, as from 1 April 2007, by section 78(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method” for “the comparative value method or deemed rate of return method”.

See section 78(10) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
Subsection (3) was amended, as from 1 April 2005, by section 78(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “branch equivalent method” for “deemed rate of return method” with application as from the 2005-06 income year.
Subsection (5) was amended, as from 1 April 2005, by section 78(4)(a) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “Subsections (6) to (8)” for “Subsections (2) to (4)” with application as from the 2005-06 income year.

Subsection (5)(b)(ii) was amended, as from 1 April 2007, by section 78(4)(b)(i) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “or (db)” after “CQ 5(1)(d)”.
See section 78(10) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.

Subsection (5)(b)(ii) was amended, as from 1 April 2007, by section 78(4)(b)(ii) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “or (db)” after “DN 6(1)(d)”.

See section 78(10) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
Subsection (6) before paragraph (a) was amended, as from 1 April 2007, by section 78(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method” for “the comparative value method or the deemed rate of return method”.

See sec- tion 78(10) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
1118 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EX 54 Subsection (6)(b) was amended, as from 1 April 2005, by section 78(6) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “reacquired” for “repurchased” with application as from the 2005-06 income year.
Subsection (7) was amended, as from 1 April 2005, by section 78(7) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “branch equivalent method” for “deemed rate of return method” with application as from the 2005-06 income year.
The list of deﬁned terms was amended, as from 1 April 2007, by section 78(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “branch equivalent method”, “cost method” and “fair divi- dend rate method”.

EX 54 FIFs migrating from New Zealand (1) (2) (3) (4) When this section applies This section applies when a person holds rights that become an attributing interest in a FIF because an entity becomes a FIF.
Treatment as sale and repurchase The person is treated as having— (a) (b) (c) disposed of the interest immediately before the change to an unrelated person; and repurchased it immediately after the change; and received for the sale and paid for the repurchase an amount equal to the market value of the interest at the end of the business day on which the change occurred.
Calculation of reduction in FIF income or loss If the change occurs during an accounting period of the FIF and the person uses the accounting proﬁts method or branch equivalent method to calculate FIF income or loss from the rights for that period, section EX 25 does not apply and the FIF income or loss is reduced by subtracting the amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) FIF income or loss is the FIF income or loss of the per- son from the rights for the period before allowing for the reduction: 1119 Part E s EX 54B Income Tax Act 2004 Reprinted as at 29 August 2011 (b) days before change is the number of complete days in the period before the change occurs: (c) days in period is the number of days in the period.
Deﬁned in this Act: accounting period, accounting proﬁts method, amount, at- tributing interest, branch equivalent method, business, FIF, FIF income, loss, market value, New Zealand Compare: 1994 No 164 ss CG 14(1)(ca), CG 23(7A)-(7D) EX 54B FIF rules ﬁrst applying to interest for income year beginning on or after 1 April 2007 (1) (2) When this section applies This section applies when a person has rights in a FIF that— for the period ending on a day (the preceding day) (a) are— (i) (ii) not an attributing interest: an attributing interest for which the person does not have FIF income or loss: rights for which the person is a share supplier in a returning share transfer; and (iii) (b) for the period beginning on the day (the application day) following the preceding day are an attributing in- terest for which the person has FIF income or loss.
Disposal and acquisition The person is treated as having— (a) (b) (c) disposed of the interest to an unrelated person immedi- ately before the application day; and reacquired the interest at the beginning of the applica- tion day; and received for the disposal and paid for the reacquisition an amount equal to the market value of the interest at the time of the disposal.
Payment of tax liability arising from transition (3) A person who is liable to pay an amount of income tax (the tax amount) because of the disposals in an income year, and related acquisitions, treated as occurring under this section— (a) may satisfy the liability by making payments to the Commissioner of at least— 1120 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EX 54B (i) (ii) (iii) one third of the tax amount, in the income year following the income year in which the disposals are treated as occurring; and one half of the balance of the tax amount remain- ing owing after the payments made under sub- paragraph (i), in the second income year follow- ing the income year in which the disposals are treated as occurring; and the balance of the tax amount remaining owing after the payments made under subparagraphs (i) and (ii), in the third income year following the income year in which the disposals are treated as occurring: (b) is not liable to pay any penalty or interest for which the entity would otherwise be liable for an inaccuracy in an estimate, or shortfall in the payment, of provisional tax to the extent that the inaccuracy or shortfall arises because of the disposals.
Deﬁned in this Act: attributing interest, FIF, FIF income, income year, loss, portfolio calculation period, revenue account property Section EX 54B was inserted, as from 1 April 2007, by section 79(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

See section 79(2) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
Section EX 54B(1) heading: substituted (with effect from 1 April 2007), on 19 December 2007, by section 96(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EX 54B(1): substituted (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 96(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EX 54B(2)(b): substituted (with effect from 1 April 2007), on 19 De- cember 2007, by section 96(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EX 54B(3): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 96(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EX 54B(3)(a)(i): amended (with effect from 1 April 2007), on 19 De- cember 2007, by section 96(3)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section EX 54B(3)(a)(ii): amended (with effect from 1 April 2007), on 19 De- cember 2007, by section 96(3)(c) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
1121 Part E s EX 55 Income Tax Act 2004 Reprinted as at 29 August 2011 Section EX 54B(3)(a)(iii): amended (with effect from 1 April 2007), on 19 December 2007, by section 96(3)(d) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EX 54B(3)(b): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 96(3)(e) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
EX 55 Death of persons holding FIF interests [Repealed] Section EX 55 was repealed, as from 1 October 2005, by section 49 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
Measurement of cost EX 56 Measurement of cost When this section applies (1) This section applies when the cost of a person’s attributing interest in a FIF is being measured for the purposes of— (a) the natural person $50,000 exemption in sections CQ 5(1)(d) or (db) (When FIF income arises) and DN 6(1)(d) or (db) (When FIF loss arises): the comparative value method: the deemed rate of return method.

the fair dividend rate method: the cost method.


(b) (c) (d) (e) (2) FIFO cost ﬂow identiﬁcation If sections EX 44C(12) and EX 44D(14) do not apply and it is not possible to speciﬁcally identify the cost of the interest because of multiple acquisitions or dispositions or both by the person, the ﬁrst-in-ﬁrst-out (the FIFO) method of identifying cost ﬂows is applied.
Deﬁnition of items in formula [Repealed] (2B) [Repealed] Share splits or similar If the person acquires the interest as the result of a share split, non-taxable bonus issue, or similar event, and the acquisition is not income for the person, subsections (4) and (5) apply.
(3) 1122 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EX 56 (4) (5) (6) (7) (8) Allocation of original cost The cost of the interest is a fair allocation (based on market values at the time of the split) of the cost of the original prop- erty that is split.
Allocation replacing original cost For the income year in which the split occurs and later,— (a) the cost allocated to the interest is no longer the cost of the original property that was split; and the person is treated as having incurred the allocated cost amount on acquiring the interest when the original property was acquired; and the person is treated as not incurring any other cost on the interest merely because the original property ceases to exist.
(b) (c) Non-monetary cost If any cost is incurred in kind and not in money, the amount of the cost is equal to the market value of the cost incurred in kind, measured as at the time incurred.
Exclusion of term life insurance element of premiums If the interest is rights to beneﬁt under a life insurance policy, the cost of the interest excludes a premium incurred in a previ- ous income year (or accounting period) to the extent to which the premium relates only to term life insurance for the previ- ous period and does not increase the policy’s surrender value.
Exclusion of holding costs The cost of the interest does not include any expenditure under the ﬁnancial arrangements rules or interest on money borrowed to acquire it, or other holding costs, incurred after its acquisition.
Deﬁned in this Act: accounting period, attributing interest, amount, compara- tive value method, cost method, deemed rate of return method, fair dividend rate method, FIF, ﬁnancial arrangements rules, income, income year, interest, life insurance, life insurance policy, market value, non-taxable bonus issue, pre- mium, share Compare: 1994 No 164 s CG 14(1) Subsection (1)(a) was amended, as from 1 April 2005, by section 80(1)(c) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “arises):” for “arises); and” with application as from the 2005–06 income year.
1123 Part E s EX 57 Income Tax Act 2004 Reprinted as at 29 August 2011 Subsection (1)(a) was amended, as from 1 April 2007, by section 80(1)(a) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “or (db)” after “CQ 5(1)(d)”.

See section 80(7) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
Subsection (1)(a) was amended, as from 1 April 2007, by section 80(1)(b) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “or (db)” after “DN 6(1)(d)”.

See section 80(7) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
Subsection (1)(b) was amended, as from 1 April 2005, by section 80(2) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “method:” for “method; and” with application as from the 2005–06 income year.

Subsection (1)(d) and (e) was inserted, as from 1 April 2007, by section 80(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
See section 80(7) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.

Section EX 56(2) heading: substituted (with effect from 1 April 2007), on 19 December 2007, by section 97 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EX 56(2): substituted (with effect from 1 April 2007), on 19 December 2007, by section 97 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (2) and the preceding heading were substituted, as from 1 April 2007, by section 80(4) Taxation (Savings Investment and Miscellaneous Provi- sions) Act 2006 (2006 No 81).

See section 80(7) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
Section EX 56(2B) heading: repealed (with effect on 1 April 2007), on 6 Octo- ber 2009, pursuant to section 800 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EX 56(2B): repealed (with effect on 1 April 2007), on 6 October 2009, by section 800 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Subsection (2B) and the preceding heading were inserted, as from 1 April 2007, by section 80(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

See section 80(7) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
The list of deﬁned terms was amended, as from 1 April 2007, by section 80(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “cost method” and “fair dividend rate method”.
Change of FIF’s balance date EX 57 Change of FIF’s balance date When this section applies This section applies when a person— (1) 1124 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EX 57 (a) (b) (c) has an attributing interest in a FIF; and calculates their FIF income or loss from the FIF using the accounting proﬁts method or the branch equivalent method; and has calculated FIF income or loss from the FIF on the basis of 1 accounting year (old accounting year); and (d) wants to change to use a different accounting year (new accounting year) for the calculations.
Commissioner’s consent The person may make the change only if the Commissioner agrees.

Commissioner’s reasons The Commissioner may take into account any relevant factors when making the decision, including— (a) whether the change is sought because ownership of the FIF has changed; and (b) whether the change is sought because of taxation or other legal requirements in a country where the FIF is resident or does business; and whether the change would postpone liability to income tax on FIF income.
(c) New accounting year If the change is approved, the person may use the new account- ing year.

Limit on transitional deferral If, in order to make the transition, the transitional accounting period is more than 1 year and ends in a later income year than the old accounting year ends in, and that would result in an amount of FIF income being derived in the later income year, subsection (6) applies and section CQ 5(1)(f) (When FIF income arises) does not.
(2) (3) (4) (5) (6) Income pro-rated over whole period For the transitional accounting period, the FIF income is di- vided by the number of days in the period and the resulting 1125 Part E s EX 58 Income Tax Act 2004 Reprinted as at 29 August 2011 amount is FIF income of the person derived on each day in the period.
Deﬁned in this Act: accounting period, accounting proﬁts method, accounting year, amount, attributing interest, branch equivalent method, business, Com- missioner, FIF, FIF income, income tax, income year, loss, year Compare: 1994 No 164 s CG 16(8)-(10) Market value rules EX 58 Market value of life policy and superannuation entitlements When this section applies This section applies when, in order to calculate a person’s FIF income or loss, it is necessary to calculate the market value of a person’s rights to beneﬁt under a life insurance policy or as a beneﬁciary under a superannuation scheme.
Value of life insurance policy The market value of rights to beneﬁt under a life insurance policy is equal to their surrender value.

Limit to subsection (2) Subsection (2) applies only for the purpose of calculating the cost of a person’s rights to beneﬁt from a life insurance policy under— (a) (b) (c) section EX 52(4); and section EX 53(2); and section EZ 7 (FIF interests held on 1 April 1993).
Value of superannuation scheme entitlement The market value at any time of a person’s rights to beneﬁt under a superannuation scheme is equal to the total of costs incurred up to that time by or for the person on acquiring the rights if— (a) it is not reasonably practicable to calculate the actual market value; and they have not derived any material gain from the rights up to that time.
(b) Deﬁned in this Act: FIF income, life insurance policy, loss, market value, super- annuation scheme Compare: 1994 No 164 s CG 23(9) (1) (2) (3) (4) 1126 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EX 60 EX 59 Non-market transactions in FIF interests Section GD 14 (Attributing interests in FIFs) applies to acquisitions and dispositions of attributing interests in FIFs when the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method is used.
Deﬁned in this Act: attributing interest, comparative value method, cost method, deemed rate of return method, fair dividend rate method, FIF Compare: 1994 No 164 s CG 23(5), (6) Section EX 59 was amended, as from 1 April 2007, by section 81(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method” for “the comparative value method or the deemed rate of return method”.
See section 81(3) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.

The list of deﬁned terms was amended, as from 1 April 2007, by section 81(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “cost method” and “fair dividend rate method”.
Commissioner’s default assessment power EX 60 Commissioner’s default assessment power (1) When this section applies This section applies when— (a) a person has failed to disclose their control interest or income interest in a CFC or attributing interest in a FIF, under section 61 of the Tax Administration Act 1994: a person has failed to disclose information regarding their control interest or income interest in a CFC or at- tributing interest in a FIF, requested under section 17 of the Tax Administration Act 1994: a person cannot obtain enough information to calculate their attributed CFC income or loss, FIF income or loss, or attributed repatriation for a period.
(b) (c) (2) Commissioner’s power The Commissioner may make an assessment of the amount of attributed CFC income or loss, FIF income or loss, or at- tributed repatriation for the relevant period.
1127 Income Tax Act 2004 Reprinted as at 29 August 2011 Examples of methods (3) Without limiting the Commissioner’s discretion, the assess- ment may be based on any of the following: (a) the accounts of the CFC or FIF for the relevant period prepared for tax authorities, creditors, shareholders, or others: the application of a rate of presumed increase of 10% or more (compounding annually) to the CFC’s or FIF’s branch equivalent income calculated under section EX 21 for a previous period: the application of a rate of presumed increase of 10% or more (compounding annually) to the CFC’s or FIF’s accounting proﬁts as shown in its accounts for a previ- ous period: an imputed rate of return on the market value of the interest at the start of the period: the actual gains or losses of the person in the period from holding or disposing of the interest: the change in the market value of the interest over the period.
(b) (c) (d) (e) (f) Deﬁned in this Act: amount, assessment, attributed CFC income, attributed re- patriation, attributing interest, branch equivalent income, CFC, Commissioner, control interest, FIF, FIF income, income interest, loss, market value, share- holder Compare: 1994 No 164 s CG 25 Subsection (1)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; or”.
Subsection (3)(a) to (e) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; or”.
Subpart EY—Life insurance rules Contents EY 1 What this subpart does EY 2 Matters to which this subpart relates EY 3 Meaning of actuarial reserves EY 4 Actuarial reserves: calculation EY 5 Actuarial reserves: actuary’s declaration 1128 Page 1130 1131 1132 1132 1133 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EX 60 EY 6 Actuarial reserves: powers of Commissioner EY 7 Meaning of claim EY 8 Meaning of life insurance EY 9 Meaning of life insurance policy EY 10 Meaning of life insurer EY 11 Meaning of life reinsurance EY 12 Meaning of life reinsurance policy EY 13 Life insurance and life reinsurance: how sections relate Premium loading EY 14 How premium loading is calculated EY 15 Premium loading: when life insurers providing life insurance at start of income year 1134 1134 1136 1137 1137 1138 1140 1140 1140 1141 EY 16 Premium loading: when life insurers not providing life 1142 insurance at start of income year EY 17 Premium loading formulas EY 18 Premium loading formulas: when life insurers not providing life insurance at start of income year EY 19 Premium loading formulas: option when more than 1 1142 1143 1144 life insured EY 20 Premium loading formula (life): when annuity payable 1145 on death EY 21 Premium loading formulas: when annuity payable on 1145 survival to date or age speciﬁed in policy EY 22 Premium loading formula (life): when partial reinsurance 1146 exists EY 23 Premium loading formulas: individual result may never 1146 be negative Mortality proﬁt EY 24 How mortality proﬁt is calculated EY 25 Mortality proﬁt: when life insurers providing life insurance at start of income year EY 26 Mortality proﬁt: when life insurers not providing life insurance at start of income year EY 27 Mortality proﬁt formula EY 28 Mortality proﬁt formula: when life insurers not providing 1147 1147 1148 1148 1150 life insurance at start of income year EY 29 Mortality proﬁt formula: option when more than 1 life 1150 insured EY 30 Mortality proﬁt formula: when annuity payable on death EY 31 Mortality proﬁt formula:
 when partial reinsurance exists 1151 1152 1129 Part E s EY 1 Income Tax Act 2004 Reprinted as at 29 August 2011 EY 32 Mortality proﬁt formula: individual result may be negative 1152 only in some cases EY 33 Mortality proﬁt formula: negative result Discontinuance proﬁt EY 34 How discontinuance proﬁt is calculated EY 35 Discontinuance proﬁt for income year EY 36 Discontinuance proﬁt formula (existing policies) EY 37 Discontinuance proﬁt formula (new policies) EY 38 Discontinuance proﬁt formula (existing policies): when partial reinsurance exists EY 39 Discontinuance proﬁt formula (new policies): when partial reinsurance exists EY 40 Discontinuance proﬁt formulas: individual result may never be negative Policyholder income EY 41 How policyholder income is calculated EY 42 Policyholder income formula EY 42B Policyholder income formula: FDR adjustment EY 42C Policyholder income formula: PILF adjustment EY 43 Policyholder income formula: when partial reinsurance exists EY 44 Policyholder income formula: when life insurance business transferred Disposal of property EY 45 Income from disposal of property EY 46 Deductions for disposal of property Non-resident life insurers 1153 1153 1154 1154 1155 1156 1156 1157 1157 1157 1159 1161 1163 1164 1165 1166 EY 47 Non-resident life insurers with life insurance policies in 1166 New Zealand EY 48 Non-resident life insurer may become resident 1167 EY 1 What this subpart does Life insurance rules This subpart contains most of the life insurance rules.
Meaning of life insurance rules Life insurance rules means— (a) the sections in this subpart; and (1) (2) 1130 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 2 (b) (c) (d) (e) (f) (g) subpart CR (Income from life insurance); and section CX 33 (Life insurers and fully reinsured per- sons); and subpart DR (Life insurance business expenditure); and section DZ 2 (Life insurers acquiring property before 1 April 1988); and section EZ 1 (Life insurers acquiring property before 1 April 1988); and section GD 7 (Distribution of property to policyhold- ers); and section GD 8 (Superannuation schemes); and subpart II (Losses: life insurers).
(h) (i) Deﬁned in this Act: life insurance rules Compare: 1994 No 164 ss OB 1 life insurance rules, OZ 1(1) EY 2 Matters to which this subpart relates (b) (c) (d) The matters to which this subpart relates are— (a) the meaning of actuarial reserves, claim, life insurance, life insurance policy, life insurer, life reinsurance, life reinsurer, and life reinsurance policy (sections EY 3 to EY 13): life insurers’ premium loading (sections EY 14 to EY 23): life insurers’ mortality proﬁt (sections EY 24 to EY 33): life insurers’ discontinuance proﬁt (sections EY 34 to EY 40): life insurers’ policyholder income (sections EY 41 to EY 44): life insurers’ income and deductions when disposing of property (sections EY 45 and EY 46): (g) non-resident life insurers (sections EY 47 and EY 48).
Deﬁned in this Act: actuarial reserves, claim, deduction, discontinuance proﬁt, income, life insurance, life insurance policy, life insurer, life reinsurance, life reinsurance policy, life reinsurer, mortality proﬁt, non-resident, premium load- ing, property (e) (f) Paragraphs (a) to (f) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; and”.
1131 Part E s EY 3 Income Tax Act 2004 Reprinted as at 29 August 2011 EY 3 Meaning of actuarial reserves Meaning (1) Actuarial reserves means a life insurer’s reserves as calculated under section EY 4.

Link between actuarial reserves and life insurer (2) Actuarial reserves, for a life insurer at any time, means the life insurer’s actuarial reserves at that time.
Deﬁned in this Act: actuarial reserves, life insurer Compare: 1994 No 164 s CM 8(1) EY 4 Actuarial reserves: calculation Calculation by actuary The life insurer’s actuarial reserves must be calculated by an actuary.
All reserves or 1 or more amounts The actuary may calculate— (a) (b) the actuarial reserves for all the life insurance policies for which the life insurer is the insurer; or the amount in the life insurer’s actuarial reserves for 1 or more life insurance policies for which the life insurer is the insurer.
Interest, mortality, and other assumptions and bases of calculation The actuary must do the calculation using interest, mortality, and other assumptions and bases of calculation that— (a) are based on the same principles as those used in the actuarial advice on which the following are calculated: the level of surplus funds available to the life in- (i) surer for allotment or payment to shareholders or policyholders; or the level of surplus funds available to the life in- surer, if a superannuation scheme, for allotment to objects of the scheme other than the object of providing for members’ beneﬁts; and (ii) (b) are likely to produce a reasonable estimation of the fu- ture experience of the life insurer in relation to life in- surance policies of which the life insurer is the insurer, having regard to the past experience of the life insurer (1) (2) (3) 1132 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 5 (4) (5) (6) (7) in relation to life insurance policies of which the life in- surer was the insurer; and conform with commercially acceptable practice.
(c) Reserves for policy never negative The amount in the actuarial reserves for a life insurance policy must never be negative.

Reserves for all policies never less than total of surrender values The actuarial reserves at any time must not be less than the total of the surrender values of all the life insurance policies they cover at that time.
Reserves for policies same at end of one, and start of next, income year The amount in the actuarial reserves for life insurance policies at the start of an income year is the same as the amount in the actuarial reserves for the life insurance policies at the end of the previous income year.
Effect of partial reinsurance The actuarial reserves of a life insurer who has partial reinsur- ance must be reduced by an amount that the actuary respon- sible for actuarial control of the life insurer considers appropri- ate having regard to the nature of the life reinsurance policies.
Deﬁned in this Act: actuarial reserves, actuary, amount, income year, life insur- ance policy, life insurer, life reinsurance policy, partial reinsurance, payment, shareholder, superannuation scheme Compare: 1994 No 164 ss CM 8(1), (2)(a), (b), CM 13(1)(d) EY 5 Actuarial reserves: actuary’s declaration (1) Content The actuary responsible for actuarial control of a life insurer must provide, with the life insurer’s return of income, a dec- laration that— (a) states that the actuary is the actuary responsible for ac- tuarial control of the life insurer; and states the speciﬁc interest, mortality, and other assump- tions and bases of calculation applied in calculating the life insurer’s premium loading, mortality proﬁt, dis- (b) 1133 Part E s EY 6 Income Tax Act 2004 Reprinted as at 29 August 2011 continuance proﬁt, and policyholder income or policy- holder net loss for the income year of the return; and states that the assumptions and bases of calculation comply with section EY 4.
(c) Form The declaration must be in the form (if any) required by the Commissioner.
Deﬁned in this Act: actuarial reserves, actuary, Commissioner, discontinuance proﬁt, income year, life insurer, mortality proﬁt, policyholder income, policy- holder net loss, premium loading, return of income Compare: 1994 No 164 s CM 8(2)(c) (2) EY 6 Actuarial reserves: powers of Commissioner (1) Seek advice from Government Actuary or other actuary The Commissioner may seek the advice of the Government Actuary or any other actuary on the interest, mortality, and other assumptions and bases of calculation used by the actuary who did the calculation under section EY 4(3).
Assess on different basis (2) Whether or not the Commissioner seeks or obtains any such advice, the Commissioner may make an assessment for a life insurer and an income year on the basis of interest, mortality, and other assumptions and bases of calculation different from those used by the actuary who did the calculation under section EY 4(3).
Deﬁned in this Act: actuarial reserves, actuary, assessment, Commissioner, in- come year, life insurer Compare: 1994 No 164 s CM 8(3) EY 7 Meaning of claim Meaning in life insurance rules In the life insurance rules, claim— (a) means the amount that a life insurer is liable to pay under a life insurance policy because the contingency against which the life insured is covered under the pol- icy has occurred.
Subsections (2) to (5) expand on “the amount that a life insurer is liable to pay”: includes a payment made by a life insurer on the transfer of some or all of its life insurance business: (b) (1) 1134 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 7 (2) (3) (4) (5) (c) in the expression claim arising, does not have the mean- ing given to the word claim in paragraph (a) or (b).
Includes cash and non-cash beneﬁts For the purposes of subsection (1)(a), the amount that a life insurer is liable to pay includes— (a) (b) (c) (d) (e) (f) a payment on the death of a life insured: a payment on maturity: a payment of a cash bonus: a payment on the surrender of a policy: an annuity payment: a beneﬁt other than in cash.
Does not include advance or amount in actuarial reserves For the purposes of subsection (1)(a), the amount that a life insurer is liable to pay does not include— (a) (b) an advance against the security of the policy; or a bonus or other discretionary amount added to the ac- tuarial reserves.
Means amount before certain subtractions For the purposes of subsection (1)(a), the amount that a life insurer is liable to pay means the amount before the subtraction of the following amounts payable to the life insurer: (a) (b) (c) an advance against the security of the policy; and an unpaid premium for the policy; and interest on an amount referred to in paragraph (a) or (b).

Amount may be zero For the purposes of subsection (1)(a), the amount that a life insurer is liable to pay may be zero.
Deﬁned in this Act: actuarial reserves, amount, business, claim, interest, life insurance, life insurance policy, life insurance rules, life insured, life insurer, pay, payment, premium Compare: 1994 No 164 s OB 1 claim Subsection (1)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; and”.
Subsection (2)(a) to (e) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; and”.
1135 Part E s EY 8 Income Tax Act 2004 Reprinted as at 29 August 2011 EY 8 Meaning of life insurance Meaning Life insurance means insurance under which— (a) person A (life insurer) is liable to provide person B (pol- icyholder) with a beneﬁt described in subsection (2); and the life insurer is entitled to receive consideration in return, either from the policyholder or from some other person.
(b) (b) (c) Beneﬁts The beneﬁts are— (a) a beneﬁt whose payment is contingent on the death of 1 or more human beings, including an annuity whose term is contingent on human life; or a beneﬁt whose payment is contingent on the survival of 1 or more human beings to a date, or an age, speciﬁed as part of the insurance, including an annuity whose term is contingent on human life; or a beneﬁt that is an annuity whose term is not contingent on human life, if the life insurer enters into the arrange- ment to provide the annuity as part of their business of providing life insurance.
Exclusion: death beneﬁts provided under accident or medical insurance Life insurance does not include accident or medical insurance under which— (a) 1 or more beneﬁts are payable for the death of the person whose life is insured; and all the beneﬁts referred to in paragraph (a) are— (i) (b) payable if the death is caused by a speciﬁed cause named in the policy; or payable incidentally to the provision of accident or medical beneﬁts, if the death is caused by a speciﬁed cause named in the policy.
(ii) Exclusion: death beneﬁts provided by superannuation funds Life insurance does not include an arrangement in which— (a) a superannuation fund is liable to pay, as a beneﬁt to a beneﬁciary of the fund, a lump sum on— (1) (2) (3) (4) 1136 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 10 (b) (i) (ii) the death of 1 or more human beings speciﬁed in the trust deed; or the survival of 1 or more human beings speciﬁed in the trust deed to a date, or an age, speciﬁed in the trust deed; and the lump sum is made up of— (i) superannuation contributions made by or for the beneﬁciary; and allocated investment earnings attributable to con- tributions made by or for the beneﬁciary; and any other allocation from the proﬁts of the super- annuation fund attributable to contributions made by or for the beneﬁciary.
(ii) (iii) Deﬁned in this Act: arrangement, business, life insurance, life insurer, pay, payment, superannuation contribution, superannuation fund Compare: 1994 No 164 ss CM 2, OB 1 life insurance Subsection (3)(b) was substituted, as from 1 April 2005, by section 82(1) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

See section 82(2) and (3) of that Act for the application of this amendment for a person for the 2005–06 and later income years.
Subsection (3) of that Act provides that if subsection (1) of that Act does not apply for a person for an income year because of subsection (2), the law that would apply if subsection (1) did not come into force applies for the person for the income year.

EY 9 Meaning of life insurance policy Life insurance policy means a policy to the extent to which it states the terms under which life insurance is covered.
Deﬁned in this Act: life insurance, life insurance policy EY 10 Meaning of life insurer (1) Meaning Life insurer means a person carrying on a business of provid- ing life insurance.

Exclusion (2) A person carrying on a business of providing life insurance in an income year is treated as not carrying on a business of providing life insurance while the person has full reinsurance.
1137 Part E s EY 11 Income Tax Act 2004 Reprinted as at 29 August 2011 Inclusion (3) An association of persons, a body of persons, or a trustee is treated as carrying on a business of providing life insurance to the extent to which— (a) the association, body, or trustee provides life insurance; and the consideration for the provision is something other than natural love and affection.
(b) (4) (5) Parties to policies treated as being unrelated Every life insurance policy entered into by the association, body, or trustee as insurer is treated as entered into with an unrelated party, even if the life insurer and the policyholder are, for example,— (a) (b) an association and a member of the association; or a trustee and a beneﬁciary of the trust.
Relationship with section HF 1 Section HF 1 (Proﬁts of mutual associations in respect of trans- actions with members) does not apply to the business of pro- viding life insurance of the association, body, or trustee.
Deﬁned in this Act: business, full reinsurance, income year, life insurance, life insurance policy, life insurer, trustee Compare: 1994 No 164 ss CM 12, CM 14, OB 1 life insurer EY 11 Meaning of life reinsurance Meaning Life reinsurance means insurance provided to a life insurer by another person (person C), under which person C secures the life insurer, fully or partially, against the life insurer’s liability under a life insurance policy.
The words ‘‘fully’’ and ‘‘par- tially’’ describe the extent to which the life insurer is secured against the life insurer’s liability under the life insurance pol- icy; they do not describe the term for which the reinsurance is provided.
Full reinsurance The life insurer has full reinsurance if all the following apply: the life insurer offered or was offered or entered into a (a) life insurance policy or policies,— (1) (2) 1138 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 11 (i) (ii) in the case of a life insurer resident in New Zealand, as part of their business of providing life insurance; or in the case of a life insurer not resident in New Zealand, as part of their New Zealand business; and the life insurer holds a life reinsurance policy or policies covering every life insurance policy described in para- graph (a); and the life insurer is fully secured against liability under the life insurance policy or policies by the life reinsurance policy or policies; and the life insurer offered or was offered or entered into the life reinsurance policy or policies in New Zealand.
(b) (c) (d) (3) Partial reinsurance The life insurer has partial reinsurance if all the following apply: (a) the life insurer— (i) holds a life reinsurance policy or policies fully securing them against liability for 1 or some, but not all, of the life insurance policies described in paragraph (b); or holds a life reinsurance policy or policies for all the life insurance policies described in paragraph (b) but only partially securing them against liabil- ity; or holds a life reinsurance policy or policies par- tially securing them against liability for 1 or some, but not all, of the life insurance policies described in paragraph (b); and (ii) (iii) (b) the life insurer offered or was offered or entered into the life insurance policy or policies covered by the life reinsurance policy or policies,— (i) in the case of a life insurer resident in New Zealand, as part of their business of providing life insurance; or in the case of a life insurer not resident in New Zealand, as part of their New Zealand business; and (ii) 1139 Part E s EY 12 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) (c) the life insurer offered or was offered or entered into the life reinsurance policy or policies in New Zealand.
Life reinsurer Life reinsurer means a person in the position of person C. Deﬁned in this Act: business, full reinsurance, life insurance, life insurance policy, life insurer, life reinsurance, life reinsurance policy, life reinsurer, New Zealand business, offered or was offered or entered into, partial reinsurance, resident in New Zealand Compare: 1994 No 164 ss CM 12, CM 13(1)(a) EY 12 Meaning of life reinsurance policy Life reinsurance policy means a policy to the extent to which it states the terms under which life reinsurance is covered.
Deﬁned in this Act: life reinsurance, life reinsurance policy EY 13 Life insurance and life reinsurance: how sections relate (1) (2) Life insurance deﬁnitions Sections EY 8 to EY 10 deﬁne terms relating to life insurance.

Life reinsurance deﬁnitions Sections EY 11 and EY 12 deﬁne terms relating to life rein- surance.
Life insurance term usually includes life reinsurance term (3) A reference in this Act to any of the terms deﬁned in sections EY 8 to EY 10 includes the equivalent term in sections EY 11 and EY 12—for example, life insurer includes life reinsurer — unless the context requires otherwise.
Deﬁned in this Act: life insurance, life insurer, life reinsurance, life reinsurer EY 14 How premium loading is calculated Premium loading Life insurer providing life insurance at start of income year Section EY 15 sets out the steps that a life insurer follows to calculate the life insurer’s premium loading for an income year if the life insurer is in the business of providing life insurance at the start of the income year.
(1) 1140 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 15 (2) (3) (4) Life insurer not providing life insurance at start of income year Section EY 16 sets out the steps that a life insurer follows to calculate the life insurer’s premium loading for an income year if the life insurer starts the business of providing life insurance in the income year.

Premium loading formula (life) Section EY 17(1) sets out the premium loading formula (life).
This is the formula a life insurer uses, as the ﬁrst step in calcu- lating the life insurer’s premium loading for an income year, to calculate an amount for a life insured under a life insurance policy, except to the extent to which an annuity is being paid under the policy at some time in the income year.

Premium loading formula (active annuities) Section EY 17(2) sets out the premium loading formula (active annuities).
This is the formula a life insurer uses, as the ﬁrst step in calculating the life insurer’s premium loading for an income year, to calculate an amount for a life insured under a life insurance policy, to the extent to which an annuity is being paid under the policy at some time in the income year.
Deﬁned in this Act: business, income year, life insurance, life insurance policy, life insured, life insurer, pay, premium loading, premium loading formula Compare: 1994 No 164 s CM 6(1), (3) EY 15 Premium loading: when life insurers providing life insurance at start of income year (1) (2) Calculation of premium loading If a life insurer is in the business of providing life insurance at the start of an income year, the life insurer calculates their premium loading for the income year by following the steps in subsection (2).
Steps The steps are,— (a) ﬁrst, use the relevant premium loading formula to cal- culate an amount for each life insured under each life insurance policy existing at the start of the income year: second, for each such life insurance policy, add together the amounts for the lives insured under it: (b) 1141 Part E s EY 16 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) third, add together the totals reached under paragraph (b).
Deﬁned in this Act: amount, business, income year, life insurance, life insur- ance policy, life insured, life insurer, premium loading, premium loading for- mula Compare: 1994 No 164 s CM 6(1) Subsection (2)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; and”.
EY 16 Premium loading: when life insurers not providing life insurance at start of income year (1) (2) Calculation of premium loading If a life insurer has started to carry on a business of providing life insurance in an income year, the life insurer calculates the life insurer’s premium loading for the income year by follow- ing the steps in subsection (2).
Steps The steps are,— (a) ﬁrst, use the relevant premium loading formula, ad- justed as described in section EY 18, to calculate an amount for each life insured under each life insurance policy existing at some time in the income year: second, for each such life insurance policy, add together the amounts for the lives insured under it: third, add together the totals reached under paragraph (b).
(b) (c) Deﬁned in this Act: amount, business, income year, life insurance, life insur- ance policy, life insured, life insurer, premium loading, premium loading for- mula Compare: 1994 No 164 s CM 6(3) Subsection (2)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; and”.
EY 17 Premium loading formulas Premium loading formula (life) The premium loading formula (life) is— (1) 0.2 x claim probability x (opening sum assured – opening actuarial reserves).

1142 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 18 (2) (3) (4) Premium loading formula (active annuities) The premium loading formula (active annuities) is— 0.01 x claim probability x opening actuarial reserves.

Deﬁnition of items in formulas The items in the formulas are deﬁned in subsections (4) to (6).
Claim probability Claim probability is the probability of a claim arising under the policy for the life insured’s death in the income year.

It is determined at the start of the income year using the same mortality assumptions as are used to calculate the life insurer’s actuarial reserves at the start of the income year.

It is expressed as a decimal.

Variations to claim probability are in sections EY 18(2) and EY 19(2).
Opening sum assured (5) Opening sum assured is the claim that would be payable under the policy for the life insured’s death in the income year or, if no such claim would be payable, the claim that would be payable under the policy for the life insured’s survival to the relevant date or age speciﬁed in the policy.

It is determined at the start of the income year.

It may be zero.

Variations to opening sum assured are in sections EY 18(3), EY 20(2), EY 21(3), and EY 22(2).
Opening actuarial reserves (6) Opening actuarial reserves is the amount in the life insurer’s actuarial reserves for the life insured under the policy.

It is de- termined at the start of the income year.

A variation to opening actuarial reserves is in section EY 18(4).
Deﬁned in this Act: actuarial reserves, amount, claim, income year, life insured, life insurer, pay, premium loading formula Compare: 1994 No 164 s CM 6(1) EY 18 Premium loading formulas: when life insurers not providing life insurance at start of income year (1) When this section applies This section applies when a life insurer has started to carry on a business of providing life insurance in an income year.
1143 Part E s EY 19 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) (3) (4) Claim probability In using the relevant premium loading formula, the life insurer treats the reference in claim probability to the start of the in- come year as a reference to the date on which the life insurance policy started to cover the life insured.
Opening sum assured In using the premium loading formula (life), the life insurer treats the reference in opening sum assured to the start of the income year as a reference to the date on which the life insur- ance policy started to cover the life insured.

Opening actuarial reserves In using the relevant premium loading formula, the life insurer treats the reference in opening actuarial reserves to the start of the income year as a reference to the end of the income year.
Deﬁned in this Act: business, income year, life insurance, life insurance policy, life insurer, premium loading formula Compare: 1994 No 164 s CM 6(3) EY 19 Premium loading formulas: option when more than 1 life insured When this section applies This section applies when a life insurance policy covers more than 1 life insured.

Claim probability In using the relevant premium loading formula, the life insurer may use as claim probability a common factor for all the lives insured under the policy.
Features of common factor The common factor must be a reasonable approximation of the average probability of a claim arising under the policy for each life insured’s death in the income year.

It must be weighted as necessary to take account of— (a) differing claims for individual lives insured under the policy; and (1) (2) (3) 1144 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 21 (b) differing amounts in the life insurer’s actuarial reserves for individual lives insured under the policy.
Deﬁned in this Act: actuarial reserves, amount, claim, income year, life insur- ance policy, life insured, life insurer, premium loading formula Compare: 1994 No 164 s CM 6(2) EY 20 Premium loading formula (life): when annuity payable on death (1) (2) When this section applies This section applies when, and to the extent to which, a life insurance policy provides for the payment of an annuity the start of which is contingent on the life insured’s death.
Opening sum assured In using the premium loading formula (life), the life insurer uses as opening sum assured the net present value of the annu- ity.

The net present value is determined— at the start of the income year; and (a) on the assumption that the life insured died at the start (b) of the income year; and using the same assumptions and bases of calculation as are used to calculate the life insurer’s actuarial reserves for the income year.
(c) Deﬁned in this Act: actuarial reserves, income year, life insurance policy, life insured, life insurer, payment, premium loading formula Compare: 1994 No 164 s CM 6(4) EY 21 Premium loading formulas: when annuity payable on survival to date or age speciﬁed in policy (1) (2) When this section applies This section applies when, and to the extent to which, a life insurance policy provides for the payment of an annuity the start of which is contingent on the life insured’s survival to the relevant date or age speciﬁed in the policy.
Claim probability In using the relevant premium loading formula, the life insurer must use claim probability as deﬁned in section EY 17(4), without regard to the fact that the payment of the annuity is not contingent on the life insured’s death.

1145 Part E s EY 22 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) Opening sum assured In using the premium loading formula (life), the life insurer must use as opening sum assured the net present value of the annuity.
The net present value is determined— (a) (b) at the relevant date or age speciﬁed in the policy; and on the assumption that the life insured survived to the date or age; and using the same assumptions and bases of calculation as are used to calculate the life insurer’s actuarial reserves for the income year.
(c) Deﬁned in this Act: actuarial reserves, income year, life insurance policy, life insured, life insurer, pay, payment, premium loading formula Compare: 1994 No 164 s CM 6(5) EY 22 Premium loading formula (life): when partial reinsurance exists (1) (2) When this section applies This section applies when a life insurer has partial reinsurance.
Opening sum assured In using the premium loading formula (life), the life insurer must reduce opening sum assured by the claim receivable by the life insurer under the life reinsurance policy for the contin- gency against which the life insured is covered under the life insurance policy.
Deﬁned in this Act: claim, life insurance policy, life insured, life insurer, life reinsurance policy, partial reinsurance, premium loading formula Compare: 1994 No 164 s CM 13(1)(a), (b) EY 23 Premium loading formulas: individual result may never be negative If a life insurer gets a negative result from using a premium loading formula to calculate an amount for a life insured under a life insurance policy for an income year, the result is treated as zero.
Deﬁned in this Act: income year, life insurance policy, life insured, life insurer, premium loading formula Compare: 1994 No 164 s CM 6(6) 1146 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 25 Mortality proﬁt EY 24 How mortality proﬁt is calculated (1) (2) (3) Life insurer providing life insurance at start of income year Section EY 25 sets out the steps that a life insurer follows to calculate their mortality proﬁt for an income year if they are in the business of providing life insurance at the start of the income year.
Life insurer not providing life insurance at start of income year Section EY 26 sets out the steps that a life insurer follows to calculate their mortality proﬁt for an income year if they start the business of providing life insurance in the income year.
Mortality proﬁt formula Section EY 27 sets out the mortality proﬁt formula that a life insurer uses, as the ﬁrst step in calculating the life insurer’s mortality proﬁt for an income year, to calculate an amount for a life insured under a life insurance policy.
Deﬁned in this Act: business, income year, life insurance, life insurance policy, life insured, life insurer, mortality proﬁt, mortality proﬁt formula Compare: 1994 No 164 s CM 5(1), (3) EY 25 Mortality proﬁt: when life insurers providing life insurance at start of income year (1) (2) Calculation of mortality proﬁt If a life insurer is in the business of providing life insurance at the start of an income year, the life insurer calculates the life insurer’s mortality proﬁt for the income year by following the steps in subsection (2).
Steps The steps are,— (a) ﬁrst, use the mortality proﬁt formula to calculate an amount for each life insured under each life insurance policy existing at the start of the income year: second, for each such life insurance policy, add together the amounts for the lives insured under it: third, add together the totals reached under paragraph (b): (b) (c) 1147 Part E s EY 26 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) fourth, if the result is positive, take it as the mortality proﬁt.
If the result is negative, sections EY 32 and EY 33 apply.

Deﬁned in this Act: amount, business, income year, life insurance, life insur- ance policy, life insured, life insurer, mortality proﬁt, mortality proﬁt formula Compare: 1994 No 164 s CM 5(1) Subsection (2)(a) to (c) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; and”.
EY 26 Mortality proﬁt: when life insurers not providing life insurance at start of income year (1) (2) Calculation of mortality proﬁt If a life insurer has started to carry on a business of providing life insurance in an income year, the life insurer calculates the life insurer’s mortality proﬁt for the income year by following the steps in subsection (2).
Steps The steps are,— (a) ﬁrst, use the mortality proﬁt formula, adjusted as de- scribed in section EY 28, to calculate an amount for each life insured under each life insurance policy exist- ing at some time in the income year: second, for each such life insurance policy, add together the amounts for the lives insured under it: third, add together the totals reached under paragraph (b): fourth, if the result is positive, take it as the mortality proﬁt.
If the result is negative, sections EY 32 and EY 33 apply.

(b) (c) (d) Deﬁned in this Act: amount, business, income year, life insurance, life insur- ance policy, life insured, life insurer, mortality proﬁt, mortality proﬁt formula Compare: 1994 No 164 s CM 5(3) Subsection (2)(a) to (c) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; and”.
EY 27 Mortality proﬁt formula Formula The mortality proﬁt formula is— (1) 1148 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 27 (2) (3) claim probability x (opening sum assured – opening actuarial reserves) – (closing sum assured – opening actuarial reserves).

Deﬁnition of items in formula The items in the formula are deﬁned in subsections (3) to (8).

Claim probability Claim probability is the probability of a claim arising under the policy for the life insured’s death in the income year.
It is determined at the start of the income year using the same mortality assumptions as are used to calculate the life insurer’s actuarial reserves at the start of the income year.

It is expressed as a decimal.

Variations to claim probability are in sections EY 28(2) and EY 29(2).

Opening sum assured (4) Opening sum assured is the claim that would be payable under the policy for the life insured’s death in the income year.

It is determined at the start of the income year.

It may be zero.
It may be zero.

Variations to opening sum assured are in sections EY 28(3), EY 30(2), and EY 31(2).

Opening actuarial reserves (5) Opening actuarial reserves is the amount in the life insurer’s actuarial reserves for the life insured under the policy.

It is de- termined at the start of the income year.

A variation to opening actuarial reserves is in section EY 28(4).
(6) (7) Closing sum assured if life insured dies in current income year If a life insured dies in the income year to which the formula is being applied, closing sum assured is the claim payable under the policy for the death.

It may be zero.

A variation to closing sum assured is in section EY 31(3).
Closing sum assured if life insured dies in 1990-91 income year or year up to current income year If a life insured dies in the 1990-91 income year or a later income year before the income year to which the formula is being applied, and the claim has not already been included in closing sum assured for an income year, closing sum assured is the claim payable under the policy for the death.

It may be zero.

A variation to closing sum assured is in section EY 31(3).
1149 Part E s EY 28 Income Tax Act 2004 Reprinted as at 29 August 2011 (8) Closing sum assured if subsections (6) and (7) do not apply If subsections (6) and (7) do not apply, closing sum assured is the same as opening actuarial reserves.
Deﬁned in this Act: actuarial reserves, amount, claim, income year, life insured, life insurer, mortality proﬁt formula, pay Compare: 1994 No 164 s CM 5(1) EY 28 Mortality proﬁt formula: when life insurers not providing life insurance at start of income year (1) (2) (3) (4) When this section applies This section applies when a life insurer starts to carry on a business of providing life insurance in an income year.
Claim probability In using the mortality proﬁt formula, the life insurer treats the reference in claim probability to the start of the income year as a reference to the date on which the life insurance policy started to cover the life insured.

Opening sum assured In using the mortality proﬁt formula, the life insurer treats the reference in opening sum assured to the start of the income year as a reference to the date on which the life insurance pol- icy started to cover the life insured.
Opening actuarial reserves In using the mortality proﬁt formula, the life insurer treats the reference in opening actuarial reserves to the start of the in- come year as a reference to the end of the income year.
Deﬁned in this Act: business, income year, life insurance, life insurance policy, life insurer, mortality proﬁt formula Compare: 1994 No 164 s CM 5(3) EY 29 Mortality proﬁt formula: option when more than 1 life insured (1) When this section applies This section applies when a life insurance policy covers more than 1 life insured.
1150 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 30 (2) (3) Claim probability In using the mortality proﬁt formula, the life insurer may use as claim probability a common factor for all the lives insured under the policy.

Features of common factor The common factor must be a reasonable approximation of the average probability of a claim arising under the policy for each life insured’s death in the income year.
It must be weighted as necessary to take account of— (a) differing claims for individual lives insured under the policy; and differing amounts in the life insurer’s actuarial reserves for individual lives insured under the policy.
(b) Deﬁned in this Act: actuarial reserves, amount, claim, income year, life insur- ance policy, life insured, life insurer, mortality proﬁt formula Compare: 1994 No 164 s CM 5(2) EY 30 Mortality proﬁt formula: when annuity payable on death (1) (2) When this section applies This section applies when, and to the extent to which, a life insurance policy provides for the payment of an annuity the start of which is contingent on the life insured’s death.
Opening sum assured In using the mortality proﬁt formula, the life insurer uses as opening sum assured the net present value of the annuity.

The net present value is determined— (a) (b) at the start of the income year; and on the assumption that the life insured died at the start of the income year; and using the same assumptions and bases of calculation as are used to calculate the life insurer’s actuarial reserves for the income year.
(c) Deﬁned in this Act: actuarial reserves, income year, life insurance policy, life insured, life insurer, mortality proﬁt formula, pay, payment Compare: 1994 No 164 s CM 5(4) 1151 Part E s EY 31 Income Tax Act 2004 Reprinted as at 29 August 2011 EY 31 Mortality proﬁt formula: when partial reinsurance exists (1) (2) (3) When this section applies This section applies when a life insurer has partial reinsurance.
Opening sum assured In using the mortality proﬁt formula, the life insurer must re- duce opening sum assured by the claim receivable by the life insurer under the life reinsurance policy for the contingency against which the life insured is covered under the life insur- ance policy.
Closing sum assured In using the mortality proﬁt formula, the life insurer must re- duce closing sum assured by the claim receivable by the life insurer under the life reinsurance policy for the contingency against which the life insured is covered under the life insur- ance policy.
Deﬁned in this Act: claim, life insurance policy, life insured, life insurer, life reinsurance policy, mortality proﬁt formula, partial reinsurance Compare: 1994 No 164 s CM 13(1)(a) EY 32 Mortality proﬁt formula: individual result may be negative only in some cases Rule: not negative If a life insurer gets a negative result from using the mortality proﬁt formula to calculate an amount for a life insured under a life insurance policy for an income year, the result is treated as zero.
However, a negative result is not treated as zero if 1 of the exclusions in subsections (2) to (4) applies.

Exclusion: death in income year The ﬁrst exception is when the life insured died in the income year.

Exclusion: death in 1990-91 income year or later The second exception is when— (a) the life insured died in the 1990-91 income year or a later income year before the income year for which the formula is being used; and the claim has not already been included in closing sum assured for an income year.
(b) (1) (2) (3) 1152 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 34 (4) Exclusion: annuity being paid The third exception is when, and to the extent to which, the beneﬁt under the policy is an annuity that is being paid at some time in the income year.
Deﬁned in this Act: claim, income year, life insurance policy, life insured, life insurer, mortality proﬁt formula, pay Compare: 1994 No 164 s CM 5(5) EY 33 Mortality proﬁt formula: negative result (1) (2) (3) When this section applies This section applies when a life insurer is allowed a deduction under section DR 1 (Mortality proﬁt formula: negative result).

Amount of deduction The amount of the deduction is the negative result.
Timing of deduction The life insurer is allowed the deduction in the income year.

Deﬁned in this Act: amount, deduction, income year, life insurer, mortality proﬁt formula Compare: 1994 No 164 s DK 3A Discontinuance proﬁt EY 34 How discontinuance proﬁt is calculated (1) (2) Life insurer providing life insurance at any time Section EY 35 sets out the steps that a life insurer follows to calculate the life insurer’s discontinuance proﬁt for an income year.
Discontinuance proﬁt formula (existing policies) Section EY 36 sets out the discontinuance proﬁt formula (existing policies).
This is the formula a life insurer uses, as the ﬁrst step in calculating the life insurer’s discontinuance proﬁt for an income year, to calculate an amount for a life insurance policy that exists at the start of the income year and to which 1 of the following applies in the income year: (a) it terminates, wholly or partly, for a reason other than the life insured’s death or the life insured’s survival to the relevant date or age speciﬁed in the policy; or 1153 Part E s EY 35 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) (b) a claim is paid under it for a reason other than the life insured’s death or the life insured’s survival to the rele- vant date or age speciﬁed in the policy.
Discontinuance proﬁt formula (new policies) Section EY 37 sets out the discontinuance proﬁt formula (new policies).
This is the formula a life insurer uses, as the ﬁrst step in calculating the life insurer’s discontinuance proﬁt for an income year, to calculate an amount for a life insurance policy to which both the following apply: (a) (b) it does not exist at the start of the income year; and it terminates in the income year for a reason other than the life insured’s death or the life insured’s survival to the relevant date or age speciﬁed in the policy.
Deﬁned in this Act: claim, discontinuance proﬁt, discontinuance proﬁt formula, income year, life insurance, life insurance policy, life insured, life insurer, pay Compare: 1994 No 164 s CM 7(1) EY 35 Discontinuance proﬁt for income year Calculation of discontinuance proﬁt (1) A life insurer calculates the life insurer’s discontinuance proﬁt for an income year by following the steps in subsection (2).
(2) Steps The steps are,— (a) ﬁrst, use the relevant discontinuance proﬁt formula to calculate an amount for each life insurance policy exist- ing at some time in the income year: second, add all the amounts together.
(b) Deﬁned in this Act: amount, discontinuance proﬁt, discontinuance proﬁt for- mula, income year, life insurance policy, life insurer Compare: 1994 No 164 s CM 7(1) Subsection (2)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; and”.
EY 36 Discontinuance proﬁt formula (existing policies) Formula The discontinuance proﬁt formula (existing policies) is— pre-termination actuarial reserves – post-termination actuarial reserves – termination payment.

(1) 1154 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 37 (2) (3) (4) (5) Deﬁnition of items in formula The items in the formula are deﬁned in subsections (3) to (5).
Pre-termination actuarial reserves Pre-termination actuarial reserves is the amount in the life in- surer’s actuarial reserves for the life insurance policy, deter- mined immediately before the event described in section EY 34(2)(a) or (b).

It is calculated using the same assumptions and bases of calculation as were used at the start of the income year to calculate the amount in the life insurer’s actuarial reserves for the policy.
Post-termination actuarial reserves Post-termination actuarial reserves is the amount in the life insurer’s actuarial reserves for the life insurance policy, de- termined immediately after the event described in section EY 34(2)(a) or (b) and having regard to the fact that the event has occurred.

It is calculated using the same assumptions and bases of calculation as were used at the start of the income year to calculate the amount in the life insurer’s actuarial reserves for the policy.
Termination payment Termination payment is the claim payable by the life insurer on the occurrence of the event described in section EY 34(2)(a) or (b).

It may be zero.

A variation to termination payment is in section EY 38(2).
Deﬁned in this Act: actuarial reserves, amount, claim, discontinuance proﬁt formula, income year, life insurance policy, life insurer, pay Compare: 1994 No 164 s CM 7(1)(a) EY 37 Discontinuance proﬁt formula (new policies) (1) (2) (3) Formula The discontinuance proﬁt formula (new policies) is— premium – termination payment.

Deﬁnition of items in formula The items in the formula are deﬁned in subsections (3) and (4).
Premium Premium is all the premiums paid to the life insurer for the life insurance policy, including a premium due before, but paid 1155 Part E s EY 38 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) after, it terminates.

A variation to premium is in section EY 39(2).

Termination payment Termination payment is the claim payable by the life insurer when the life insurance policy terminates.

It may be zero.

A variation to termination payment is in section EY 39(3).
Deﬁned in this Act: claim, discontinuance proﬁt formula, life insurance policy, life insurer, pay, premium Compare: 1994 No 164 s CM 7(1)(b) EY 38 Discontinuance proﬁt formula (existing policies): when partial reinsurance exists (1) (2) When this section applies This section applies when a life insurer has partial reinsurance.
Termination payment In using the discontinuance proﬁt formula (existing policies), the life insurer must reduce termination payment by the claim receivable by the life insurer under the life reinsurance policy on the occurrence of the event described in section EY 34(2)(a) or (b).
Deﬁned in this Act: claim, discontinuance proﬁt formula, life insurer, life rein- surance policy, partial reinsurance Compare: 1994 No 164 s CM 13(1)(c)(ii) EY 39 Discontinuance proﬁt formula (new policies): when partial reinsurance exists When this section applies This section applies when a life insurer has partial reinsurance.
Premium In using the discontinuance proﬁt formula (new policies), the life insurer must reduce premium by an amount to which both the following apply: (a) it is part of the premiums payable by the life insurer in the income year for a life reinsurance policy or policies (life reinsurance premiums); and (b) it is the part of the life reinsurance premiums that relates to the life insurance policy.
(1) (2) 1156 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 42 (3) Termination payment In using the discontinuance proﬁt formula (new policies), the life insurer must reduce termination payment by the claim re- ceivable by the life insurer under the life reinsurance policy for the termination of the life insurance policy.
Deﬁned in this Act: amount, claim, discontinuance proﬁt formula, income year, life insurance policy, life insurer, life reinsurance policy, partial reinsurance, pay, payment, premium Compare: 1994 No 164 ss CM 7(1), CM 13(1)(c)(i) EY 40 Discontinuance proﬁt formulas: individual result may never be negative If a life insurer gets a negative result from using a discontinu- ance proﬁt formula to calculate an amount for a life insurance policy for an income year, the result is treated as zero.
Deﬁned in this Act: discontinuance proﬁt formula, income year, life insurance policy, life insurer Compare: 1994 No 164 s CM 7(2) Policyholder income EY 41 How policyholder income is calculated Section EY 42 sets out the policyholder income formula that a life insurer uses for each income year to calculate the life insurer’s policyholder income for the income year.
Deﬁned in this Act: holder income formula Compare: 1994 No 164 s CM 15(1) income year, life insurer, policyholder income, policy- EY 42 Policyholder income formula Formula The policyholder income formula is— (1) claim due + (closing actuarial reserves – opening actuarial reserves) – (FDR adjustment + PIE adjustment) – (premium – underwriting result) (1 – tax rate).

Deﬁnition of items in formula The items in the formula are deﬁned in subsections (3) to (8).
(2) 1157 Part E s EY 42 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) Claim due Claim due is the total of— (a) (b) each claim that became due and payable in the income year; and each claim that became due and payable in a previous income year to the extent to which— (i) the claim relates to a contingency that was met in the 1990-91 income year or a later income year before the income year for which the formula is being used; and the claim has not already been included in claim in an income year.
(ii) (4) Closing actuarial reserves Closing actuarial reserves is the life insurer’s actuarial re- serves, determined at the end of the income year.

A variation to closing actuarial reserves is in section EY 44(2).

Opening actuarial reserves (5) Opening actuarial reserves is the life insurer’s actuarial re- serves, determined at the start of the income year.

A variation to opening actuarial reserves is in section EY 44(3).
FDR adjustment (5B) FDR adjustment is the amount given by section EY 42B to the extent to which it applies.

PIE adjustment (5C) PIE adjustment is the amount given by section EY 42C to the extent to which it applies.

(6) Premium Premium is all the premiums due and payable to the life insurer in the income year.

Premium does not include a premium due and payable to the life insurer in a previous income year.

A variation to premium is in section EY 43.


Underwriting result (7) Underwriting result is the total of the following that the life insurer has in the income year: (a) (b) (c) the premium loading; and the mortality proﬁt; and the discontinuance proﬁt.
1158 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 42B (8) Tax rate Tax rate is the rate of tax speciﬁed in schedule 1, part A, clause 1 (Basic rates of income tax and speciﬁed superannuation con- tribution withholding tax), expressed as a decimal.

Positive result (9) A positive result from using the policyholder income formula is policyholder income in the income year.
Negative result (10) A negative result from using the policyholder income formula is policyholder net loss for the income year, and is dealt with under sections II 1 (Policyholder net losses) and II 2 (Policy- holder net loss for tax year preceding 1990-91).
Deﬁned in this Act: actuarial reserves, claim, discontinuance proﬁt, income year, life insurer, mortality proﬁt, pay, policyholder income, policyholder in- come formula, policyholder net loss, premium, premium loading, tax Compare: 1994 No 164 ss CM 15(1), (2), (4), OB 1 underwriting result Section EY 42(1) heading: substituted (with effect from 1 October 2007), on 19 December 2007, by section 98(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EY 42(1): substituted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 98(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EY 42(5B) heading: inserted (with effect from 1 October 2007), on 19 December 2007, by section 98(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EY 42(5B): inserted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 98(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EY 42(5C) heading: inserted (with effect from 1 October 2007), on 19 December 2007, by section 98(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EY 42(5C): inserted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 98(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
EY 42B Policyholder income formula: FDR adjustment (1) When this section applies This section applies for the purposes of section EY 42(5B) to property that supports only actuarial reserves to the extent to which— 1159 Part E s EY 42B Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) (c) the property is an attributing interest in a FIF held by the life insurer, or by a portfolio tax rate entity that the life insurer has directly or indirectly invested in; and the life insurer or the portfolio tax rate entity uses the fair dividend rate method for the property; and section EY 42C does not apply to the property.
When has life insurer indirectly invested in portfolio tax rate entity?

For the purposes of subsection (1), a life insurer is treated as indirectly investing in a portfolio tax rate entity (PTRE A) when a portfolio tax rate entity has invested in PTRE A and the investment may be traced back through an unbroken chain of investments in portfolio tax rate entities to a direct investment by the life insurer in a portfolio tax rate entity.
FDR adjustment In using the policyholder income formula, the life insurer may calculate the item FDR adjustment— (a) (b) using the formula in subsection (5); or by calculating, using any reasonable method for the in- formation available to the life insurer, the amount cred- ited to actuarial reserves in relation to the property, but excluding amounts which are related to FIF income under the fair dividend rate method.
(2) (3) Consistency requirement (4) A life insurer, in using the policyholder income formula, must calculate the item FDR adjustment by always applying whichever of subsection (3)(a) or (b) they ﬁrst apply.

Formula The formula described in subsection (3)(a) for the calculation of the item FDR adjustment is— 0.6 × (FIF result - FDR income).

Deﬁnition of items in formula The items in the formula are deﬁned in subsections (7) and (8).
FIF result FIF result is the life insurer’s gains and losses for the income year, for the property, calculated using accepted accounting practice.

(5) (6) (7) 1160 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 42C (8) FDR income FDR income is the amount for the income year of the life insurer’s income related to FIF income under the fair dividend rate method for the property, calculated using any reasonable method for the information available to the life insurer.
Deﬁned in this Act: amount, attributing interest, fair dividend rate method, FIF, FIF income, FIF loss, income, portfolio investment entity, portfolio investment- linked life fund Section EY 42B: inserted (with effect from 1 October 2007), on 19 December 2007, by section 99(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
EY 42C Policyholder income formula: PILF adjustment (1) (2) When this section applies This section applies for the purposes of section EY 42(5C) to property that supports only actuarial reserves for a portfolio investment-linked life fund, to the extent to which the property is— (a) an attributing interest in a FIF,— (i) held by the life insurer, or by a portfolio tax rate entity that the life insurer has directly or indi- rectly invested in; and for which the life insurer or the portfolio tax rate entity uses the fair dividend rate method for the property: (ii) (b) shares described in section CX 44C (Proceeds from dis- posal of certain shares by portfolio investment entities) held by the life insurer.
When has life insurer indirectly invested in portfolio tax rate entity?

For the purposes of subsection (1), a life insurer is treated as indirectly investing in a portfolio tax rate entity (PTRE A) when a portfolio tax rate entity has invested in PTRE A and the investment may be traced back through an unbroken chain of investments in portfolio tax rate entities to a direct investment by the life insurer in a portfolio tax rate entity.
(3) PIE adjustment In using the policyholder income formula, the life insurer may calculate the item PILF adjustment— 1161 Part E s EY 42C Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) using the formula in subsection (5); or by calculating, using any reasonable method for the in- formation available to the life insurer, the amount cred- ited to actuarial reserves in relation to the property, but excluding amounts that are— (i) related to FIF income under the fair dividend rate method: dividends or distributions for shares described subsection (1)(b), other than distributions from a portfolio tax rate entity to which section CX 44D(2) (Portfolio investor allocated income and distributions of income by portfolio tax rate en- tities) applies.
(ii) Consistency requirement (4) A life insurer, in using the policyholder income formula, must calculate the item PILF adjustment by always applying whichever of subsection (3)(a) or (b) they ﬁrst apply.

Formula The formula described in subsection (3)(a) for the calculation of the item PILF adjustment is— 0.9 × (FIF result - FDR income) + 0.9 × excluded shares.

Deﬁnition of items in formula The items in the formula are deﬁned in subsections (7) to (9).
FIF result FIF result is the life insurer’s gains and losses for the income year, for the property described in subsection (1)(a), calculated using accepted accounting practice.

FDR income FDR income is the amount for the income year of the life insurer’s income related to FIF income under the fair dividend rate method for the property described in subsection (1)(a), calculated using any reasonable method for the information available to the life insurer.
Excluded shares Excluded shares is the total for the life insurer, for shares described in subsection (1)(b), of— (5) (6) (7) (8) (9) 1162 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 43 (a) (b) (c) the positive amount of income excluded by section CX 44C(2): the negative amount of a deduction not allowed by sec- tion DB 17(3)(b) (Cost of revenue account property): the gains and losses for the shares, calculated using ac- cepted accounting practice, but excluding— (i) amounts already accounted for under paragraph (a) or (b) of this subsection, or under subsection (7): dividends and distributions for the shares, other than distributions from a portfolio tax rate entity to which section CX 44D(2) applies.
Deﬁned in this Act: amount, attributing interest, deduction, dividend, excluded income, fair dividend rate method, FIF, FIF income, FIF loss, income, portfolio investment-linked life fund, portfolio tax rate entity, share (ii) Section EY 42C: inserted (with effect from 1 October 2007), on 19 December 2007, by section 99(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
EY 43 Policyholder income formula: when partial reinsurance exists (1) (2) (3) (4) When this section applies This section applies when a life insurer has partial reinsurance.

Premium In using the policyholder income formula, the life insurer must reduce premium by an amount calculated using the formula— reinsurance premium – reinsurance claim.

Deﬁnition of items in formula The items in the formula are deﬁned in subsections (4) and (5).
Reinsurance premium Reinsurance premium is the total of the premiums due and payable by the life insurer in the income year under the life reinsurance policies under which the life insurer has partial reinsurance.

Reinsurance premium does not include pre- miums due and payable by the life insurer in previous income years.
(5) Reinsurance claim Reinsurance claim is the total of the claims receivable by the life insurer in the income year under the life reinsurance poli- 1163 Part E s EY 44 Income Tax Act 2004 Reprinted as at 29 August 2011 cies under which the life insurer has partial reinsurance.

Rein- surance claim does not include claims receivable by the life insurer in previous income years.
Deﬁned in this Act: amount, claim, income year, life insurer, life reinsurance policy, partial reinsurance, policyholder income formula, premium Compare: 1994 No 164 s CM 17(1) EY 44 Policyholder income formula: when life insurance business transferred When this section applies This section applies when a life insurance business is trans- ferred in a transfer to which all the following apply: (a) (ii) the transferor and the transferee, whether or not resident in New Zealand, are members of the same whollyowned group of companies immediately before and immedi- ately after the transfer; and 1 of the following is met: (i) if the transferor is resident in New Zealand, all the transferor’s life insurance business is trans- ferred to the transferee; or if the transferor is not resident in New Zealand, all the life insurance policies offered or entered into in New Zealand that are held by the trans- feror are transferred to the transferee; and the Commissioner receives conﬁrmation from the Gov- ernment Actuary that— (i) (ii) paragraph (b) is met; and no policyholder will be unduly disadvantaged as a result of the transfer; and the Commissioner is satisﬁed that the transfer is being undertaken for commercial reasons and that no undue tax advantage to either the transferor or the transferee will arise as a result of the transfer.
(b) (c) (d) Closing actuarial reserves In using the policyholder income formula for the income year in which the transfer occurs, the transferor must use as closing actuarial reserves the transferor’s actuarial reserves immedi- ately before the transfer.
(1) (2) 1164 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 45 (3) Opening actuarial reserves In using the policyholder income formula for the income year in which the transfer occurs, the transferee must use as opening actuarial reserves the total of— (a) the transferee’s actuarial reserves, determined at the start of the income year; and the transferee’s actuarial reserves for the business or policies transferred to the transferee, determined imme- diately after the transfer.
(b) Deﬁned in this Act: actuarial reserves, business, Commissioner, income year, life insurance, life insurance policy, offered or entered into in New Zealand, policyholder income formula, resident in New Zealand, wholly-owned group of companies Compare: 1994 No 164 s CM 18 Disposal of property EY 45 Income from disposal of property (1) When this section applies This section applies when a life insurer disposes of any prop- erty of their life insurance business.
Property generally (2) An amount that a life insurer derives from disposing of any property of their life insurance business is income of the life insurer under section CR 1(5) (Income of life insurer).

How- ever, if the property is a ﬁnancial arrangement, subsections (3) to (5) apply instead of this subsection.
(3) (4) Financial arrangement: application of ﬁnancial arrangements rules If the life insurer disposes of a ﬁnancial arrangement to which the ﬁnancial arrangements rules apply, subpart EW (Financial arrangements rules) applies.

Financial arrangement: application of old ﬁnancial arrangements rules If the life insurer disposes of a ﬁnancial arrangement to which the old ﬁnancial arrangements rules apply, sections EZ 30 to EZ 49 (which relate to the old ﬁnancial arrangements rules) apply.
1165 Part E s EY 46 Income Tax Act 2004 Reprinted as at 29 August 2011 (5) Financial arrangement: before old ﬁnancial arrangements rules If the life insurer receives an amount on or after 1 April 1982 as repayment or partial repayment of a ﬁnancial arrangement to which the old ﬁnancial arrangements rules would have applied if section EZ 42 (Application of old ﬁnancial arrangements rules) had not existed, the amount is income of the life insurer.
Deﬁned in this Act: amount, business, ﬁnancial arrangement, ﬁnancial arrange- ments rules, income, life insurance, life insurer, old ﬁnancial arrangements rules, property Compare: 1994 No 164 s CM 10 EY 46 Deductions for disposal of property (1) (2) (3) When this section applies This section applies when a life insurer is allowed a deduction under section DR 2 (Disposal of property).
Amount of deduction The amount of the deduction is— (a) (b) the property’s acquisition value or cost; or the amount described in section EZ 2(1) (Deductions for disposal of property: 1982-83 and 1989-90 income years); or the amount described in section EZ 2(2) (Deductions for disposal of property: 1982-83 and 1989-90 income years).

(c) Timing of deduction The life insurer is allowed the deduction in the income year in which they dispose of the property.
Deﬁned in this Act: amount, deduction, income year, life insurer, property Compare: 1994 No 164 s DK 3B(1), (3) Non-resident life insurers EY 47 Non-resident life insurers with life insurance policies in New Zealand When this section applies This section applies when a life insurer not resident in New Zealand offers or is offered or enters into life insurance poli- cies in New Zealand.
(1) 1166 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 48 (2) (3) (4) Income derived from New Zealand The life insurer’s income from the business of providing life insurance, as determined under this section, is income derived from New Zealand.
Underwriting result and policyholder income The life insurer applies the items of the premium loading for- mula, the mortality proﬁt formula, the discontinuance proﬁt formula, and the policyholder income formula only to— (a) the life insurance policies the life insurer, as insurer, offered or was offered or entered into in New Zealand; and the life reinsurance policies held by the life insurer that relate exclusively to the life insurance policies the life insurer, as insurer, offered or was offered or entered into in New Zealand.
(b) Other income The life insurer’s income from the business of providing life insurance, other than under a formula referred to in subsection (3), is determined only in relation to the life insurer’s New Zealand business.
Deﬁned in this Act: business, discontinuance proﬁt formula, income, income derived from New Zealand, life insurance, life insurance policy, life insurer, life reinsurance policy, mortality proﬁt formula, New Zealand, New Zealand busi- ness, non-resident, offered or was offered or entered into, policyholder income formula, premium loading formula, resident in New Zealand Compare: 1994 No 164 ss CM 13(2), CM 16, CM 17(2), CN 3(1), (1A) EY 48 Non-resident life insurer may become resident Non-resident life insurer may apply (1) A life insurer not resident in New Zealand may apply to be treated for its New Zealand business as resident in New Zealand on and after the ﬁrst day of a particular income year.
(2) Application The life insurer applies by— (a) (b) completing a written application specifying the particu- lar income year; and giving the application to the Commissioner not less than 20 working days before the start of the particular income year.

1167 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) (4) (5) (6) Commissioner may grant The Commissioner may grant the application.
Company resident in New Zealand If the application is granted, the life insurer’s New Zealand business is treated, on and after the ﬁrst day of the particular income year, as being carried on by a company resident in New Zealand in which the life insurer holds all the issued shares.
Life insurer agent for company The life insurer is treated as carrying on its New Zealand busi- ness as agent for the company and is liable, as agent for the company, to pay amounts payable to the Commissioner and to provide returns of income and other information required by the Commissioner.

Company and life insurer separate persons The life insurer and the company are treated as being separate persons in relation to the life insurer’s New Zealand business.
Deﬁned in this Act: agent, amount, Commissioner, company, income year, life insurer, New Zealand business, non-resident, resident in New Zealand, return of income, share, working day Compare: 1994 No 164 s OE 3 Subpart EZ—Terminating provisions Contents Life insurance Page EZ 1 Life insurers acquiring property before 1 April 1988 EZ 2 Deductions for disposal of property: 1982-83 and 1989-90 1171 1172 income years EZ 3 Petroleum mining Petroleum development expenditure from 1 October 1990 to 15 December 1991 1173 Livestock EZ 4 Valuation of livestock bailed or leased as at 2 September 1174 1992 EZ 4B Reduction: bloodstock not previously used for breeding 1175 in New Zealand: pre-1 August 2006 EZ 4C Reduction: broodmare previously used for breeding in 1177 New Zealand: pre-1 August 2006 1168 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EY 48 EZ 5 Buying patent rights before 1 April 1993 Patent rights EZ 6 Premium paid on land leased before 1 April 1993 Leases of land EZ 7 EZ 8 EZ 9 Foreign investment fund rules FIF interests held on 1 April 1993 [Repealed] Depreciation Pool method for items accounted for by globo method for 1992-93 income year Pool items accounted for by globo method for 1992-93 income year EZ 10 Amounts of depreciation recovery income and depreciation loss for part business use in or before 1992-93 income year EZ 11 Amount of depreciation loss for item acquired from associated person on or before 23 September 1997 EZ 12 Annual rate for item acquired on or after 1 April 1993 and before end of person’s 1994-95 income year EZ 13 Pre-1993 depreciation rate EZ 14 Annual rate for excluded depreciable property: 1992-93 tax year EZ 15 Amount of depreciation loss for plant or machinery additional to section EZ 14 amount EZ 16 Additional amount of depreciation loss: between 16 December 1991 and 1 April 1994 EZ 17 Section EZ 16 amount of depreciation loss when items transferred between companies in wholly-owned group before 1 April 1993 1178 1179 1180 1180 1180 1181 1181 1183 1183 1185 1187
 1188 1189 EZ 18 Section EZ 16 amount of depreciation loss when person 1190 previously exempt from tax acquires item EZ 19 Adjusted tax value for software acquired before 1 April 1191 1993 EZ 20 Sections EE 38 and EE 40: permanent removal: allowance 1191 before 1 April 1995 EZ 21 Base value and total deductions in section EE 47: before 1 1192 April 1995 EZ 21B Economic rate for plant or equipment acquired before 1 1193 April 2005 and buildings acquired before 19 May 2005 EZ 22 Meaning of new asset Deﬁnitions 1194 1169 Income Tax Act 2004 Reprinted as at 29 August 2011 EZ 23 Meaning of New Zealand-new asset EZ 24 Meaning of qualifying capital value EZ 25 Meaning of qualifying improvement EZ 26 Meaning of qualifying asset Accident insurance 1196 1197 1198 1199 EZ 27 Private insurers under Accident Insurance Act 1998 EZ 28 Base premium for 1998-99 premium year under Accident 1200 1201 Insurance Act 1998 CFC and FIF rules EZ 29 Disclosure restrictions on grey list CFCs before 2011–12 1202 Old ﬁnancial arrangements rules EZ 30 Application of old ﬁnancial arrangements rules EZ 31 Election to apply ﬁnancial arrangements rules in subpart 1204 1204 EW EZ 32 Accruals in relation to income and expenditure in respect 1204 of ﬁnancial arrangements EZ 33 Excepted ﬁnancial arrangement that is part of ﬁnancial 1211 arrangement EZ 34 Cash basis holder EZ 35 Income and expenditure where ﬁnancial arrangement redeemed or disposed of EZ 36 Forgiveness of debt EZ 37 Accrued income written off EZ 38 Sale of debt to associate of debtor EZ 39 Post facto adjustment EZ 40 Variable principal debt instruments EZ 41 Relationship with rest of Act EZ 42 Application of old ﬁnancial arrangements rules EZ 43 Election to treat short term trade credit as ﬁnancial arrangement EZ 44 Election to continue to treat certain excepted ﬁnancial arrangements as ﬁnancial arrangements EZ 45 Deﬁnitions EZ 46 Determination of core acquisition price where consideration for property denominated in foreign currency
 EZ 47 Rules for non-market transactions EZ 48 Transitional adjustment when changing to ﬁnancial arrangements rules EZ 49 References to new rules include old rules EZ 50 Transitional rule for IFRS ﬁnancial reporting method 1170 1211 1217 1222 1223 1224 1225 1227 1227 1228 1229 1230 1230 1244 1245 1246 1248 1249 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 1 EZ 51 Transitional rule for ﬁnancial reporting method EZ 52 Transitional rule for changes from the fair value method 1249 1250 EZ 1 Life insurers acquiring property before 1 April 1988 Life insurance (1) (2) (3) (4) (5) (6) (7) When this section applies This section applies when section DZ 2 (Life insurers acquir- ing property before 1 April 1988) applies.
Amount of deduction The amount of the deduction is calculated using the formula— Deﬁnition of items in formula The items in the formula are deﬁned in subsections (4) to (9).

Speciﬁc liability Speciﬁc liability is the amount in the life insurer’s total liabil- ity on the last day of the 1987-88 income year for the following matters covered by the life insurer’s Life Insurance Fund: (a) (b) (c) superannuation policies; and pre-1983 mortgage repayment insurance policies; and annuities that have been granted.
Total liability Total liability is the life insurer’s liability for life insurance policies on the last day of the 1987-88 income year.

Property sum The property sum is calculated under whichever is relevant of subsections (7) to (9).
Property acquired before last day of 1982-83 income year For property acquired on or before the last day of the 1982-83 income year, the property sum is calculated by subtracting the speciﬁed base cost for 1983 income year property from the market value of the property on 1 April 1988.
1171 Part E s EZ 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (8) (9) Property acquired after end of 1982-83 income year: not ﬁnancial arrangement For property acquired after the end of the 1982-83 income year that is not a ﬁnancial arrangement, the property sum is calcu- lated by subtracting the cost price or acquisition value of the property from the market value of the property on 1 April 1988.
Property acquired after end of 1982-83 income year: ﬁnancial arrangement For property acquired after the end of the 1982-83 income year that is a ﬁnancial arrangement, the property sum is the base price adjustment for the arrangement, calculated as if the ar- rangement had matured on 1 April 1988 but using the formula in section EW 31 (Base price adjustment formula).

Timing of deduction (10) The life insurer is allowed the deduction in the income year in which they dispose of the property.
Deﬁned in this Act: amount, deduction, ﬁnancial arrangement, income year, Life Insurance Fund, life insurance policy, life insurer, property, speciﬁed base cost for 1983 income year property, superannuation policy Compare: 1994 No 164 s DK 3C EZ 2 Deductions for disposal of property: 1982-83 and 1989-90 income years (b) Section EY 46(2)(b) For the purposes of section EY 46(2)(b) (Deductions for dis- posal of property), for property to which both the following apply, the amount of the deduction is the market value of the property on the last day of the 1989-90 income year: (a) the property is land or buildings acquired on or before the last day of the 1989-90 income year; and the proﬁt from the property’s disposal on or before the last day of the 1989-90 income year, had it been dis- posed of then at a proﬁt, would have been a capital proﬁt or gain and not a proﬁt on disposal of an investment sub- ject to income tax under section 204 of the Income Tax Act 1976 (as that section was immediately before its re- peal and substitution by section 13(1) of the Income Tax Amendment Act (No 2) 1990).
(1) 1172 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 3 (2) Section EY 46(2)(c) For the purposes of section EY 46(2)(c) (Deductions for dis- posal of property), for property to which both the following apply, the amount of the deduction is the speciﬁed base cost for 1983 income year property: (a) the property was acquired on or before the last day of the 1982-83 income year; and subsection (1) does not apply to the property.
(b) Deﬁned in this Act: amount, deduction, income year, property, speciﬁed base cost for 1983 income year property Compare: 1994 No 164 s DK 3B(1) Petroleum mining EZ 3 Petroleum development expenditure from 1 October 1990 to 15 December 1991 (1) (2) (3) Timing of deduction Expenditure that is allowed as a deduction under section DZ 3 (Petroleum mining: development expenditure from 1 Octo- ber 1990 to 15 December 1991) must be deducted in equal amounts over the 10 years starting with the later of— (a) the income year in which commercial production starts; and the income year in which the expenditure is incurred.
(b) Petroleum mining operations outside New Zealand This section applies with any necessary modiﬁcations to a pet- roleum miner who undertakes petroleum mining operations that are— (a) outside New Zealand and undertaken through a branch or a controlled foreign company; and substantially the same as the petroleum mining activ- ities governed by this Act.
(b) Partnership interests 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.

1173 Part E s EZ 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) Disposal of part of asset 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: amount, commercial production, controlled foreign com- pany, deduction, dispose, income year, New Zealand, petroleum, petroleum miner, petroleum mining operations Compare: 1994 No 164 ss DM 1(3), DM 7(1), DM 9, DM 10 Livestock EZ 4 Valuation of livestock bailed or leased as at 2 September 1992 When this section applies This section applies when— (a) (b) an owner of livestock valued a class of livestock for the 1991-92 income year under section 86 of the Income Tax Act 1976 (as that section was in force before its repeal by section 21 of the Income Tax Amendment Act (No 2) 1993); and either— (i) the livestock was, as at 2 September 1992, at the use of a person under a bailment, lease, or other agreement that the owner entered into on or be- fore that date, or was, on or before that date, live- stock that was subject to a binding contract to bail or lease the livestock to a person, or otherwise al- low them to use the livestock; or the class of livestock was not one that the owner had on hand in the previous income year, but was a class that, as at 2 September 1992, was at the use of a person under a bailment, lease, or other agreement that the owner entered into on or before that date.
(ii) Rolling average value The owner may value the livestock at a value equal to 70% of the rolling average value of that class of livestock.

When subsection (2) applies Subsection (2) applies for the 1992-93 income year and any later income year in which the livestock continues to be bailed, (1) (2) (3) 1174 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 4B leased, or otherwise used by the person under the bailment, lease, or other agreement.
(4) (5) Number of livestock valued The number of speciﬁed livestock of a class that may be valued under this section is the number that is the least of— (a) the number of livestock of the class bailed, leased, or otherwise used (or, for a binding contract entered into before 2 September 1992 but not yet applying, the num- ber of livestock of that class provided for in the con- tract); and the number of livestock of the class bailed, leased, or otherwise used as at the end of the 1992-93 income year; and the lesser of the opening and closing number of stock of the class bailed, leased, or otherwise used in a later in- come year up to and including the income year in which the livestock is being valued.
(b) (c) Meaning of rolling average value In this section, rolling average value, for an income year and a class of speciﬁed livestock, means one-third of the sum of the national average market values set for that income year and each of the 2 previous income years for livestock of that class.
Deﬁned in this Act: class, income year, lease, national average market value, rolling average value, speciﬁed livestock Compare: 1994 No 164 s EZ 4(1), (2), (5) EZ 4B Reduction: bloodstock not previously used for breeding in New Zealand: pre-1 August 2006 (1) Bloodstock to which this section applies This section applies to bloodstock that— (a) (b) was not used for breeding in New Zealand before 16 December 1991; and before a person (person A) acquired it, was not used for breeding in New Zealand by any other person, unless— the other person transferred the bloodstock to (i) person A under a matrimonial agreement to which section FF 12 (Bloodstock) applies; or the other person and person A were companies in the same wholly-owned group at the time person (ii) 1175 Part E s EZ 4B Income Tax Act 2004 Reprinted as at 29 August 2011 (c) A acquired the bloodstock from the other person; and section EC 39(1) or (2) applies to,— before 1 August 2006; or (i) for an income year ending on or after 1 August (ii) 2006, if a requirement in paragraphs (a) to (c) of section EC 39(1) or (2) is ﬁrst met before 1 August 2006.
(2) Stallion For the purposes of sections EC 39 and EC 40, the reduction applying to the value of a stallion is 25% of the cost price of the stallion unless person A chooses to value the stallion by the reducing value method.

Stallion valued by reducing value method (3) When person A chooses to value the stallion by the reduc- ing value method, the reduction applying to the value of the stallion is 37.5% of its cost price in the ﬁrst income year and 37.5% of its opening value in each later income year.
Person A must give notice to the Commissioner of their election in their return of income for the ﬁrst income year.

Broodmare when ﬁrst used before 1 April 2001 For the purposes of sections EC 39 and EC 40, the reduction applying to the value of a broodmare is calculated using the formula— Deﬁnition of item in formula In the formula, age of broodmare is— (a) (b) 12 years of age; or the actual age in years, if the broodmare is 11 years of age or less at the end of the income year.
Broodmare when ﬁrst used on or after 1 April 2001 but before 1 August 2006 For the purposes of sections EC 39 and EC 40, the reduction applying to the value of a broodmare to which section EC 39(2) applies is calculated using the formula— (4) (5) (6) 1176 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 4C (7) Deﬁnition of item in formula In the formula, age of broodmare is— (a) (b) 8 years of age; or the actual age in years, if the broodmare is 7 years of age or less at the end of the income year.
Deﬁned in this Act: bloodstock, broodmare, Commissioner, company, cost price, income year, matrimonial agreement, New Zealand, notice, return of in- come, stallion, wholly-owned group, year Sections EZ 4B and EZ 4C were inserted, as from 1 August 2006, by section 101 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellan- eous Provisions) Act 2006 (2006 No 3).
EZ 4C Reduction: broodmare previously used for breeding in New Zealand: pre-1 August 2006 (1) (2) (3) Broodmare to which this section applies This section applies to a broodmare that section EC 39(1) or (2) applies to,— (a) (b) before 1 August 2006; or for an income year ending on or after 1 August 2006, if a requirement in paragraphs (a) to (c) of section EC 39(1) or (2) is ﬁrst met before 1 August 2006.
Broodmare when ﬁrst used before 1 April 2001 For the purposes of sections EC 39 and EC 40, the reduction applying to the value of a broodmare to which section EC 39(1) applies and sections EC 41 and EZ 4B do not apply is calcu- lated using the formula— Deﬁnition of item in formula In the formula, age of broodmare is— (a) (b) 12 years of age; or the actual age in years, if the broodmare is 11 years of age or less at the end of the income year.
1177 Part E s EZ 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) (5) Broodmare when ﬁrst used on or after 1 April 2001 but before 1 August 2006 For the purposes of sections EC 39 and EC 40, the reduction applying to the value of a broodmare to which section EC 39(2) applies and sections EC 41 and EZ 4B do not apply is calcu- lated using the formula— Deﬁnition of item in formula In the formula, age of broodmare is— (a) (b) 8 years of age; or the actual age in years, if the broodmare is 7 years of age or less at the end of the income year.
Deﬁned in this Act: broodmare, cost price, income year, year Sections EZ 4B and EZ 4C were inserted, as from 1 August 2006, by section 101 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellan- eous Provisions) Act 2006 (2006 No 3).

EZ 5 Buying patent rights before 1 April 1993 Patent rights When this section applies This section applies when section DZ 8 (Buying patent rights before 1 April 1993) applies.
Amount of deduction The amount of the deduction is the expenditure that the person has incurred in buying the patent rights.
Amount when patent rights expired or disposed of If, before the expiry of the patent rights, the rights have come to an end or have been disposed of, the person is allowed a deduction of an amount that bears to the total sum of the ex- penditure on the purchase of the rights the same proportion as the unexpired term of the rights when they came to an end or were disposed of bears to their unexpired term at the date of their purchase.
An amount that the person has otherwise been allowed as a deduction is not included.

(1) (2) (3) 1178 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 6 (4) (5) Timing of deduction: subsection (2) The deduction referred to in subsection (2) is allocated to the income years in relation to which the term of the patent rights that is unexpired at the date of purchase applies.
Timing of deduction: subsection (3) The deduction referred to in subsection (3) is allocated to the income year in which the rights have come to an end or been disposed of.

Deﬁned in this Act: amount, deduction, income year, patent rights Compare: 1994 No 164 s EZ 5 EZ 6 Premium paid on land leased before 1 April 1993 Leases of land (1) (2) (3) (4) (5) When this section applies This section applies when section DZ 9 (Premium paid on land leased before 1 April 1993) applies.
Amount of deduction The amount of the deduction is the premium paid on the grant or renewal of the lease.

If person A does not use the land for the whole of a tax year, the amount of the deduction is reduced proportionately.

Amount when lease or renewal granted to another person If the lease or the renewal of the lease is granted to another person, the deduction must not be more than the amount of the premium paid by person A on the acquisition of the lease.
Timing of deduction The deduction is allocated evenly to the income years in rela- tion to which the term of the lease applies.

Meaning of term of the lease In this section, term of the lease, for a lease of indeﬁnite du- ration, means the minimum period it has to run.
Deﬁned in this Act: amount, deduction, income year, lease, premium, tax year, term of the lease Compare: 1994 No 164 s EZ 6 1179 Part E s EZ 7 Income Tax Act 2004 Reprinted as at 29 August 2011 Foreign investment fund rules EZ 7 FIF interests held on 1 April 1993 [Repealed] Section EZ 7 was repealed, as from 1 April 2007, by section 83(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
See section 83(2) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
Depreciation EZ 8 Pool method for items accounted for by globo method for 1992-93 income year If a person chooses the pool method for an item of property of a kind described in section EE 57(3)(c) (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: 1994 No 164 s EG 3(5) EZ 9 Pool items accounted for by globo method for 1992-93 income year Limit on amount of income 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 pre- vious income years for all items in the pool, including amounts allowed before the person’s 1993-94 income year under the globo accounting method (1) (2) 1180 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 11 (b) income is all amounts of income under section EE 22(5)(a) (Cases affecting pool) in all previous income years.
Deﬁned in this Act: amount, Commissioner, depreciable property, depreciation loss, income year, pool Compare: 1994 No 164 s EG 11(4A) EZ 10 Amounts of depreciation recovery income and depreciation loss for part business use in or before 1992-93 income year For the purposes of sections EE 42(1)(b)(ii) (Amount of depre- ciation recovery income when item partly used for business) and FB 7(5)(b)(ii) (Depreciation: partial income-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 EG 2(1)(d) or (e) of the In- come Tax Act 1994: 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 a previous income year, an item that the person did not use wholly in deriving assessable income or carrying on a business for the purpose of deriving assessable income and for which, consequently, the person was allowed a smaller deduction for depreciation under section 108 of the In- come Tax Act 1976 than they would have been allowed if they had used the item wholly for 1 of those purposes.
(b) (c) Deﬁned in this Act: assessable income, business, income year Compare: 1994 No 164 s EG 19(4) Paragraphs (a) and (b) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; or”.
EZ 11 Amount of depreciation loss for item acquired from associated person on or before 23 September 1997 (1) 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 1181 Part E s EZ 11 Income Tax Act 2004 Reprinted as at 29 August 2011 entitled to a deduction for an amount of depreciation loss for it.
(2) Exclusions This section does not apply— (a) (b) (c) if the item is acquired under a relationship agreement in circumstances to which section FF 16(1) (Depreciable property) applies; or if the item is listed in schedule 17 (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 17 (Depreciable in- tangible property) and the Commissioner is of the opin- ion 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 con- sideration 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 that which the associated person would have had if the associ- ated person had kept the item.
Amount of depreciation loss dealt with under section EE 41 If the associated person has an amount of depreciation loss that has been dealt with under section EE 41 (Effect of disposal or event), person A has an amount of depreciation loss for the item based on the total of— (a) all amounts dealt with under section EE 41 (Effect of disposal or event); and the depreciated value of the item immediately before person A acquired it.
(b) 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 (4) (5) 1182 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 13 (6) 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, matrimonial agreement Compare: 1994 No 164 s EZ 11 Subsection (2)(a) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agree- ment” for “matrimonial agreement”.
EZ 12 Annual rate for item acquired on or after 1 April 1993 and before end of person’s 1994-95 income year (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 27 (Annual rate for ﬁxed life intangible prop- erty) and EZ 14 respectively).
Rate The rate is— (a) (b) the item’s economic rate; or the pre-1993 depreciation rate described in section EZ 13, 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: 1994 No 164 s EG 5(1) EZ 13 Pre-1993 depreciation rate Scope of election (1) A person may choose the pre-1993 depreciation rate for all items, or any item, that they acquire before the end of their 1994-95 income year.
(2) 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.

1183 Part E s EZ 13 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) 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 (4) A person who chooses the pre-1993 depreciation rate has the following choices: (a) if the rate is a diminishing value rate, the person may instead use the straight-line rate by— (i) rounding the diminishing value rate to the nearest rate speciﬁed in schedule 10, 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 (Straight-line equivalents of diminishing value rates of depre- ciation); 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— 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 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 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 (5) (6) (7) (8) 1184 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 14 for the 1992-93 tax year, for which the item was eligible for the 1992-93 tax year.

Section 113A rate (9) Section 113A rate means 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.
Section 113A rate Deﬁned in this Act: Commissioner, diminishing value rate, income year, return of income, standard balance date, straight-line rate, tax year Compare: 1994 No 164 s EG 5(2)-(4) EZ 14 Annual rate for excluded depreciable property: 1992-93 tax year (1) (2) (3) (4) 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 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 (5) Other sections rate means a rate of additional or supplemen- tary deduction under section 113A or any other provision of 1185 Part E s EZ 14 Income Tax Act 2004 Reprinted as at 29 August 2011 (6) 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 15 or EZ 16 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 (b) when an adjusted rate is applied to the item, the person does not have a separate amount of depreciation loss for the item under section EZ 15 or EZ 16 or the other provision.
Changing rate (7) A person applying the rate in subsection (2) has the following choices: (a) if the rate is a diminishing value rate, the person may instead use the straight-line rate by— (i) rounding the diminishing value rate to the nearest rate speciﬁed in schedule 10, 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 (Straight-line equivalents of diminishing value rates of depre- ciation); 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: 1994 No 164 s EG 9 (ii) 1186 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 15 EZ 15 Amount of depreciation loss for plant or machinery additional to section EZ 14 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) aluminium smelting plant or machinery: Exclusions This section does not apply to— (a) (b) motorcars: (c) (d) (e) 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 a previous 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 a previous relevant income year.
(f) (3) 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 14 (Annual rate for excluded depreciable property: 1992-93 tax year).
1187 Part E s EZ 16 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) (5) 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: (b) for plant or machinery described in subsection (1)(b)(ii), 6% of the diminishing value of the plant or machinery in each income year.
Deﬁned in this Act: amount, assessable income, business, Commissioner, de- preciation loss, excluded depreciable property, income year, motorcar, New Zealand, petroleum, working day Compare: 1994 No 164 s EG 18 Subsection (1)(b)(i) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; or”.
Subsection (2)(a) to (e) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; or”.

Subsection (5)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; and”.
EZ 16 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.
(1) (2) 1188 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 17 (3) (4) 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) and section EZ 15.

This subsection is overridden by section EE 41(2) (Effect of disposal or event).
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 (Depreciation) and section EZ 15 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 (Depreciation) and section EZ 15 for the asset or item and the income year had its value been equal to its qualifying capital value.
Deﬁned in this Act: acquire, amount, depreciation loss, income year, qualifying capital value, qualifying improvement, qualifying asset Compare: 1994 No 164 ss ED 4(5), EG 15(1), (2) (b) EZ 17 Section EZ 16 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 16 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 16 for the asset or item for the income year in which the disposal occurs must be subtracted when the 1189 Part E s EZ 18 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) amount of depreciation loss that the transferee company has under section EZ 16 for the income year is calculated.
How deﬁnitions affected This section applies despite any limitations in the deﬁnitions of new asset, New Zealand-new asset, qualifying capital value, qualifying improvement, and qualifying asset as to the identity of the person for whom an asset or item or im- provement will be treated as a qualifying asset or qualifying improvement.
Deﬁned in this Act: amount, company, depreciation loss, dispose, income year, new asset, New Zealand-new asset, qualifying capital value, qualifying im- provement, qualifying asset, wholly-owned group of companies Compare: 1994 No 164 s EG 15(3) EZ 18 Section EZ 16 amount of depreciation loss when person previously exempt from tax acquires item When this section applies This section applies when a person who has derived nothing but exempt income— (a) starts in an income year to derive income that is not exempt income; and (b) would have had an amount of depreciation loss under section EZ 16 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 16 applies or made a qualifying improvement to the item to which section EZ 16 applies.
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: 1994 No 164 s EG 15(4) (1) (2) 1190 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 20 EZ 19 Adjusted tax value for software acquired before 1 April 1993 (1) (2) 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: (a) (b) (c) the copyright in software: the right to use the copyright in software: the right to use software.
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: 1994 No 164 s EG 19(9), (10)(a) Subsection (1)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:” for “; and”.
EZ 20 Sections EE 38 and EE 40: permanent removal: allowance before 1 April 1995 (1) (2) Section EE 38(8) For the purposes of section EE 38(8) (Consideration for pur- poses of section EE 37), 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 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 40(10) For the purposes of section EE 40(10) (Events for purposes of section EE 37), 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) has been taken out of New Zealand temporarily; and 1191 Part E s EZ 21 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) 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, matrimonial agreement, New Zealand, tax- able supply Compare: 1994 No 164 s EG 19(7)(d), (9) Subsection (1)(b) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agree- ment” for “matrimonial agreement”.
EZ 21 Base value and total deductions in section EE 47: before 1 April 1995 Base value in section EE 47 when section 108 of the Income Tax Act 1976 applies For the purposes of section EE 47 (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 person’s accounts for taxation purposes for the 1992-93 income year.
Section EE 48(3)(d) For the purposes of section EE 48(3)(d) (Base value in section EE 47 when none of sections EE 49, EE 50, or EZ 21(1) ap- plies),— (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 49(1)(e)(ii) For the purposes of section EE 49(1)(e)(ii) (Base value in sec- tion EE 47 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.
(1) (2) (3) 1192 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 21B (4) Section EE 51(2)(c) For the purposes of section EE 51(2)(c) (Total deductions in section EE 47), the provision is section 117(5) of the Income Tax Act 1976.
Deﬁned in this Act: amount, income year Compare: 1994 No 164 s OB 1 adjusted tax value (a)(i)-(iii) EZ 21B 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 91AAFof the Tax Administration Act 1994.
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 speci- ﬁed in schedule 11, column 1 (Banded rates of depreci- ation); and (b) 1193 Part E s EZ 22 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) sets the same rate for some or all of the kinds of items of depreciable property that are similar to one another, if the Commissioner thinks it is appropriate to do so having regard to— (i) (ii) the rate calculated for each kind; and the reduction in compliance costs that is likely to be achieved.
Formula The formula is— (4) (5) Deﬁnition of item in formula In the formula,— (a) residual value is the greater of— (i) estimated residual market value, which is deﬁned in section EE 58 (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 54 (Mean- ing 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 Section EZ 21B was inserted, as from 3 April 2006, by section 102(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
Deﬁnitions EZ 22 Meaning of new asset Meaning (1) 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— (2) 1194 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 22 (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 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.
(3) (4) Exclusion (5) A constructed item that a person owns is not a new asset if— its construction started before 16 December 1991 (but this paragraph does not apply to the extent to which the (a) 1195 Part E s EZ 23 Income Tax Act 2004 Reprinted as at 29 August 2011 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 the item was not ﬁrst used by the person before 1 April 1994.
(b) (c) (d) Deﬁned in this Act: acquire, new asset, trading stock Compare: 1994 No 164 s OB 1 new asset EZ 23 Meaning of New Zealand-new asset Meaning (1) New Zealand-new asset means an item of property that a per- son 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 (ii) (iii) (2) (3) 1196 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 24 (4) (5) 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 The item is— (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: 1994 No 164 s OB 1 New Zealand-new asset EZ 24 Meaning of qualifying capital value Meaning (1) Qualifying capital value means, for an income year,— (a) (b) 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).
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 are deﬁned in subsections (4) to (6).

(2) (3) Acquisition cost (4) 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.
1197 Part E s EZ 25 Income Tax Act 2004 Reprinted as at 29 August 2011 (5) (6) (7) (8) (9) (10) 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.
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 previous 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 are deﬁned in subsections (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 previous in- come years, not including an amount of depreciation loss cal- culated using the straight-line method.
Deﬁned in this Act: acquire, amount, depreciation loss, income year, qualifying capital value, qualifying improvement, qualifying asset, straight-line method Compare: 1994 No 164 s EG 15(5) EZ 25 Meaning of qualifying improvement Meaning (1) Qualifying improvement, for a person’s income year, means an improvement of an item that the person owns, if all the following apply: (a) the person incurred the expenditure on the improve- ment— (i) in the period starting on 16 December 1991 and ending with the close of 31 March 1993, other 1198 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 26 (ii) 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 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.
Exclusions (2) Qualifying improvement does not include— (ii) (a) (b) an improvement to a building; or an improvement requiring construction, if— (i) 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: 1994 No 164 s OB 1 “qualifying improvement” (iii) (iv) EZ 26 Meaning of qualifying asset Qualifying asset means— (a) a new asset, other than a building, that a person owns in an income year and for which they are allowed a deduction for depreciation under the Income Tax Act 1976 for the income year; or (b) a New Zealand-new asset, other than a building or a motorcar, that a person owns in an income year and for which they are allowed a deduction for depreciation under the Income Tax Act 1976 for the income year.
1199 Part E s EZ 27 Income Tax Act 2004 Reprinted as at 29 August 2011 Deﬁned in this Act: income year, motorcar, new asset, New Zealand-new asset, qualifying asset Compare: 1994 No 164 s OB 1 “qualifying asset” Accident insurance EZ 27 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 following, 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) 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 (b) (4) 1200 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 28 of the Government Actuary or any other actuary in de- termining it.
Calculation or determination of reserve (5) A person calculating or determining the amount of a reserve under subsection (4) must ensure that the amount has regard to— (a) (b) (c) generally accepted accounting practice; and generally accepted actuarial practice; and the present value of expected future payments.

(6) 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, supplement, tax year Compare: 1994 No 164 s DK 5 EZ 28 Base premium for 1998-99 premium year under Accident Insurance Act 1998 Discount payment date (1) An amount of base premium for the 1998-99 premium year that is paid on or before the discount payment date is treated as expenditure in the tax year in which the discount payment date falls if the discount payment date is before the date on the invoice that speciﬁes when payment is due.
This subsection overrides section EF 3(1) (ACC levies and premiums).

(2) (3) 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 1201 Part E s EZ 29 Income Tax Act 2004 Reprinted as at 29 August 2011 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, dis- count payment date, interest, monthly instalment plan, tax year Compare: 1994 No 164 ss ED 1A(1A), (5), ED 6A CFC and FIF rules EZ 29 Disclosure restrictions on grey list CFCs before 2011–12 No attributed CFC income from taxable distribution (1) No attributed CFC income arises under section EX 19 (Taxable distribution from non-qualifying trust) in respect of a person’s income interest in a CFC if subsection (4) applies.
No branch equivalent income or loss (2) No branch equivalent income or loss arises under section EX 21 (Branch equivalent income or loss: calculation rules) in respect of a person’s income interest in a CFC if subsection (4) applies.

No FIF income or loss (3) No FIF income or loss arises under section EX 46 (Additional FIF income or loss if CFC owns FIF) in respect of a person’s income interest in a CFC if subsection (5) applies.
Application of subsections (1) and (2) Subsection (1) or (2) applies in respect of a person’s income interest for an accounting period in a CFC if— (a) the income interest arises from an interest of the person in a CFC that satisﬁes subsection (6); and the person holds information that would, if considered by the Commissioner, satisfy the Commissioner under subsection (7).
(b) Application of subsection (3) Subsection (3) applies in respect of a person’s income interest for an accounting period in a CFC if— (a) (b) the income interest satisﬁes subsection (6); and the person holds information that would, if considered by the Commissioner, satisfy the Commissioner under subsection (7).
(4) (5) 1202 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 29 Relevant grey list CFC (6) An interest in a CFC satisﬁes this subsection for an accounting period if the CFC is, throughout the accounting period,— (a) (b) resident in a country on the grey list; and quoted on the ofﬁcial list of a recognised exchange in the country; and under the law of the country or the rules of the ex- change,— (i) (c) prevented from disclosing to the person informa- tion necessary for calculating attributed CFC in- come or loss or FIF income or loss: required, as a result of the disclosure, to make a further disclosure of information that would be harmful to the commercial interests of the CFC.
(ii) (7) (8) Person must satisfy Commissioner For this section to apply in respect of a person’s income inter- est for an accounting period in a CFC, the person must hold information that would satisfy the Commissioner that, for the accounting period, an effect of the law or rules referred to in subsection (6) is that the person cannot calculate the attributed CFC income or loss or FIF income or loss in respect of the in- come interest.
Section terminates after 2010–11 income year This section does not apply to the tax on income derived by a person in an income year after the income year that corres- ponds to the 2010–11 tax year.
Deﬁned in this Act: accounting period, attributed CFC income, attributed CFC income or loss, branch equivalent income or loss, Commissioner, CFC, FIF, FIF income or loss, grey list, income, income interest, income year, recognised exchange, tax, tax year Section EZ 29 was substituted, as from 1 October 2006, by section 103(1) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3) with application as from the income year corres- ponding to the 2006–07 tax year.
1203 Part E s EZ 30 Income Tax Act 2004 Reprinted as at 29 August 2011 Old ﬁnancial arrangements rules EZ 30 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: 1994 No 164 s EH A1 EZ 31 Election to apply ﬁnancial arrangements rules in subpart EW Despite section EZ 30, a person may elect to apply the ﬁnan- cial arrangements rules by calculating a transitional adjust- ment under section EZ 48.
Compare: 1994 No 164 s EH A2 EZ 32 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) 1204 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 32 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) 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 results in the allocation to each income year of amounts that are not materially different from amounts that would be calculated but for this proviso.
(3) Notwithstanding subsection (2), but subject to the other 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) (c) the person may calculate income or expenditure for that income year in respect of those ﬁnancial arrangements by using the straight-line method so as to result in the allocation to that income year and subsequent income years of amounts that are fair and reasonable in respect of those arrangements; and (b) where the straight-line method is used under paragraph (a), that method must be used by the person in respect of all ﬁnancial arrangements of which the person was the holder or issuer during that income year; and 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- (c) 1205 Part E s EZ 32 Income Tax Act 2004 Reprinted as at 29 August 2011 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 per- son in respect of the ﬁnancial arrangement for the relevant in- come 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— (i) was acquired or issued by the person in a previous income year; and (4) (5) 1206 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 32 (ii) continues to be held or issued by the person at the end of the ﬁrst income year for which income or expenditure is calculated under subsection (3),— the amount of income or expenditure of the person in respect of that ﬁnancial arrangement for that ﬁrst income year is an amount calculated in accordance with the following formula: a – b – c + d where— a is the sum of all amounts that would have been income derived by the person in respect of the ﬁnancial 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 b c d is the sum of all amounts that would have been ex- penditure incurred by the person in respect of the ﬁnan- cial arrangement if the straight-line method referred to in subsection (3) had been applied to the ﬁnancial ar- rangement 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 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;— 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 amount that is deemed to be income or expenditure of the per- 1207 Part E s EZ 32 Income Tax Act 2004 Reprinted as at 29 August 2011 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 alter- native method to the method prescribed in any such de- termination that has regard to the principles of accrual accounting, and— (i) (ii) (iii) 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 the amounts that would be calculated, but for this proviso; and (b) in the absence of any such determination, by applying a method that satisﬁes subparagraphs (i) and (ii) of the proviso to paragraph (a) and that results in the allocation to each income year of an amount that, having regard to the tenor of subsection (2), is fair and reasonable;— and such amount of income or expenditure so allocated to each income year is income deemed to be derived or, as the case may be, expenditure deemed to be incurred by the person in the income year.
(7) Notwithstanding subsections (2) and (6), the Commissioner must accept an alternative method for calculating the amount to be deemed to be income or expenditure of the person, in respect of a ﬁnancial arrangement, to the methods provided for under subsections (2) and (6), if the alternative method has regard to market valuation, and— (a) (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- 1208 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 32 (c) (d) (e) 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;— and such amount of income or expenditure so calculated is in- come deemed to be derived or, as the case may be, expend- iture deemed to be incurred by the person in respect of the ﬁ- nancial arrangement in the income year: provided that where income or expenditure in respect of a ﬁnancial arrangement has been calculated by a person under this subsection, income or expenditure in respect of that ﬁnancial arrangement must, except as otherwise allowed under subsection (8), continue to be calculated on that basis by that person until the maturity, remittance, sale, or other transfer of the arrangement.
(8) Where a method of calculating income or expenditure in re- spect of a ﬁnancial arrangement fails to satisfy the require- ments of paragraph (b) of the proviso to subsection (2) or sub- paragraph (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 con- sistently applied by a person in respect of all such ﬁnancial arrangements for ﬁnancial reporting purposes, that method is nevertheless deemed to satisfy the relevant one of those provi- sions where the method— 1209 Part E s EZ 32 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) (c) (d) 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.
(9) 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 35 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 the trustee is, or if it were a natural person would be, a cash basis holder in respect of the ﬁnancial arrangement.
(ii) (10) For the purposes of this section, the Commissioner may deter- mine whether and to what extent any issuer or class of issuers 1210 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 34 (b) (c) 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) 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 applica- tion 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: 1994 No 164 s EH 1 EZ 33 Excepted ﬁnancial arrangement that is part of ﬁnancial arrangement The amount of the income deemed to be derived or the 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: 1994 No 164 s EH 2 EZ 34 Cash basis holder (1) Subject to this section, a natural person is a cash basis holder in respect of ﬁnancial arrangements held by that person in any income year, where— either— (a) (i) the income derived by that person in that income year in respect of those ﬁnancial arrangements, calculated in accordance with subpart EW or sec- 1211 Part E s EZ 34 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) tion EZ 32 or EZ 35, 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) (b) 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 32(3) (regardless of whether or not the person is entitled or has opted to use that method) 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 35— (B) 1212 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 34 in respect of ﬁnancial arrangements held by the person at the end of the income year; and (ii) the amount of income that would be calcu- lated by the person for the income year in respect of ﬁnancial arrangements held by the person at the end of the income year if the person were a cash basis holder.
(2) For the purposes of subsection (1), a person must take into account ﬁnancial arrangements to which subpart EW applies.
the Commis- (3) Notwithstanding anything in subsection (1), sioner may,— (a) where the Commissioner is satisﬁed, having regard to the tenor of section EZ 32(2), that treatment of a class of ﬁnancial arrangements other than under section EZ 32 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 (b) 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.
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- ments that are already dealt with according to section EZ 32 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 (4) 1213 Part E s EZ 34 Income Tax Act 2004 Reprinted as at 29 August 2011 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 b c d 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;— 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— 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 been a cash basis holder in respect of the ﬁnancial arrangement for the whole of that period (5) 1214 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 34 b c d is the sum of all amounts which would have been de- ductions of the person in respect of the ﬁnancial ar- rangement from the date the ﬁnancial arrangement was acquired to the end of the income year if the person had been a cash basis holder in respect of the ﬁnancial 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;— 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: pro- vided 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 de- rived by the holder in the income year; and (b) where it is a negative amount, deemed to be a deduction of the holder in the income year.
For the purposes of subsection (1), but subject to subsections (8) and (9),— (a) all income in respect of ﬁnancial arrangements that is trustee income or beneﬁciary income under the trust rules is disregarded, as is the value of all such ﬁnancial arrangements producing such income; and no person who holds such ﬁnancial arrangements is a cash basis holder in relation to such ﬁnancial arrange- ments.
(b) (6) (7) (8) 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- 1215 Part E s EZ 34 Income Tax Act 2004 Reprinted as at 29 August 2011 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.
(10) For the purposes of subsection (1),— (a) (b) ﬁnancial arrangements held; and income required to be returned in respect of those ﬁ- nancial arrangements under section 42(1) of the Tax Administration Act 1994— by a partnership is treated as being held or, as the case may be, derived by each partner to the extent of the partner’s share in the ﬁnancial arrangements held by the partnership or, as the case may be, the income of the partnership in respect of ﬁnancial arrangements.
Compare: 1994 No 164 s EH 3 1216 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 35 EZ 35 Income and expenditure where ﬁnancial arrangement (1) redeemed or disposed of Subject to subsection (2), where, in relation to any person, a ﬁnancial arrangement matures or is remitted (other than by way of being written off as a bad debt), sold, or otherwise transferred by the person in any income year, the amount of the base price adjustment in relation to that income year, that person, and that ﬁnancial arrangement is an amount calculated in accordance with the following formula: a – (b + c) where— a is,— (i) (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 38 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 32 or EZ 39 or deemed to be a deduc- tion under section EZ 34 by the person in respect of the ﬁnancial arrangement in all previous in- 1217 Part E s EZ 35 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) 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 of the ﬁnancial arrangement, less the aggregate of— (A) (B) all amounts that are income deemed to be derived under
 section EZ 32 or EZ 34 or EZ 39 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 is the sum of all consideration derived in respect of the ﬁnancial arrangement by the person, and amounts remitted by the person b c 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 32 and EZ 39 or deemed to be a deduction under section EZ 34.
Subject to subsection (5), the amount of the base price adjust- ment in relation to any ﬁnancial arrangement and any income year is,— (3) 1218 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 35 (a) (b) 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 (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) 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 de- rived by the cash basis holder in the income year; and (b) where it is a negative amount, deemed to be a deduction of the cash basis holder in the income year.
(5) Notwithstanding anything in section EZ 47(3), 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 business of the holder comprises holding or dealing in ﬁ- 1219 Part E s EZ 35 Income Tax Act 2004 Reprinted as at 29 August 2011 nancial arrangements of that class, and the issuer of the ﬁnan- cial arrangement and the holder are not associated persons.
(6) Where— (a) (ii) (iii) 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 section EZ 35(8)(c)(ii); and 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 derived by or expenditure in- curred by that person, and notwithstanding the old ﬁ- nancial arrangements rules (other than this subsection), deemed to have been paid under that ﬁnancial arrange- ment when the obligation to make payment has been so released.
(b) (7) 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 (8) 1220 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 35 (b) (c) (d) the expression issuer, in relation to a ﬁnancial arrange- ment, includes a person who ceases to be an issuer of 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 38; 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 1221 Part E s EZ 36 Income Tax Act 2004 Reprinted as at 29 August 2011 an issuer or a holder is deemed, in relation to the person, to have been
 transferred for its market value at that date.
Compare: 1994 No 164 s EH 4 Section EZ 35(6)(a)(i): amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55).

Section EZ 35(8)(d)(ii): amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55).
EZ 36 Forgiveness of debt (1) In determining the income or expenditure under the base price adjustment in section EZ 35, an amount owing under a debt, including an amount accrued and unpaid at the time of the for- giveness, is treated as paid when forgiven under the old ﬁnan- cial 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 34 or CW 35; or a natural person that meets paragraph (b)(i) and an organisation or a trust that meets paragraph (b)(ii).
(2) Subsection (3) applies when a trustee makes a distribution, including a distribution of beneﬁciary income, to a beneﬁciary that is neither— (a) a natural person for whom the creditor has natural love and affection; nor an organisation or a trust whose income is exempt under section CW 34 or CW 35.
(b) (2A) Subsection (3) does not apply when a trustee of a trust (trust A) to which subsection (1)(b) applies makes a distribution to another trust (trust B) if— (a) trust B is a trust described in subparagraphs (i), (ii), or (iii) of subsection (1)(b); and 1222 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 37 (b) subsection (1)(b) would apply to trust B if, at the time the distribution is made, the creditor of trust A were a creditor of trust B, and the creditor had forgiven a debt owing by trust B.
(3) A distribution to the beneﬁciary is income derived by the trustee— (a) (b) 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 (3) applies, the income derived by the trustee is not income for the purposes of the beneﬁciary income deﬁn- ition.
For the purposes of subsection (3), 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 (3) applies to a distribution made on or after 20 May 1999.
Compare: 1994 No 164 s EH 5 (3A) (4) (5) EZ 37 Accrued income written off (1) A deduction is allowed to a person for an amount written off by the person as a bad debt in respect of a ﬁnancial arrangement where and to the extent that— (a) the person derives income in respect of the ﬁnancial arrangement under any of sections EZ 32, EZ 34(4), EZ 35, and EZ 39; and the amount written off is attributable to that income.
(b) (2) A deduction is allowed to a person for an amount written off by the person as a bad debt in respect of a ﬁnancial arrangement (not being an amount allowed as a deduction under subsection (1)) where— (a) the person— (i) carries on a business which comprises holding or dealing in such ﬁnancial arrangements; and is not associated with the person owing the amount written off; or (ii) 1223 Part E s EZ 38 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) the ﬁnancial arrangement is a trade credit and the person carries on a business of dealing in the goods or services for which the trade credit is a debt.
(3) Where a person receives a security payment in relation to a loss and a deduction is denied to the person for the loss other than under this subsection, the person is allowed a deduction for the loss no greater than the amount of the security payment.

(4) A deduction for bad debts is allowed under this section only where the requirements of section DB 23(1) and (5) have been met.
(5) A deduction for a share loss (within the meaning of section DB 18) is allowed under subsection (3) only where the require- ments of section DB 18 have been met.

Compare: 1994 No 164 s EH 6 EZ 38 Sale of debt to associate of debtor (1) This section applies to a ﬁnancial arrangement that is a debt which is sold at a discount to a person associated with the debtor on or after 20 May 1999.
(2) A creditor is treated as having sold a debt at a discount if the debt is sold to a person associated with the debtor for 80% or less of the market value of the debt.
Subsection (4) applies to a debt that is sold if its market value was inﬂuenced by— (a) (3) 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).

For the purposes of subsection (2), associated person has the meaning set out in section OD 8(3).
(4) (5) 1224 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 39 (6) (7) 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.
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: 1994 No 164 s EH 7 a deduction to the debtor; and income of the person associated with the debtor.
EZ 39 Post facto adjustment (1) A ﬁnancial arrangement is subject to the provisions of this section where— (a) any of the amount or amounts payable under the 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.
(b) (c) (d) (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 (b) where the person has not ceased to be a holder or an issuer of the ﬁnancial arrangement at the end of the ﬁfth 1225 Part E s EZ 39 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) 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 year succeeding the income year in which the post facto adjustment was last required to be made under this sec- tion.
(3) In order to calculate the post facto adjustment, a person must,— (a) having regard to all amounts speciﬁed in section EZ 32(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 ma- turity method as prescribed in a determination made by the Commissioner for the purposes of section EZ 32(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 calcula- tion, deemed to have transferred the ﬁnancial arrange- ment for an amount equal to its market value on the last day of the income year; and 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.
(b) (4) Where a person has been required to calculate the post facto adjustment, the person is required to make a special return in respect of the post facto adjustment in the form required by the Commissioner, no later than the time at which that person is required to ﬁle an annual return for the income year in which the post facto adjustment is made.
(5) Despite the time bar, the Commissioner must amend the per- son’s assessment for the income years to which the post facto adjustment relates in accordance with the alterations to that 1226 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 41 income or expenditure as calculated by the post facto adjust- ment.
Compare: 1994 No 164 s EH 8 EZ 40 Variable principal debt instruments For the purposes of the old ﬁnancial arrangements rules, where a person is a party to a variable principal debt instrument on the implementation date, the person is deemed to have acquired or, as the case may be, issued it on that day for a consideration equal to the amount of money that would be payable to the holder on that day if the amount or amounts payable under the ﬁnancial arrangement were due and payable on that day.
Compare: 1994 No 164 s EH 9 EZ 41 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.
(1A) 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.
(2) 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,— 1227 Part E s EZ 42 Income Tax Act 2004 Reprinted as at 29 August 2011 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: 1994 No 164 s EH 10 EZ 42 Application of old ﬁnancial arrangements rules The old ﬁnancial arrangements rules do not apply— (a) (b) 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 imple- mentation date in relation to the ﬁnancial arrangement where the rollover, extension, or advance occurs on or after 1 April 1990; or (c) in relation to a person and a ﬁnancial arrangement, where the person acquired the ﬁnancial arrangement in accordance with a relationship agreement 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 (d) (e) 1228 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 43 (f) carried on by that person through a ﬁxed estab- lishment in New Zealand; or non-resident withholding income; or (ii) in relation to a ﬁnancial arrangement to the extent that the income or expenditure incurred by a person in re- 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: 1994 No 164 s EH 11 Paragraph (c) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.

EZ 43 Election to treat short term trade credit as ﬁnancial (1) 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.
(2) Notice of an election under subsection (1) in relation to an income year must be given to the Commissioner within the time within which a vendor or a purchaser is required under section 37 of the Tax Administration Act 1994 to furnish a return of income for the income year to which the election is to apply.
(3) 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.
(4) 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 1229 Part E s EZ 44 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) (iii) 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.
Compare: 1994 No 164 s EH 12 EZ 44 Election to continue to treat certain excepted ﬁnancial arrangements as ﬁnancial arrangements (1) A person may elect to continue to treat all excepted ﬁnancial arrangements under any of paragraphs (p), (q), (r), (s), (t), (u), and (v) 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.
(2) 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.
(3) 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: 1994 No 164 s EH 13 EZ 45 Deﬁnitions For the purposes of the old ﬁnancial arrangements rules, each of the following terms has the meaning given to it, despite any other meaning given to the term in section OB 1 (Deﬁni- tions) 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 1230 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 45 where— y is the core acquisition price of the ﬁnancial ar- rangement z is the smaller of— (i) (ii) 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 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 is the core acquisition price of the ﬁnancial ar- rangement z is the smaller of— (i) (ii) 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 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 1231 Part E s EZ 45 Income Tax Act 2004 Reprinted as at 29 August 2011 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 47 applies, the amount determined under that section; and (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) v is— (i) (ii) the cash price of the goods or services to which the trade credit relates (referred to in this item and item “v” as the spe- ciﬁed goods or services), as determined by section 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 ser- vices, as determined under a determination made by the Commissioner under section 90(1)(h) of the Tax Administration Act 1994 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 1232 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 45 (c) 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 does not proceed), an amount calculated in accordance with the following formula: w + x where— w is— (i) (ii) x is— (i) the lowest price (determined in accord- ance with section EZ 46, 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- 1233 Part E s EZ 45 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) 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 (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 incurred 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 1234 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 45 (B) 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 (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) 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- 1235 Part E s EZ 45 Income Tax Act 2004 Reprinted as at 29 August 2011 (B) 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- 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) (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 FC 1 or FC 2 applies: a short term trade credit, unless the purchaser or vendor has elected in accordance with section EZ 43 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 ap- plies: 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 (c) (d) (b) (e) (f) 1236 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 45 (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) (q) 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 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 OB 1, but including an agreement that would be a hire pur- chase agreement but for the exclusion in paragraph (g) 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: 1237 Part E s EZ 45 Income Tax Act 2004 Reprinted as at 29 August 2011 (r) (s) (t) (u) (v) 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 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 per- son 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 1238 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 45 (B) a forward contract or a futures contract,— a person who is a vendor in relation to the ﬁnancial arrangement: (ii) in relation to an option to purchase or otherwise acquire property, a person who is a grantor of the option: 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, the 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;— (iii) (iv) (v) (b) and hold has a corresponding meaning; and is further deﬁned in section EZ 35(8) for the purposes of that section implementation date means,— (a) in the case of— (i) forward or future contracts, including, but not limited to, contracts for— (A) (B) (C) (D) (ii) (iii) (iv) (v) foreign exchange: commodities: ﬁnancial arrangements: excepted ﬁnancial arrangements; and 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 (b) 1239 Part E s EZ 45 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) (d) 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 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,— (ii) (iii) (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 35(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 ma- tured and where the amount which has not been paid is im- material and the ﬁnancial arrangement has been structured to avoid the
 application of section EZ 35, the ﬁnancial arrange- ment is deemed to have matured money, in paragraph (b) of the deﬁnition of ﬁnancial arrangement and in the deﬁnition of security payment, includes money’s worth, whether or not convertible into money, and the right to money, includ- ing 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- 1240 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 45 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— (i) 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 (ii) settlement is required to take place within 365 days after the day on which the agreement was entered into or the speciﬁed option granted (b) (c) property,— (a) 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 (b) 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— any capital asset that is not foreign exchange or a ﬁnan- cial 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 pur- poses only (b) (i) (ii) (iii) (iv) right in the speciﬁed property, in the deﬁnition of core ac- quisition price, means— (a) the right to possession of the property; or 1241 Part E s EZ 45 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) (b) 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 inﬂu- ence any other person in the exercise of, any decision- making in respect of the property; or (d) any other right of a substantially similar nature: provided that the mere right to enforce any agreement for the sale and purchase of property or any speciﬁed option does not of itself constitute a right in the speciﬁed property secured arrangement, 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 1242 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 45 (b) the subject-matter of the option is not real property and settlement is required to take place within 63 days of the day on which the option was granted short term trade credit, in the deﬁnitions of core acquisition price, excepted ﬁnancial arrangement, and trade credit, 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 35(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 comprises dealing in such property or the property was acquired 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 5 to CB 21 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 1243 Part E s EZ 46 Income Tax Act 2004 Reprinted as at 29 August 2011 advance further sums to the issuer; or variable principal debt instrument means a bank deposit ac- count or other ﬁnancial arrangement where it is contemplated that the holder may— (a) (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: 1994 No 164 s EH 14 EZ 46 Determination of core acquisition price where consideration for property denominated in foreign currency For the purposes of paragraph (c) of the deﬁnition of core ac- quisition price in section EZ 45, if the consideration payable under the relevant ﬁnancial arrangement for the speciﬁed prop- erty is denominated in a foreign currency, the lowest price re- ferred 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- (1) (b) (c) 1244 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 47 (2) (3) (4) plicable to the taxpayer in a determination issued under section 90(1)(k) of the Tax Administration Act 1994.
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: 1994 No 164 s EH 15 EZ 47 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 32 or EZ 34 or EZ 35 or EZ 39, 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) 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 (2) 1245 Part E s EZ 48 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) Zealand, the person is deemed to have acquired the ﬁnancial arrangement at that time; or 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.
(3) A ﬁnancial arrangement is treated as having been sold and purchased or transferred and realised at its market value on the date of its sale or transfer if the sale or transfer, including a transfer by way of distribution to shareholders, is not for consideration in money or is for a consideration that is less than the market value of the ﬁnancial arrangement.

The market value of a ﬁnancial arrangement is the market value for both seller and purchaser or transferor and transferee.
Compare: 1994 No 164 s EH 16 (5) EZ 48 Transitional adjustment when changing to ﬁnancial arrangements rules (1) A person may elect to apply the ﬁnancial arrangements rules to a ﬁnancial arrangement to which the old ﬁnancial arrange- ments rules apply.

(2) 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.
(3) Despite subsections (1) and (2), a person must apply section EZ 35 if that section applies to a ﬁnancial arrangement in the income year in which the election is made.

1246 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 48 (4) Once an election is made, the ﬁnancial arrangement is subject to the ﬁnancial arrangements rules and is treated in the same way as a ﬁnancial arrangement that was entered into on or after 20 May 1999.
(5) A person who makes an election must calculate a transitional adjustment for the income year of election and return the 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) (6) where— income (ﬁnancial arrangements rules) is the total amount of income that would be derived by the person from the ﬁnancial arrangement if the ﬁnancial arrangements rules were applied to the ﬁnancial arrangement for the period beginning on the date the person acquires the arrangement and ending on the last day of the income year in which this calculation is made expenditure (ﬁnancial arrangements rules) is the total amount of expenditure that would be incurred by the person under the ﬁnancial arrangement if the ﬁnancial arrangements rules were applied to the ﬁnancial arrangement for the period beginning on the date the person acquires the arrangement and ending on the last day of the income year in which this calculation is made income (old ﬁnancial arrangements rules) is the total amount of income of the person from the ﬁnancial arrangement in all income years before the income year in which this calculation is made expenditure (old ﬁnancial arrangements rules) is the total amount of expenditure incurred by the person under the ﬁnancial arrangement in all income years before the income year in which this calculation is made.
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) 1247 (7) Part E s EZ 49 Income Tax Act 2004 Reprinted as at 29 August 2011 (8) In the income year in which the transitional adjustment is made to a ﬁnancial arrangement, a person must take into account only the income derived or the expenditure incurred as a result of the adjustment for the ﬁnancial arrangement.
(9) Despite subsections (2) to (8), a person is treated as 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 35 if— (a) (b) (c) 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.
Compare: 1994 No 164 s EH 17 EZ 49 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 30 to EZ 48; 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 OB 1 if that deﬁnition or part refers to section EZ 45; or section GD 11, because the former taxation law to which it corresponds has been re-enacted as section EZ 47.
(b) (2) (3) 1248 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 51 (4) Section HB 2(1)(a)(v) applies to a ﬁnancial arrangement to which the old ﬁnancial arrangements rules apply as if— (a) the reference to section EW 31 were to section EZ 35; and the words “ﬁnancial arrangements rules” read “old ﬁ- nancial arrangements rules”.
(b) Compare: 1994 No 164 s EH 18 EZ 50 Transitional rule for IFRS ﬁnancial reporting method (1) (2) When this section applies This section applies for a ﬁnancial arrangement when— (a) a person starts to use a spreading method for that ﬁnan- cial arrangement before the person adopts IFRSs for the purposes of ﬁnancial reporting; and that spreading method does not comply with whichever is relevant of sections EW 16(2)(d), EW 18(1)(f), and EW 20(2)(f) because the person adopts IFRSs for the purposes of ﬁnancial reporting; and the person is not required by section EW 15B to use the IFRS taxpayer method; and the income year is the 2007–08 income year or an earlier income year.
(b) (c) (d) Transitional rule For the ﬁnancial arrangement, the person is treated as comply- ing with whichever is relevant of sections EW 16(2)(d), EW 18(1)(f), and EW 20(2)(f).

Deﬁned in this Act: ﬁnancial arrangement, IFRS, IFRS taxpayer method, in- come year Section EZ 50: added (with effect from 1 April 2007), on 19 December 2007, by section 100 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EZ 50(1)(b): amended (with effect on 1 April 2007), on 6 October 2009, by section 801(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EZ 50(2): amended (with effect on 1 April 2007), on 6 October 2009, by section 801(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
EZ 51 Transitional rule for ﬁnancial reporting method (1) This section applies for a ﬁnancial arrangement when–– 1249 Part E s EZ 52 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) the ﬁrst income year for which a person adopts IFRSs for the purposes of ﬁnancial reporting is before the 2007–08 income year and the person has not chosen to apply the IFRS taxpayer method in a return of income for any year before the 2008–09 income year; and the income year is that ﬁrst income year or any subse- quent income year that is before the 2008–09 income year.
(2) Despite sections EW 21(e) and EW 23, for an income year described in subsection (1)(b), the person may apply a method that is not used by the person for ﬁnancial reporting purposes if it is a method that they would be allowed to use if they had not adopted IFRSs.

The requirements for using a ﬁnancial reporting method, other than the requirement in section EW 21(e), must still be met by the person.
Deﬁned in this Act: ﬁnancial arrangement, IFRS, IFRS taxpayer method, in- come year, return of income Section EZ 51: added (with effect on 1 April 2007), on 6 October 2009, by sec- tion 802 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
EZ 52 Transitional rule for changes from the fair value method This section applies for a ﬁnancial arrangement when–– (1) (a) the person chooses to apply the IFRS taxpayer method in a return of income for the 2005–06 income year; and the person uses the fair value method under the IFRS method described in section EW 15C in the 2005–06 income year.
(b) (2) Despite section EW 26(2) and (7) (Change of spreading method), the person is treated as having a sound commercial reason for changing from the fair value method to another method under the IFRS taxpayer method in the 2006–07 or 2007–08 income year.
Deﬁned in this Act: ﬁnancial arrangement, IFRS taxpayer method, income year, return of income, sound commercial reason Section EZ 52: added (with effect on 1 April 2007), on 6 October 2009, by sec- tion 802 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1250 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 52 Part F Apportionment and recharacterised transactions Contents Subpart FB—Apportionment Page FB 2 Apportionment of income derived partly in New Zealand 1256 and partly elsewhere FB 3 Disposal of trading stock FB 4 Income derived from disposal of trading stock together with other assets of business FB 4A Land on revenue account FB 7 Depreciation: partial income-producing use Subpart FC—Recharacterisation Debentures and notes Floating rate of interest on debentures Interest on debentures issued in substitution for shares FC 1 FC 2 FC 2B Stapled debt securities 1257 1258 1260 1260 1264 1265 1266 Share dealing FC 3 FC 4 Valuation adjustments where company acquires its shares 1267 1268 Shares FC 5 Assets purchased and resold after deduction of payments 1270 Leases under lease Effect of speciﬁed lease on lessor and lessee Income of lessor under speciﬁed lease FC 6 FC 7 FC 8 Deduction to lessee under speciﬁed lease Finance leases FC 8A Lease of personal property lease asset treated as sale FC 8B Rules for personal property lease asset during term of ﬁnance lease FC 8C Termination of ﬁnance lease FC 8D Lessor’s use of personal property lease asset after ﬁnance lease ends FC 8E Purchase and sale of personal property lease asset by lessee or associated person FC 8F Lessor’s income FC 8G Deduction to lessee 1271 1274 1275 1275 1275 1276 1277 1277 1277 1278 1251 Income Tax Act 2004 Reprinted as at 29 August 2011 FC 8H Adjustment required if lease becomes ﬁnance lease FC 8I Adjustment required for certain operating leases entered 1278 1279 before 20 June 2007 Purpose FC 9 FC 10 Taxation of hire purchase agreements Hire purchase 1280 1280 FC 13 Premiums derived by non-resident general insurers treated 1285 Non-resident general insurers as being derived from New Zealand FC 14 Non-resident general insurers’ income FC 15 Non-resident general insurers’ expenditure FC 16 Liability to make return and pay income tax FC 17 Premiums paid to residents of Switzerland
 Non-resident shippers FC 18 Non-resident shippers’ income FC 19 Non-resident shippers’ excluded income FC 20 Non-resident shippers’ expenditure Non-resident ﬁlm renters 1288 1288 1288 1289 1290 1290 1291 FC 21 Amounts derived by non-residents from renting ﬁlms 1291 Transitional residents FC 22 Tax treatment of foreign-sourced amounts derived by transitional resident FC 23 General requirements for being transitional resident FC 24 Transitional resident 1292 1292 1293 Subpart FCB—Emigration of resident companies FCB 1 Tax effects of company becoming non-resident to reﬂect 1296 tax effects of liquidation FCB 2 Emigrating company treated as paying distribution to 1297 shareholders FCB 3 Emigrating company treated as disposing of property and 1298 immediately reacquiring property FD 1 Subpart FD—Consolidation of companies Purpose and application of consolidated grouping provisions Interpretation FD 2 FD 3 Companies which may constitute consolidated group FD 4 Formation of consolidated group 1299 1299 1300 1301 1252 Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 52 FD 5 Company may not be member of more than 1 consolidated 1303 group FD 6 Nominated companies FD 7 FD 8 FD 9 Joining existing consolidated group Leaving consolidated group Part income year accounts and part tax year income allocation FD 10 Special provisions relating to dispositions of property FD 11 Application of international tax rules Subpart FDA—Imputation group of companies FDA 1 Companies that may constitute imputation group FDA 2 Formation, entry, and combination of imputation groups FDA 3 Membership of groups FDA 4 Liability of members of imputation group FDA 5 Nominated company FDA 6 Leaving imputation group Subpart FE—Amalgamation FE 1 Amalgamation of companies: purpose FE 2 Cancellation of shares held by amalgamating company on amalgamation 1304 1304 1307 1309 1310 1317 1317 1319 1320 1320 1320 1321 1324 1325 FE 3 Deduction to amalgamated company for bad debts and 1325 expenditure
 FE 4 Amalgamated company to assume unexpired accrual 1326 expenditure and proﬁts or gains of amalgamating company Transfer of property or obligations under ﬁnancial arrangements deemed to be at market value FE 6 Acquisition of property by amalgamated company on FE 5 qualifying amalgamation FE 6A Deduction to amalgamating company for depreciable FE 7 property transferred Succession of obligations of amalgamating company under ﬁnancial arrangement on amalgamation 1326 1327 1331 1331 FE 8 Amalgamated company to assume rights and obligations 1333 of amalgamating company FE 9 Amalgamation not to result in deemed income or remission of liabilities FE 10 Treatment of ﬁnancial arrangements between amalgamating companies Subpart FF—Transfers under relationship agreements FF 1 Shares or options 1333 1334 1339 1253 Income Tax Act 2004 Reprinted as at 29 August 2011 Patent applications and patent rights Speciﬁed livestock Financial arrangements Business stock in hand Personal property Commercial bills Land FF 2 FF 3 FF 4 FF 5 FF 6 FF 7 Disposal of timber under relationship agreement FF 8 FF 9 FF 10 Non-speciﬁed livestock FF 11 High-priced livestock FF 12 Bloodstock FF 13 Trading stock FF 14 Leased assets FF 15 Amount of depreciation loss for qualifying assets FF 16 Depreciable property FF 17 Pensions FF 18 Land used in speciﬁed activity FF 19 Mining assets Subpart FG—Apportionment of interest costs Purpose of this subpart Entities to which interest deduction rules potentially apply FG 1 FG 2 FG 3 When interest apportioned under section FG 8 or annual total deduction adjusted under section FG 8B FG 4 Rules for calculating New Zealand group debt percentage FG 5 Rules for calculating worldwide group debt percentage FG 6 Concession for on-lending FG 7 Concession for exchange rate ﬂuctuations FG 8 Apportionment of interest deductions—taxpayer not in New Zealand banking group FG 8B Adjustment of annual total deduction—reporting bank FG 8C New Zealand banking group of registered bank FG
 8D Reporting bank for New Zealand banking group FG 8E Measurement periods and measurement days FG 8F Financial value and regulatory value FG 8G New Zealand net equity of New Zealand banking group FG 8H Net equity threshold FG 8I Valuation of debt and risk-weighted exposures FG 8J Treatment of temporary change in New Zealand net equity or net equity threshold Treatment of speciﬁed leases and interest expense FG 9 FG 10 Mode of elections Reprinted as at 29 August 2011 Income Tax Act 2004 Part E s EZ 52 Subpart FH—Foreign attributed income excess interest allocation FH 1 Circumstances in which group excess interest allocation 1391 required FH 2 Rules for determining company’s foreign attributed income group FH 3 Rules for determining New Zealand foreign attributed income group debt percentage FH 4 Rules for determining consolidated foreign attributed income group debt percentage FH 5 Rule for calculating group excess interest allocation 1393 1393 1394 1396 amount FH 6 Rule for calculating company’s excess interest allocation 1397 percentage FH 7 Rule for calculating individual excess interest allocation 1398 amount FH 8 Rules for applying surplus group excess interest allocation amount to increase income tax and dividend withholding payment 1399 FI 1 FI 2 FI 3 FI 4 Subpart I—Effect of certain disposals and resulting acquisitions Disposals and resulting acquisitions to which subpart FI applies Disposal and resulting acquisition of property treated as occurring at market value Date on which disposal and resulting acquisition treated as occurring Disposal and resulting acquisition of property by spouse, civil union partner, or de facto partner on death of person Distributions of property to close relatives and others Disposal and resulting acquisition of timber Relationship of section
 FI 2(2) to subpart CB Relationship of subpart FI to unexpired prepayments Death occurring before 1 October 2005 FI 5 FI 6 FI 7 FI 8 FI 9 FI 10 Value of property acquired by beneﬁciary of trust before 1 October 2005 FI 11 Disposal of certain ﬁnancial arrangements on death 1401 1402 1402 1403 1404 1405 1405 1406 1407 1408 1409 Subpart FZ—Terminating provisions FZ 1 Deduction for dividends paid on certain preference shares 1409 1255 Income Tax Act 2004 Reprinted as at 29 August 2011 FZ 2 Amounts owing under convertible notes deemed to be 1410 share capital and holders deemed to be shareholders Subpart FB—Apportionment Contents FB 2 Apportionment of income derived partly in New Zealand and partly elsewhere FB 3 Disposal of trading stock FB 4 Income derived from disposal of trading stock together with other assets of business FB 4A Land on revenue account FB 7 Depreciation: partial income-producing use Page 1256 1257 1258 1260 1260 FB 2 Apportionment of income derived partly in New Zealand (1) and partly elsewhere For the purposes of this Act generally, if— (a) (b) any business of a taxpayer is carried on partly in New Zealand and partly outside New Zealand; or a contract is made in New Zealand and is wholly or partly performed by a taxpayer outside New Zealand, or is made outside New Zealand and is wholly or partly performed by a taxpayer in New Zealand,— the gross amount of income from the business or contract, and expenditure incurred in deriving that income, is apportioned to New Zealand in such a way and to such an extent as is ne- cessary to produce an amount of net income or net loss for the purposes of this Act in respect of the business or contract which the taxpayer might be expected to have if the taxpayer’s activities in New Zealand in respect of the business or contract were carried out by the taxpayer as a separate and wholly inde- pendent person undertaking only those activities and dealing at arm’s length, and the gross amount of income, so far as so
 apportioned to New Zealand, is deemed to be derived from New Zealand.
(1A) For the purposes of Part L, if— 1256 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FB 3 (a) (b) any business of a taxpayer is carried on partly in 1 coun- try and partly in another country; or a contract is made in 1 country and wholly or partly performed by a taxpayer in another country, or is partly performed by a taxpayer in 2 or more countries,— the gross amount of income from the business or contract, and expenditure incurred in deriving that income, is apportioned between the countries in such a way and to such an extent as is necessary to produce an amount of net income or net loss, in respect of each country and the business or contract, which the taxpayer might be expected to have if the taxpayer’s activities in that country in respect of the business or contract were car- ried out by the taxpayer as a separate and wholly independent person undertaking only those activities and dealing at arm’s length.
This section must not be construed as applying with respect to— (a) income of any of the classes referred to in section OE 4(1) (except paragraphs (a) and (q)); or income of any of the classes referred to in section OE 4(1)(a) or (q) to the extent that that income consists of income of any of the classes referred to in any of the other provisions of that subsection.
(b) (2) Compare: 1994 No 164 s FB 2 Subsection (2)(a) was amended, as from 1 April 2005, by section 104(1) Taxa- tion (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3) by substituting the expression “section OE 4(1)” for the expression “section OE (1)” with application as from the income year corresponding to the 2005–06 tax year.
Subsection (2)(b) was amended, as from 1 April 2005, by section 104(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting the expression “section OE 4(1)(a)” for the expression “section OE (1)(a)” with application as from the income year corresponding to the 2005–06 tax year.
FB 3 Disposal of trading stock Where in any income year the whole or any part of the assets of a business owned or carried on by any taxpayer is sold or otherwise disposed of (whether by way of exchange, or other- wise, other than by a disposition of property that is not at mar- ket value because of the operation of any of sections FI 4 to 1257 Part F s FB 4 Income Tax Act 2004 Reprinted as at 29 August 2011 FI 6, and whether or not in the ordinary course of the busi- ness of the taxpayer or for the purpose of putting an end to that business or any part of it), and the assets sold or otherwise disposed of consist of or include any trading stock, the consid- eration received or receivable for the trading stock or, as the case may be, the price which under this Act the trading stock is deemed to have realised is taken into account in determining the taxpayer’s assessable income for that income year, and the person acquiring the trading stock is, for the purpose of calcu- lating the person’s taxable income for that income year or for any subsequent income year, deemed to have purchased it at the amount of that consideration or price.
This section, with any necessary modiﬁcations, applies in any case where a share or interest in any trading stock is sold or otherwise disposed of by any taxpayer.
Compare: 1994 No 164 s FB 3 Section FB 3 was amended, as from 1 October 2005, by section 50 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “(whether by way of exchange, or otherwise, other than by a dis- position of property that is not at market value because of the operation of any of sections FI 4 to FI 6” for “(whether by way of exchange, or gift, or distribu- tion in terms of a will or on an intestacy, or otherwise” with application as from the 2005–06 income year.
FB 4 Income derived from disposal of trading stock together with other assets of business If trading stock is sold together with other assets of a business, the total consideration must be apportioned, for the purposes of this Act, between the trading stock and the other assets so as to reﬂect their respective market values, and the amount apportioned to the trading stock is treated as being the price paid for the trading stock by the purchaser.
For the purposes of this section, any trading stock which has been disposed of otherwise than by sale and otherwise than by way of a transfer in accordance with a relationship agree- ment is deemed to have been sold, and any trading stock so disposed of and any trading stock which has been sold for a consideration other than cash is deemed to have realised its market value at the date of the disposition or sale.
(1) (2) 1258 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FB 4 (3) (4) This section, with any necessary modiﬁcations, applies in any case where a share or interest in any trading stock is sold or otherwise disposed of together with other assets of a business or with a share or interest in other assets of a business.
For the purposes of this section,— (a) the creation or grant of any right to take timber is treated as a sale or other disposition of trading stock of a kind referred to in subsection (5)(d): (5) (ii) (iii) (b) where there is a sale or other disposition of land with standing timber on the land, that sale or other dispos- ition is deemed to include a sale or other disposition of trading stock of a kind referred to in subsection (5)(d), except to the extent that the timber is— (i) timber comprised in ornamental or incidental trees, as evidenced by a certiﬁcate given under section 44C of the Tax Administration Act 1994; or subject to a forestry right (as deﬁned in section 2 of the Forestry Rights Registration Act 1983) registered under the Land Transfer Act 1952; or subject to a proﬁt à prendre granted before 1 January 1984.
In this section, trading stock includes— (a) (b) anything produced or manufactured: anything acquired or purchased for purposes of manu- facture, sale, or exchange: livestock: timber: any right to take timber: any other real or personal property sold or disposed of by the taxpayer where the business of the taxpayer com- prises dealing in such property or the property was ac- quired by the taxpayer for the purpose of sale or other disposal: anything in respect of which expenditure is incurred after 8.30 pm New Zealand Standard Time on 31 July 1986 and which, if possession of that thing were taken, would be trading stock;— (c) (d) (e) (f) (g) 1259 Part F s FB 4A Income Tax Act 2004 Reprinted as at 29 August 2011 but does not include any ﬁnancial arrangement to which the ﬁnancial arrangements rules apply.
Compare: 1994 No 164 s FB 4 Subsection (2) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.

FB 4A Land on revenue account If a person derives income under sections CB 5 to CB 21 from the disposal of land, and the land is acquired together with other property, the cost of acquisition must be apportioned be- tween the land and the other property.
Compare: 1994 No 164 s DJ 14(4) FB 7 Depreciation: partial income-producing use (1) Subsection (2) applies when— (a) a person has an amount of depreciation loss for an item of depreciable property for an income year, other than an amount arising under section EE 41(2); and at a time during the income year, the item is partly used, or is partly available for use, by the person— (i) in deriving assessable income or carrying on a business for the purpose of deriving assessable income; or (ii) in a way that is subject to fringe beneﬁt tax; and at the same time, the item is partly used, or is partly available for use, by the person for a use that falls out- side both paragraph (b)(i) and (ii); and the item is not a motor vehicle to which subpart DE applies.
(b) (c) (d) The deduction the person is allowed for the amount of depre- ciation loss must not be more than the amount calculated using the formula— In the formula,— (a) depreciation loss means the amount of depreciation loss for the income year: (2) (3) 1260 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FB 7 (b) (c) qualifying use days means the number of days in the income year on which the person owns the item and uses it, or has it available for use, for a use that falls within subsection (1)(b)(i) or (ii): all days means the number of days in the income year on which the person owns the item and uses it or has it available for use.
(4) A unit of measurement other than days, whether relating to time, distance, or anything else, is to be used in the formula if it achieves a more appropriate apportionment.
Subsection (6) applies when— (a) (5) a person has an amount of depreciation loss for an item of depreciable property arising under section EE 41(2); and the item was, at any time during the period the person owned it, dealt with in— subsection (2); or (i) (ii) any applicable paragraph in section EZ 10; and the item is not a motor vehicle to which subpart DE applies.
(6) The deduction the person has for the amount of depreciation loss is calculated using the formula— (7) In the formula,— (a) disposal depreciation loss is the amount resulting from a calculation made for the item under section EE 41(2): all deductions is all amounts of depreciation loss relat- ing to the item for which the person has been allowed a deduction in each of the income years in which the per- son has owned the item: base value has the applicable one of the meanings in sections EE 48 to EE 50: adjusted tax value is the item’s adjusted tax value on the date on which the disposal or event occurs.
(8) Subsection (9) applies when— 1261 (b) (c) (b) (c) (d) Part F s FB 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) (c) (d) a person has an amount of depreciation loss for an item of depreciable property arising under section EE 41(2); and in the income year in which the depreciation loss arises, the person starts to use the item, or to have it available for use, for the purpose of deriving assessable income or carrying on a business for the purpose of deriving assessable income; and at a time during the income year, the item is partly used, or is partly available for use, by the person— (i) in deriving assessable income or carrying on a business for the purpose of deriving assessable income; or (ii) in a way that is subject to fringe beneﬁt tax; and the item is not a motor vehicle to which subpart DE applies.
(9) The deduction the person has for the amount of depreciation loss is calculated using the formula— (10) In the formula,— (a) (b) (c) disposal depreciation loss is the amount resulting from a calculation made for the item under section EE 41(2): qualifying use days means the number of days in the income year on which the person owns the item and uses it, or has it available for use, for a use that falls within subsection (8)(c)(i) or (ii): all days means the number of days in the income year on which the person owns the item and uses it or has it available for use, for any purpose.
(11) Despite subsection (8), a unit of measurement other than days, whether relating to time, distance, or anything else, is to be used in the formula if it achieves a more appropriate appor- tionment.

Compare: 1994 No 164 ss EG 2(1)(e), EG 19(4) Subsections (8) to (11) were inserted, as from 18 December 2006, by section 84(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2006–07 income year.
1262 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FB 7 Subpart FC—Recharacterisation Contents Debentures and notes Floating rate of interest on debentures Interest on debentures issued in substitution for shares FC 1 FC 2 FC 2B Stapled debt securities Page 1264 1265 1266 Share dealing FC 3 FC 4 Valuation adjustments where company acquires its shares 1267 1268 Shares FC 5 Assets purchased and resold after deduction of payments 1270 Leases under lease Effect of speciﬁed lease on lessor and lessee Income of lessor under speciﬁed lease FC 6 FC 7 FC 8 Deduction to lessee under speciﬁed lease Finance leases FC 8A Lease of personal property lease asset treated as sale FC 8B Rules for personal property lease asset during term of ﬁnance lease FC 8C Termination of ﬁnance lease FC 8D Lessor’s use of personal property lease asset after ﬁnance lease ends FC 8E Purchase and sale of personal property lease asset by lessee or associated person FC 8F Lessor’s income FC 8G Deduction to lessee FC 8H Adjustment required if lease becomes ﬁnance lease FC 8I Adjustment required for certain operating leases entered before 20 June 2007 Purpose FC 9 FC 10 Taxation of hire purchase agreements Hire purchase 1271 1274 1275 1275 1275 1276 1277 1277 1277 1278 1278 1279 1280 1280 FC 13 Premiums derived by non-resident general insurers treated 1285 Non-resident general insurers as being derived from New Zealand FC 14 Non-resident general insurers’ income FC 15 Non-resident general insurers’ expenditure 1288 1288 1263 Part F s FC 1 Income Tax Act 2004 Reprinted as at 29 August 2011 FC 16 Liability to make return and pay income tax FC 17 Premiums paid to residents of Switzerland Non-resident shippers FC 18 Non-resident shippers’ income FC 19 Non-resident shippers’ excluded income FC 20 Non-resident shippers’ expenditure Non-resident ﬁlm renters 1288 1289 1290 1290 1291 FC 21 Amounts derived by non-residents from renting ﬁlms 1291 Transitional residents FC 22 Tax treatment of foreign-sourced amounts derived by transitional resident
 FC 23 General requirements for being transitional resident FC 24 Transitional resident 1292 1292 1293 Debentures and notes FC 1 Floating rate of interest on debentures (1) Where in any debenture issued by a company the rate of in- terest payable in respect of the debenture is not speciﬁcally determined, but is determinable from time to time— (a) by reference to the dividend payable by the company; or by reference to the company’s proﬁts, however mea- sured, for debentures issued after 8.00 pm New Zealand Standard Time on 23 October 1986 other than those is- sued under a binding contract entered into before that time; or in any other manner, for debentures issued before the time speciﬁed in paragraph (b),— (b) (c) the company is denied a deduction in respect of any interest payable under the debenture or of any expenditure or loss in- curred in connection with the debenture or in borrowing the money secured by or owing under it.
Section HK 12 does not apply with respect to any such deben- ture or to the interest paid or payable under it.

This section does not apply if, under the terms of the deben- ture, the rate of interest payable is determined by a ﬁxed rela- (2) (3) 1264 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 2 (4) tionship to banking rates or general commercial rates or (in the case of debentures issued after the time speciﬁed in subsection (1)(b)) economic, commodity, industrial, or ﬁnancial indices.
This section does not apply to a debenture treated as a share under section FC 2B.

Compare: 1994 No 164 s FC 1 Section FC 1(4): added (with effect on 25 February 2008), on 6 October 2009, by section 803 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
FC 2 Interest on debentures issued in substitution for shares (1) Where a company has issued debentures to its shareholders or to any class of its shareholders, and the amount of the deben- ture or debentures issued to each shareholder of the company or of that class has been determined by reference to the num- ber or to the available subscribed capital per share calculated under the slice rule of, or by reference otherwise to, the shares in that company or in any other company (whether or not that other company is being or has been liquidated) that were held by or on behalf of the shareholder at the time the debentures were issued or at any earlier time, the company is denied a de- duction in respect of any interest payable under any debenture so issued or of any expenditure or loss incurred in connection with any such debenture or in borrowing the money secured by or owing under any such debenture.
Section FC 1 applies with respect to all debentures to which subsection (1) applies, and to the interest payable under those debentures, in the same manner as if those debentures and that interest were debentures and interest of the kinds referred to in section FC 1.
This section does not apply with respect to any issue of deben- tures if more than 25% of the debentures (computed by refer- ence to the amount of the debentures) were transferred for a consideration in money or money’s worth before 30 August 1940 (being the date of the passing of the Finance Act (No 2) 1940).

This section does not apply with respect to any debenture that is a convertible note.
(3) (2) (4) 1265 Part F s FC 2B Income Tax Act 2004 Reprinted as at 29 August 2011 (4B) This section does not apply to a debenture treated as a share (5) under section FC 2B.

In this section,— amount of the debenture means, in respect of any debenture, the principal sum expressed to be secured by or owing under that debenture shareholder includes, in respect of any company, a person by whom or on whose behalf shares in the company have at any time been held.
Compare: 1994 No 164 s FC 2 Section FC 2(4B): inserted (with effect on 25 February 2008), on 6 October 2009, by section 804 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

FC 2B Stapled debt securities (1) (2) Stapled debt security means a debt security issued by a com- pany when— (a) 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.
(b) 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 8B may deny deductions for expenditure or loss related to the security.
(b) (3) A stapled debt security and a share to which it is stapled are treated as a single share for the purposes of applying— (a) the deﬁnition in section CD 14(9) of non-participating redeemable share; and the deﬁnition in section LF 2(3) of ﬁxed rate share; and the deﬁnition in section OB 1 of ﬁxed rate share, ex- cept for the purposes of subsection (1)(b).
(b) (c) (4) In this section, debt security means a ﬁnancial arrangement if— (a) the ﬁnancial arrangement provides funds to the com- pany; and 1266 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 3 (b) (c) 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.
(5) (6) (7) 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.
Section FC 2B: inserted (with effect on 25 February 2008), on 6 October 2009, by section 805(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Shares FC 3 Share dealing (1) If a taxpayer holds shares that are revenue account property, a dividend derived by the taxpayer or an associated person from the shares after their acquisition which— (a) constitutes a realisation or recovery of the price at which the taxpayer acquired those shares; and is a dividend the declaration, payment, or distribution of which was in any way— (i) (ii) controlled or directed by the taxpayer; or part of or associated with a scheme which in- cludes the acquisition of those shares and the payment or distribution of the dividend— (b) is deemed to be received by the taxpayer as consideration or part consideration on the sale of the shares, whether or not the 1267 Part F s FC 4 Income Tax Act 2004 Reprinted as at 29 August 2011 shares have been or will be sold, and is income in the tax year in which the dividend is derived: provided that if, in relation to the transaction initiated by the acquisition of those shares in the tax year in which the dividend is derived, the amount that would be the taxpayer’s net income if the taxpayer’s only income derived in that tax year were in respect of the transaction (including any amount deemed to be consideration under this subsection) is more than zero, the amount of the consideration that is treated as income under this subsection is reduced by the lesser of— (c) the amount that would be the taxpayer’s net income so calculated; and the total of any dividends that have been treated as in- come under subsection (2) and that have not previously been applied in reduction of the amount of consider- ation under this paragraph.
(d) (2) Notwithstanding anything in subsection (1), any dividend that is taken into account under that subsection in any tax year re- mains and is a dividend derived by the taxpayer in that tax year, and the amount of that dividend is income of the taxpayer in that tax year.
Compare: 1994 No 164 s FC 3 FC 4 Valuation adjustments where company acquires its shares Where— (a) a company acquires, redeems, or otherwise cancels a share in the company (referred to in this section as the cancellation); and the cancellation is not an on-market cancellation; and any consideration derived by the shareholder from the cancellation would be income of the shareholder under any of sections CB 1 to CB 4 or any other provision of this Act (other than a provision in subpart CD or section HH 1(8)); and the shareholder continues to hold, after the cancellation, shares of the same class as the share,— (b) (c) (d) then, for the purposes of this Act,— (e) if the whole of the consideration derived by the share- holder is treated as a dividend for the purposes of this 1268 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 4 (f) Act, the shareholder is deemed not to have disposed of the share (except for the purpose of determining whether the shareholder has derived a dividend) and an amount equal to the cost to the shareholder of the share must be fairly divided amongst and added to the cost to the shareholder of the shareholder’s remaining shares of the same class when taking into account, under subpart EB, this section, or otherwise, the cost of those remaining shares of the same class at any time after the cancellation; and in any case where— (i) (ii) paragraph (e) does not apply; and the consideration payable by the company for the cancellation is less than the market value of the share at the time at which notice is ﬁrst given by the company to the shareholder or, in any case where the cancellation is proposed by the shareholder, by the shareholder to the company proposing the cancellation (for any reason other than that the proposal requires the consideration to be equal to the market value of the share at the time of the cancellation),— section GD 1 does not apply but an amount (being not less than nil) calculated in accordance with the follow- ing formula: where— a b is the cost to the
 shareholder of the share is the aggregate cost to the shareholder of all the shareholder’s shares of the same class imme- diately before the cancellation c d is the consideration derived by the shareholder from the company in respect of the cancellation is the market value of all the shareholder’s shares of the same class immediately before the cancellation 1269 Part F s FC 5 Income Tax Act 2004 Reprinted as at 29 August 2011 must be— (iii) (iv) fairly divided amongst and added to the cost to the shareholder of the shareholder’s remaining shares of the same class when taking into ac- count, under subpart EB, this section, or other- wise, the cost of those remaining shares of the same class at any time after the cancellation; and in any case where the shares are not trading stock of the shareholder, excluded from the cost of the share acquired, redeemed, or otherwise can- celled, so that the shareholder is denied any de- duction for that amount.
Compare: 1994 No 164 s FC 4 Leases FC 5 Assets purchased and resold after deduction of payments under lease (1) Where— (a) a taxpayer leased, rented, or hired any asset, being any plant or machinery (including a motor vehicle) or other equipment or a temporary building and the taxpayer has been allowed a deduction for the consideration paid or given in respect of that lease, rental, or hire; and either— (i) that taxpayer at any time purchased or otherwise acquired that asset and sold or otherwise dis- posed of it for a consideration in excess of the consideration for which the taxpayer purchased or otherwise acquired it; or any other person, where the taxpayer and that other person are associated persons, at any time purchased or otherwise acquired that asset, not being an acquisition resulting from a relationship agreement, whether or not from the taxpayer, and that other person sold or otherwise disposed of it for a consideration in excess of the consideration for which that other person purchased or other- wise acquired it,— (ii) (b) 1270 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 6 (2) (3) an amount equal to the excess or to the total amount of the deductions so allowed, whichever is less, is income of the taxpayer derived in the tax year in which the asset is sold or otherwise disposed of.
Subsection (1) applies whether or not there was any clause or condition in the lease, contract, agreement, or arrangement under which the asset was leased, rented, or hired, by which that taxpayer or that other person was required to purchase or otherwise acquire that asset.
For the purposes of this section,— (a) if an asset to which this section relates has been pur- chased or otherwise acquired, or sold or otherwise disposed of, together with other assets, the total con- sideration must be apportioned between the asset and the other assets so as to reﬂect their respective market values, and the amount apportioned to the asset is treated as being the consideration for which the asset was purchased, acquired, sold, or disposed of: (b) where any asset to which this section relates has been sold or otherwise disposed of, not being a disposition in accordance with a relationship agreement, without consideration or for a consideration which is less than the market value of that asset at the date of the sale or other disposition, that asset is deemed to have been sold at and to have realised that market value.
Compare: 1994 No 164 s FC 5 Subsection (1)(b)(ii) was amended, as from 26 April 2005, by section 3(1) In- come Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.

Subsection (3)(b) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agree- ment” for “matrimonial agreement”.
FC 6 Effect of speciﬁed lease on lessor and lessee (1) (2) This section applies notwithstanding anything in this Act.
The leasing of any personal property lease asset under any speciﬁed lease is deemed to be a sale of that asset, made at the commencement of the term of the lease, by the lessor to the lessee, and the lessee is deemed to have incurred, pursuant 1271 Part F s FC 6 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) (4) to that sale, capital expenditure of an amount equal to the cost price of that asset.
The lessor in any speciﬁed lease is deemed to have advanced to the lessee in that speciﬁed lease a loan of an amount equal to the cost price of the personal property lease asset and the lessee is deemed to have applied that loan in the ﬁnancing of the acquisition of that asset.

In any income year in which the lessor leases, under a speciﬁed lease, any personal property lease asset to any lessee, the lessor is denied a deduction for an amount of depreciation loss in respect of that asset.
(5) On the expiry of the term of the lease, where the personal prop- erty lease asset is not purchased by the lessee under the terms of that lease or on the exercise of any option under that lease, the asset is deemed to have been sold on the expiry of the term of the lease to the lessor for— (a) an amount equal to the guaranteed residual value (if any) speciﬁed, in respect of the asset, in the speciﬁed lease; or (b) where no guaranteed residual value is so speciﬁed, no consideration.
In any case where a speciﬁed lease is terminated before the expiry of the term of the lease (whether by cancellation, sur- render, or otherwise),— (a) the personal property lease asset in relation to that lease is deemed to be sold, on the date of that termination, to the lessor by the lessee at a price equal to the amount by which the amount of the outstanding balance (at the time of that termination) of any loan advanced by the lessor to the lessee exceeds the amount or the sum of the amounts payable by the lessee to the lessor in con- sideration for the release by the lessor of the lessee from the obligations of the lessee under the lease: provided that where, in relation to the amount of that outstanding balance and to the amount or the sum of the amounts payable by the lessee to the lessor, no such excess arises, that asset is deemed to have been so sold for no consid- eration: (6) 1272 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 6 (b) where the value of the consideration payable by the lessee to the lessor in respect of that termination exceeds the amount of the outstanding balance (at the time of that termination) of any loan advanced by the lessor to the lessee, an amount equal to the amount of that excess is deemed to be income derived by the lessor in the in- come year in which that lease is terminated.
(7) Where on or after the expiry of the term of the lease in rela- tion to any speciﬁed lease the personal property lease asset in relation to that lease is sold, assigned, or leased under a speci- ﬁed lease by the lessor to another person and the value of the consideration in respect of that sale, or that assignment, or that lease— (a) (b) exceeds the amount determined, in respect of that ﬁrst-mentioned speciﬁed lease, under subsection (5), that amount so determined is increased by such further amount as is equal to such part (if any) of the excess as is paid by the lessor to the lessee: is less than the amount determined, in respect of that ﬁrst-mentioned speciﬁed lease, under subsection (5)(a) and the lessee is required to make a further payment to the lessor equal to the difference between the guaran- teed residual value in relation to that lease value and that value of that consideration, that amount so determined is reduced by the amount of that further payment: pro- vided that in any case where the value of the consider- ation in respect of that sale, or that assignment, or that lease exceeds the amount determined under subsection (5), such part (if any) of that excess as is not paid to the lessee is deemed to be income derived by the lessor in the income year in which that term of the lease expires.
In any case where the lessee in any speciﬁed lease, or any other person where that other person and that lessee are associated persons, at any time purchased or otherwise acquired that per- sonal property lease asset and sold or otherwise disposed of that asset and the value of the consideration for that sale or other disposal exceeds the value of the consideration for which the lessee or the other person purchased or otherwise acquired it, an amount equal to that excess is income derived by the (8) 1273 Part F s FC 7 Income Tax Act 2004 Reprinted as at 29 August 2011 lessee in the income year in which the asset is sold or other- wise disposed of.
Compare: 1994 No 164 s FC 6 FC 7 Income of lessor under speciﬁed lease (1) For the purposes of this Act, the income of any lessor derived under any speciﬁed lease is deemed to be interest.
The amount of interest so derived by any lessor is deemed to be,— (a) during the term of the lease, derived during the ini- tial period and each instalment period, an amount that either— (i) (ii) is calculated, on the outstanding balance in re- lation to that initial period and each instalment period, at such a rate and in such a manner that the aggregate of all of the amounts so calculated is equal to the amount ﬁrst mentioned in para- graph (b); or is calculated, in relation to that initial period and to each instalment period, in accordance with such other method commonly applied in com- mercial usage as, having regard to the term of the lease and to the frequency of the personal prop- erty 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 such amounts so allocated being equal to the amount ﬁrst mentioned in para- graph (b): (b) in relation to the term of the lease, such amount as is equal to the sum of the amounts of the personal prop- erty lease payments in relation to the speciﬁed lease and the amount of the guaranteed residual value (if any) in relation to the speciﬁed lease, reduced by the cost price of the personal property lease asset.
The interest so derived by any lessor is, in relation to any in- come year, deemed to be an amount equal to the sum of such of the amounts (being amounts calculated in accordance with subsection (2)(a)) as are calculated in relation to the initial (2) (3) 1274 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 8B period (if any) and to each instalment period that ends in that income year.
Compare: 1994 No 164 s FC 7 FC 8 Deduction to lessee under speciﬁed lease No deduction is allowed for any expenditure incurred by the lessee under a speciﬁed lease except to the extent that the ex- penditure— (a) would be allowed as a deduction to the lessee under section BD 2; and does not exceed the sum of such of the amounts (be- ing amounts calculated in accordance with section FC 7(2)(a)) as are calculated in relation to the initial period (if any) and to each instalment period that ends in that income year.
Compare: 1994 No 164 s FC 8 (b) Finance leases FC 8A Lease of personal property lease asset treated as sale (1) The leasing of a personal property lease asset under a ﬁnance lease is treated as a sale of the asset from the lessor to the lessee on the date that the lease starts, and— (a) the lessor is treated as giving the lessee a loan for the asset; and the lessee is treated as using the loan to purchase the asset.

(b) (2) (3) For the lessor, the loan’s value is the lessor’s disposition value.
For the lessee, the loan’s value is the lessee’s acquisition cost.

Compare: 1994 No 164 s FC 8A FC 8B Rules for personal property lease asset during term of ﬁnance lease (1) A lessor is denied a deduction for an amount of depreciation loss for a personal property lease asset in a tax year or a part of a tax year (as the case may be) in which the lessor leases the asset under a ﬁnance lease.
If the lessee acquires ownership of the personal property lease asset by the date on which the term of the lease ends, the sale (2) 1275 Part F s FC 8C Income Tax Act 2004 Reprinted as at 29 August 2011 giving rise to the acquisition is the same sale referred to in section FC 8A.
(3) Despite section EE 38, if the lessee does not purchase the per- sonal property lease asset by the date on which the term of the lease ends, the lessor is treated as having purchased the asset on the date on which the lease ends, and the asset is sold to the lessor for— (a) (b) the guaranteed residual value; or no consideration, if there is no guaranteed residual value.
Compare: 1994 No 164 s FC 8B Subsection (2) was amended, as from 1 October 2005, by section 198(1) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “by the date on which the lease term ends” for “on the date that the term of the lease ends or terminates” with application as from the 2005–06 income year.
Subsection (2) was amended, as from 1 October 2005, by section 51(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “term of the lease” for “lease term” with application as from the 2005–06 income year.
Subsection (3) was amended, as from 1 October 2005, by section 198(2)(a) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “by the date on which the lease term ends” for “at the end of the term of the lease” with application as from the 2005–06 income year.
Subsection (3) was amended, as from 1 October 2005, by section 198(2)(b)Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “on which” for “that” with application as from the 2005–06 income year.

Subsection (3) was amended, as from 1 October 2005, by section 51(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “term of the lease” for “lease term” with application as from the 2005–06 income year.
FC 8C Termination of ﬁnance lease 1Despite section EE 38, if a ﬁnance lease terminates before the term of the lease ends and the lessor reacquires the personal property lease asset, the asset is treated as being sold to the lessor for the amount by which the outstanding balance of the loan on the date of termination is more than the amount the lessee paid to be released from his or her obligations under the lease.
Compare: 1994 No 164 s FC 8C 1276 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 8F FC 8D Lessor’s use of personal property lease asset after (1) ﬁnance lease ends If, on or after the date the term of the lease ends, the personal property lease asset is sold, assigned, or leased by the lessor to another person under another ﬁnance lease, and the consid- eration for the sale, assignment, or lease— (a) is more than the amount determined under section FC 8B(3), the amount determined under section FC 8B(3) is increased by the excess to the extent that it is paid by the lessor to the lessee of the original ﬁnance lease: is less than the amount determined under section FC 8B(3)(a), and the lessee is required to make a further payment to the lessor for the difference between the guaranteed residual value and the consideration for the sale, assignment, or lease, the amount so determined is reduced by the further payment.
(b) (2) If subsection (1)(a) applies, any excess that is not paid by the lessor to the lessee is income derived by the lessor in the tax year in which the original term of the lease ends.
Compare: 1994 No 164 s FC 8D FC 8E Purchase and sale of personal property lease asset by lessee or associated person If the lessee, or a person who is associated with the lessee, pur- chases or acquires a personal property lease asset that has been subject to a ﬁnance lease and sells or disposes of it for more than the consideration given for the purchase or acquisition, the difference is income of the lessee in the tax year in which the lessee or the person who is associated with the lessee sells the asset.
Compare: 1994 No 164 s FC 8E FC 8F Lessor’s income Income derived by a lessor from the loan under a ﬁnance lease is treated as interest.

Compare: 1994 No 164 s FC 8F 1277 Part F s FC 8G Income Tax Act 2004 Reprinted as at 29 August 2011 FC 8G Deduction to lessee A lessee is denied a deduction for expenditure incurred under a ﬁnance lease in a tax year, except to the extent that the lessee would be allowed a deduction for the expenditure under sec- tion BD 2.
Compare: 1994 No 164 s FC 8G FC 8H Adjustment required if lease becomes ﬁnance lease (1) A lessor and a lessee must make an adjustment under this sec- tion if— (a) the lease is a consecutive or a successive lease— (i) that is deemed to be 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.
The lessor and lessee must each— (a) (b) calculate an adjustment for the lease; and include the adjustment in a return of income for the tax year corresponding to the income year in which the lease becomes a ﬁnance lease.

The amount of the adjustment is calculated in relation to the period described in subsection (5) using the formula— ﬁnance income - ﬁnance expenditure - unadjusted income + unadjusted expenditure.
In the formula— (a) ﬁnance income is the income that the lessor or lessee would have derived under the lease if the lease were a ﬁnance lease for the period: ﬁnance expenditure is the expenditure that the lessor or lessee would have incurred under the lease if the lease were a ﬁnance lease for the period: (b) (2) (3) (4) 1278 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 8I (5) (6) (7) (c) (d) unadjusted income is the income that the lessor or lessee derived under the lease: unadjusted expenditure is the expenditure that the lessor or lessee incurred under the lease.
The period begins with the start of the term of the lease and ends with the end of the income year in which the lease be- comes a ﬁnance lease.

If the adjustment is positive, the amount is income of the lessor or lessee in the income year in which the lease becomes a ﬁ- nance lease.

If the adjustment is negative, the amount is expenditure in- curred by the lessor or lessee in the income year in which the lease becomes a ﬁnance lease.
Section FC 8H: substituted (with effect from 20 June 2007), on 19 December 2007, by section 101(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
FC 8I Adjustment required for certain operating leases entered before 20 June 2007 (1) A lessor must make an adjustment under this section if the lease is an operating lease— (a) (b) entered before 20 June 2007; and that is or is part of an arrangement meeting on 20 June 2007 the requirements of paragraph (c)(i) to (iii) of the deﬁnition of ﬁnance lease; and with a term of the lease ending after the end of the in- come year including 20 June 2007; and that does not meet the requirements of section FC 8H(1)(a) before the end of the income year after the income year including 20 June 2007.
(c) (d) (2) The lessor must— (a) (b) calculate an adjustment for the lease asset; and include the adjustment in a return of income for the tax year corresponding to the income year after the income year including 20 June 2007.

(3) The amount of the adjustment is calculated using the for- mula— 1279 Part F s FC 9 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) (5) (6) (7) (8) total depreciation losses 6.
In the formula, total depreciation losses is the total amount of deductions for depreciation losses for the lease asset allowed to the lessor in the period described in subsection (5).

The period begins with the start of the term of the lease and ends with the end of the income year including 20 June 2007.

The adjustment is income under the lease of the lessor in the income year after the income year including 20 June 2007.
The adjusted tax value of the lease asset at the beginning of the income year after the income year including 20 June 2007 is the total of the adjustment and the adjusted tax value that the lease asset would have in the absence of this section.
For an income year beginning after 20 June 2007 in which the lease is an operating lease, the depreciation loss allowed for the lease asset other than under section EE 41(2) is ﬁve-sixths of the depreciation loss that would be allowed for the lease asset in the absence of this subsection.

Section FC 8I: substituted (with effect from 20 June 2007), on 19 December 2007, by section 101(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
FC 9 Purpose Hire purchase This section and section FC 10 are intended to result in hire purchase agreements that are made in relation to personal property other than livestock or bloodstock being treated for the purposes of this Act in a similar manner to a sale of the property with a loan for the purchase price being made by the person providing the ﬁnance under the agreement to the person obtaining under the agreement the use of or right to use the property.
Compare: 1994 No 164 s FC 9 FC 10 Taxation of hire purchase agreements (1) For the purposes of this Act, except subsections (2), (3), and (6) and section FC 9, where a hire purchase asset is provided to a lessee under a hire purchase agreement,— 1280 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 10 (a) (b) (c) the lessor is deemed to have sold the hire purchase asset at the commencement of the hire purchase agreement for an amount equal to the lessor’s disposition value for the hire purchase asset; and the lessee is deemed to have purchased the hire purchase asset at the commencement of the hire purchase agree- ment for an amount equal to the lessee’s acquisition cost for the hire purchase asset; and the lessee, but no other person, is allowed deductions for amounts of depreciation loss of the hire purchase asset attributable to the period until the hire purchase agreement is terminated.
(2) Subject to subsections (3) and (4), for the purposes of this Act, if on or after the termination or expiry of a hire purchase agree- ment the lessee, or any other person if that person and the lessee are associated persons, does not acquire ownership of the hire purchase asset the subject of the hire purchase agree- ment,— (a) the lessor is deemed to have acquired ownership of the hire purchase asset from the lessee for an amount equal to the lessor’s outstanding balance in relation to the hire purchase agreement; and the lessee is deemed to have disposed of ownership of the hire purchase asset to the lessor for an amount equal to the lessee’s outstanding balance in relation to the hire purchase agreement— (b) (3) on the date of the termination or expiry of the hire purchase agreement.
If the lessor is a cash basis person, the amount referred to in subsection (2) is reduced by an amount for accrued but unpaid interest on the hire purchase agreement calculated using the formula— accrual income – income 1281 Part F s FC 10 Income Tax Act 2004 Reprinted as at 29 August 2011 where— accrual income is the amount of income that would have been derived under 1 of the spreading methods for the hire purchase payments if— (a) (b) the lessor were not a cash basis person; and section EW 31 did not apply to the lessor and the hire purchase agreement in the income year that the hire purchase agreement terminates or expires income is the income of the lessor from hire purchase payments paid.
(4) If the lessee is a cash basis person, the amount referred to in subsection (2) is reduced by an amount for accrued but unpaid interest on the hire purchase agreement calculated using the formula— expenditure under the ﬁnancial arrangements rules – expenditure where— expenditure under the ﬁnancial arrangements rules is the amount of expenditure that would have been incurred under 1 of the spreading methods for the hire purchase payments if— (a) the lessee were not a cash basis person; and 1282 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 10 (b) section EW 31 did not apply to the lessee and the hire purchase agreement in the income year that the hire purchase agreement terminates or expires is the expenditure incurred by the lessee from hire purchase payments paid.
expenditure (5) For the avoidance of doubt, if a lessor is deemed to acquire ownership of a hire purchase asset the subject of a hire pur- chase agreement from a lessee under subsection (2),— (a) (b) (c) the amount calculated in accordance with subsection (2) and, if applicable, subsection (3) or (4) is taken into ac- count as consideration paid by the lessee to the lessor in relation to the hire purchase agreement for the purposes of section EW 31, and as consideration derived by the lessor in respect of the hire purchase agreement for the purposes of section EW 31; and the costs and expenses referred to in section 31(2)(c) and (d) of the Credit (Repossession) Act 1997 (being, generally, storage and repossession and other costs and expenses associated with a breach of a hire purchase agreement by the lessee) are not taken into account by the lessor or the lessee for the purposes of the old ﬁnan- cial arrangements rules; and the lessor is denied a deduction under section DB 11 or DB 23 for bad debts in relation to any amount owing or to become owing in respect of the hire purchase agree- ment, if the amount calculated for the lessor under sub- section (2) and, if applicable, subsection (3) in relation to the hire purchase agreement is taken into account by the lessor— (i) as the acquisition price of trading stock of the lessor; or for the purpose of calculating the net income of the lessor for any income year, in any way not referred to in subparagraph (i); and (ii) 1283 Part F s FC 10 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) (e) (f) any amount paid at any time in an income year subse- quent to the income year in which a hire purchase agree- ment is terminated or expires on account of any amount that, under the terms of the hire purchase agreement, the lessee or any person associated with the lessee is liable to pay to the lessor or any person associated with the lessor is income of the lessor in the income year it is re- ceived by the lessor or associate of the lessor; and any amount— (i) paid at
 any time in an income year subsequent to the income year in which a hire purchase agree- ment is terminated or expires by the lessor or any person associated with the lessor to the lessee or any person associated with the lessee under the hire purchase agreement and consequent upon the termination or expiry of the hire purchase agreement; and that was not taken into account in the computa- tion of the lessor’s outstanding balance in rela- tion to that hire purchase agreement— (ii) is, in the income year it is paid, deemed to be expend- iture incurred by the lessor; and any amount— (i) paid at any time in an income year subsequent to the income year in which a hire purchase agree- ment is terminated or expires by the lessor or any person associated with the lessor to the lessee or any person associated with the lessee under the hire purchase agreement and consequent upon the termination or expiry of the hire purchase agreement; and that was not taken into account in the computa- tion of the lessee’s outstanding balance in rela- tion to that hire purchase agreement— (ii) is, in the income year it is paid, deemed to be income derived by the lessee if the lessee has been allowed a deduction in re- spect of the hire purchase asset that is the subject of the agree- ment.
1284 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 13 (6) (6A) (7) (8) For the purposes of this Act, if a lessee acquires ownership of a hire purchase asset on the termination or expiration of a hire purchase agreement and the lessor has been deemed already to have disposed of that ownership under subsection (1), that acquisition does not constitute a further disposition of the hire purchase asset by the lessor or further acquisition of the hire purchase asset by the lessee.
Income derived by a lessor from the loan under a hire purchase agreement is treated as interest.

Sections FC 5 and FF 14 do not apply to a lessee in relation to a hire purchase agreement.
In this section, lessee’s acquisition cost, in relation to a hire purchase asset, means the aggregate of— (a) the consideration provided to the lessee under the hire purchase agreement, as determined by the deﬁnition of consideration ; and the amount of any expenditure or loss incurred by the lessee in preparing and installing the hire purchase as- set for use (unless the lessee is allowed a deduction for such expenditure or loss, other than a deduction for an amount of depreciation loss).
(b) Compare: 1994 No 164 s FC 10 Subsection (8)(a) was amended, as from 1 October 2005, by section 199 Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “consideration provided to the lessee under the hire purchase agreement” for “consideration paid to the lessee for the hire purchase agree- ment”.
Non-resident general insurers FC 13 Premiums derived by non-resident general insurers treated as being derived from New Zealand (1) A premium is treated as being derived from New Zealand, for the purposes of sections FC 14 and FC 15, if— (a) an insured person pays the premium to an insurer for insurance of any of the kinds described in subsections (2) to (4); and the premium meets all 3 conditions in subsections (5) to (7); and (b) 1285 Part F s FC 13 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) the premium is not excluded from the application of this section by subsection (8).
(2) (3) (4) (5) (6) (7) For the purposes of subsection (1)(a), the ﬁrst kind of insur- ance is general insurance.

For the purposes of subsection (1)(a), the second kind of in- surance is a guarantee against risk given by an insurer to an insured person, if— (a) the insured person is liable to pay a premium to the insurer for the guarantee; and (b) the insured person is associated with the insurer.
For the purposes of subsection (1)(a), the third kind of insur- ance is a guarantee against risk given by an insurer to an in- sured person, if— (a) the insured person is liable to pay a premium to the insurer for the guarantee; and the risk arises from money lent to the insured person; and the amounts the insured person is liable to pay for the money are signiﬁcantly less than they would otherwise have been because of the guarantee; and the effect of the guarantee on the amounts payable is more than an incidental effect, or comes about as more than an incidental purpose, of the insurer’s giving the guarantee.
(b) (c) (d) For the purposes of subsection (1)(b), the premium is derived by an insurer who is not resident in New Zealand when the insurer derives it.

For the purposes of subsection (1)(b), the premium is not attributable to a ﬁxed establishment of the insurer in New Zealand through which the insurer carries on business in New Zealand.
For the purposes of subsection (1)(b), at least 1 of the follow- ing applies to the premium: (a) the insured person from whom the premium is derived is resident in New Zealand; or the insurance contract from which the premium is de- rived is offered or entered into in New Zealand; or (b) 1286 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 13 (c) the insurance contract from which the premium is de- rived is entered into for the purposes of a business car- ried on by the insured person in New Zealand through a ﬁxed establishment in New Zealand.
(8) (9) For the purposes of subsection (1)(c), the premium is excluded from the application of this section if— (a) all risk covered by the premium is located outside New Zealand; and the insurer deriving the premium is not associated with the insured person.
(b) In this section, and sections FC 14 to FC 17,— insurance means insurance of a kind described in any of sub- sections (2) to (4) insured person means,— (a) in relation to insurance of the kind described in subsec- tion (2), a person who is liable to pay a premium to an insurer for the insurance and is entitled by the payment of the premium to make a claim against the insurer: in relation to insurance of the kinds described in sub- sections (3) and (4), a person who is liable to pay a pre- mium to an insurer for the guarantee, whether or not the payment of the premium entitles the person to make a claim against the insurer (b) insurer means,— (a) (b) in relation to insurance of the kind described in sub- section (2), a person who provides the insurance and to whom an insured person is liable to pay a premium: in relation to insurance of the kinds described in subsec- tions (3) and (4), a person who provides the guarantee and to whom an insured person is liable to pay a pre- mium premium means,— (a) in relation to insurance of the kind described in subsec- tion (2), an amount payable in respect of a contract of insurance entered by an insured person: in relation to insurance of the kinds described in sub- sections (3) and (4), an amount payable in respect of a (b) 1287 Part F s FC 14 Income Tax Act 2004 Reprinted as at 29 August 2011 guarantee of a contract of insurance entered by an in- sured person.
(c) Compare: 1994 No 164 ss CN 4(1)(b), (c), OB 1, OE 4(1)(o) Subsection (9): paras (a) and (b) of the deﬁnition of “premium” were substi- tuted, as from 1 October 2005, by section 200 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Subsection (9): paragraph (c) of the deﬁnition of “premium” was repealed, as from 1 October 2005, by section 200 Taxation (Venture Capital and Miscellan- eous Provisions) Act 2004 (2004 No 111).
FC 14 Non-resident general insurers’ income (1) This section applies when an insurer derives a premium that, under section FC 13, is treated as being derived from New Zealand.

Ten percent of the gross premium derived by the insurer is income of the insurer.

Compare: 1994 No 164 s CN 4(1) (2) FC 15 Non-resident general insurers’ expenditure (1) This section applies when an insurer derives income under sec- tion FC 14.
The insurer is denied a deduction in relation to an amount to which this section applies.

This section overrides the general permission.

Compare: 1994 No 164 s CN 4(2) (2) (3) FC 16 Liability to make return and pay income tax (1) This section applies when an insurer derives income under sec- tion FC 14.

To the extent to which the insurer makes a return of income and pays income tax on the income, no other person described in this section is liable to do so.
To the extent to which a person on behalf of the insurer, includ- ing a broker or other agent who pays the premium on behalf of another person, makes a return and pays income tax on the income, no agent described in any of subsections (4) to (6) is liable to do so.
(2) (3) 1288 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 17 (4) (5) (6) The person who is liable in the ﬁrst place as an agent of the insurer to make a return of income and pay income tax on the income is— (a) a person, including a broker or agent, who pays the pre- mium to the insurer or to some other person not carry- ing on a business through a ﬁxed establishment in New Zealand; or a person described in subsection (7)(b).
(b) The person who is liable in the second place as an agent of the insurer to make a return of income and pay income tax on the income is a person who pays the premium, whether or not through a broker or agent.

The person who is liable in the third place as an agent of the insurer to make a return of income and pay income tax on the income is the insured person.
(7) When a bank or other body to whom any of section NF 9(1)(a) and (b) applies pays the premium on behalf of another person to the insurer or to some other person not carrying on a busi- ness through a ﬁxed establishment in New Zealand,— (a) (b) the bank or other body is not an agent of the insurer; and the person who provides the bank or other body with the funds from which the premium is paid is an agent of the insurer.
Compare: 1994 No 164 s CN 4(3)-(5) Subsection (7) was amended, as from 1 April 2005, by section 105(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “section NF 9(1)(a) and (b)” for “section NF 9(1)(a) to (c)” with application as from the income year corresponding to the 2005–06 tax year.
FC 17 Premiums paid to residents of Switzerland (1) This section applies when— (a) (b) an insurer derives income under section FC 14; and an agent of the insurer under section FC 16 pays the pre- mium to an insurer or to some other person not carrying on a business in New Zealand through a ﬁxed establish- ment in New Zealand; and the insurer or other person is treated as being resident in Switzerland for the purposes of a double tax agree- (c) 1289 Part F s FC 18 Income Tax Act 2004 Reprinted as at 29 August 2011 ment between the government of New Zealand and the government of Switzerland.
(2) The agent must disclose details of the premium payment to the Commissioner in the manner, if any, required by the Commis- sioner.

Compare: 1994 No 164 s CN 4(3A) The heading to section FC 17 was amended, as from 1 April 2005, by sec- tion 52(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by omitting the words “and the Netherlands” with application as from the 2005–06 income year.
Subsection (1)(c) was substituted, as from 1 April 2005, by section 52(2) Taxa- tion (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.

Non-resident shippers FC 18 Non-resident shippers’ income (1) This section applies when a ship that belongs to, or is chartered by, a non-resident person carries outside New Zealand cargo, mail, or passengers shipped or embarked in New Zealand.
In this section, cargo, mail, or passengers shipped or embarked at a port in New Zealand for carriage outside New Zealand are treated as carried outside New Zealand from that port, even though the ship may call at another port in New Zealand before ﬁnally leaving New Zealand.

Five percent of the amount payable to the person for the car- riage (whether it is payable inside or outside New Zealand) is treated as income of the person derived from New Zealand.
This section is subject to an exemption granted by the Com- missioner under section FC 19.
Compare: 1994 No 164 s CN 1(1), (3) (2) (3) FC 19 Non-resident shippers’ excluded income The Commissioner may determine that some or all of an amount that would otherwise be income of a non-resident person under section FC 18 is excluded income if, and to the extent to which, in circumstances corresponding to those described in that section, similar persons resident in New Zealand are not liable to, or are exempt from, income tax 1290 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 21 imposed by the laws of the country or territory in which the non-resident person is resident.
Compare: 1994 No 164 s CN 1(2) FC 20 Non-resident shippers’ expenditure (1) When a person who is a non-resident is treated by section FC 18 as deriving income from New Zealand for cargo, mail, or passengers shipped outside New Zealand,— (a) the person is denied a deduction in relation to an amount to which this section applies; and the person has no amount of depreciation loss in relation to that income.

(b) (2) This section overrides the general permission.
Compare: 1994 No 164 s CN 1(1A) Non-resident ﬁlm renters FC 21 Amounts derived by non-residents from renting ﬁlms (1) (b) Ten percent of the amounts derived from New Zealand by a non-resident person from the following activities is income of the non-resident person: (a) renting, exhibiting, or issuing a ﬁlm, or making other arrangements for its exhibition: selling or hiring ﬁlm containers, cinematographic or photographic materials, or equipment or accessories re- lating to a ﬁlm: selling or hiring advertising materials relating to a ﬁlm.
(c) The rest of the amounts derived from activities in subsection (1) are exempt income of the non-resident person.

The non-resident person is denied a deduction in relation to an amount to which this section applies.
If the non-resident person is required under an agreement with another non-resident (person A) to pay to person A an amount that is a ﬁlm rent, or a royalty, commission, or arises from an amount derived by the non-resident person from activities described in subsection (1), the amount paid to person A is exempt income of person A.
This section does not apply if the amounts derived by the non- resident person from activities described in subsection (1) are (2) (3) (3B) (4) 1291 Part F s FC 22 Income Tax Act 2004 Reprinted as at 29 August 2011 an insigniﬁcant proportion of the total amounts derived by them from any business.

This section overrides the general permission.


Compare: 1994 No 164 s CN 2 (5) Subsection (3B) was inserted, as from 1 April 2005, by section 85(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2005–06 income year.

Subsection (4) was substituted, as from 1 April 2005, by section 85(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Transitional residents This heading was inserted, as from 1 October 2005, by section 106(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for a person who becomes a transitional resident as from 1 April 2006.

See section 106(2) and (3) of that Act as to the application of this amendment.
FC 22 Tax treatment of foreign-sourced amounts derived by transitional resident The intended effect of this section and sections FC 23 and FC 24 and related provisions of the Act is that, for the purposes of the Act, a person who derives a foreign-sourced amount is treated as being a non-resident in relation to the amount if the person derives the amount when the person is a transitional resident.
Sections FC 22 to FC 24 were inserted, as from 1 October 2005, by section 106(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscel- laneous Provisions) Act 2006 (2006 No 3) with application for a person who becomes a transitional resident as from 1 April 2006.

See section 106(2) and (3) of that Act as to the application of this amendment.
FC 23 General requirements for being transitional resident A person satisﬁes the general requirements for being a transi- tional resident if— (a) (b) the person is resident in New Zealand; and for a continuous period (the non-residence period) of at least 10 years ending immediately before the person satisﬁes the requirements of section OE 1(1) or (2) (De- termination of residence of person other than company) for becoming resident in New Zealand, the person— 1292 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 24 (i) did not satisfy the requirements of section OE 1(1) or (2) for being resident in New Zealand: (ii) was not resident in New Zealand; and.
the person was not a transitional resident before the non- residence period; and the person has not ceased to be a transitional resident after the end of the non-residence period.

(c) (d) Sections FC 22 to FC 24 were inserted, as from 1 October 2005, by section 106(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscel- laneous Provisions) Act 2006 (2006 No 3) with application for a person who becomes a transitional resident as from 1 April 2006.
See section 106(2) and (3) of that Act as to the application of this amendment.

Paragraph (a) was amended, as from 1 October 2005, by section 86(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “is resident” for “has a permanent place of abode” with application as from the 2005–06 income year.
Paragraph (b) was substituted, as from 1 October 2005, by section 86(2) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2005–06 income year.

Paragraph (c) was amended, as from 1 October 2005, by section 86(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “period; and” for “period.” with application as from the 2005–06 income year.
Paragraph (d) was inserted, as from 1 October 2005, by section 86(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2005–06 income year.

FC 24 Transitional resident Meaning (1) A natural person is a transitional resident at a time in the period given by subsection (2) if the person— (a) satisﬁes at the time the general requirements of section FC 23; and does not make an election under subsection (3) for the time.
(b) (2) Period The period for which a natural person may be a transitional resident— (a) begins from the ﬁrst day of the residence required by section FC 23(a); and ends on the day that is the earlier of the following: (b) 1293 Part F s FC 24 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) the day before the person ceases to be a New Zealand resident: the last day of the 48th month after the earliest month in which the person meets the require- ments of section OE 1(1) or (2) (Determination of residence of person other than company) for the residence required by section FC 23(a).
Election not to be transitional resident (3) A person who would otherwise be a transitional resident in an income year may choose irrevocably by a notice under subsec- tion (4) or (6) not to be a transitional resident for a period— (a) beginning on or after the beginning of the income year; and ending immediately before the person ceases to meet the requirements for being a transitional resident.
(b) Application for tax credit under subpart KD treated as election by person and by spouse or partner in certain circumstances For a person who satisﬁes the requirements of subsection (5), an application under section 41 of the Tax Administration Act 1994 by the person for a credit of tax under subpart KD for the income year is treated as being— (a) a notice of an election under subsection (3) by the per- son, if the person is eligible to be a transitional resident and has not made an election under subsection (3); and a notice of an election under subsection (3) by any spouse, civil union partner or de facto partner of the person who is eligible to be a transitional resident and who has not made an election under subsection (3); and for the period beginning with the ﬁrst day of the period to which the application relates.
(b) (c) Circumstances in which application treated as election Subsection (4) applies to a person making an application under section 41 of the Tax Administration Act 1994 who— (a) is eligible to receive a credit of tax under subpart KD in the income year or would be eligible to receive such a credit of tax if the person’s spouse, civil union partner, or de facto partner were not a transitional resident; and (4) (5) 1294 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FC 24 (b) makes the application— (i) (ii) on or after 1 April 2007; or before 1 April 2007 and does not give to the Com- missioner before 1 June 2007 a notice that the person does not wish the application to be treated as a notice of an election under subsection (3).
Notice of election (6) A notice under this subsection of an election under subsection (3) by a person must be— (a) (b) in a form acceptable to the Commissioner; and received by the Commissioner on or before the latest of the following: (i) the date by which section 37 of the Tax Administration Act 1994 would require the per- son to furnish a return of income for the 2006–07 tax year if the person were required to furnish a return of income for that year: the date by which section 37 of the Tax Administration Act 1994 would require the per- son to furnish a return of income for the tax year corresponding to the ﬁrst income year affected by the election if the person were required to furnish a return of income for that year: the date allowed by the Commissioner upon ap- plication by or on behalf of the person.
(ii) (iii) Application for extension of time for notice (7) An application under subsection (6)(b)(iii) by a person, or by a tax agent for a person, for an extension of time to make an election is treated as if it were an application under section 37 of the Tax Administration Act 1994 by the person or tax agent in relation to a return of income for the later of the tax years referred to in subsection (6)(b)(i) and (ii).
Sections FC 22 to FC 24 were inserted, as from 1 October 2005, by section 106(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscel- laneous Provisions) Act 2006 (2006 No 3) with application for a person who becomes a transitional resident as from 1 April 2006.

See section 106(2) and (3) of that Act as to the application of this amendment.
Section FC 24 was substituted, as from 1 October 2005, by section 87(1) Taxa- tion (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2005–06 income year.

See section 87(2) and (3) of 1295 Income Tax Act 2004 Reprinted as at 29 August 2011 that Act as to the application of this amendment as from the 2005–06 income year.
Subpart FCB—Emigration of resident companies Subpart FCB (comprising sections FCB 1 to FCB 3) was inserted, as from 3 April 2006, by section 107(1) Taxation (Depreciation, Payment Dates Align- ment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
See section 107(2) and (3) of that Act as to the application of this amendment: to a com- pany that becomes a non-resident on or after 21 March 2005 (subject to section 107(2)(a)(i) and (ii)); and as from the income year corresponding to the 2005–06 tax year.
Contents FCB 1 Tax effects of company becoming non-resident to reﬂect tax effects of liquidation FCB 2 Emigrating company treated as paying distribution to shareholders Page 1296 1297 FCB 3 Emigrating company treated as disposing of property and 1298 immediately reacquiring property FCB 1 Tax effects of company becoming non-resident to reﬂect is a New Zealand resident; and ceases to be a New Zealand resident.
tax effects of liquidation This subpart applies to an emigrating company, which is a company that— (a) (b) The intended effect of this subpart and related provisions of the Act is that, for the purposes of the Act, the effects on an emigrating company and its shareholders when the emigrating company becomes a non-resident reﬂect the effects that would have resulted if,— (a) immediately before the emigration time,— (i) the emigrating company disposed of its property at market value; and the emigrating company went into liquidation; and (ii) (1) (2) 1296 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FCB 2 (b) (iii) the amount available for distribution in the liquid- ation were distributed as dividends to the share- holders of the emigrating company; and at the emigration time, the emigrating company were reformed as a foreign company that— (i) had the same ownership and business activities as those of the emigrating company immediately before the emigration time; and had acquired at market value the property of the emigrating company immediately before the emigration time.
(ii) Subpart FCB (comprising sections FCB 1 to FCB 3) was inserted, as from 3 April 2006, by section 107(1) Taxation (Depreciation, Payment Dates Align- ment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

See section 107(2) and (3) of that Act as to the application of this amendment: to a com- pany that becomes a non-resident on or after 21 March 2005 (subject to section 107(2)(a)(i) and (ii)); and as from the income year corresponding to the 2005–06 tax year.
FCB 2 Emigrating company treated as paying distribution to disposed of its property at market value; and shareholders Immediately before the emigration time for an emigrating company,— (a) the emigrating company is treated as paying, as divi- dends, a distribution in money to shareholders of the amount that would be available for distribution to the shareholders if, immediately before the emigration time, the emigrating company— (i) (ii) went into liquidation; and each shareholder in the emigrating company is treated as being paid by the emigrating company, as a divi- dend, a distribution in money of the amount to which the shareholder would be entitled in such a liquidation.
Subpart FCB (comprising sections FCB 1 to FCB 3) was inserted, as from 3 April 2006, by section 107(1) Taxation (Depreciation, Payment Dates Align- ment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

See section 107(2) and (3) of that Act as to the application of this amendment: to a com- pany that becomes a non-resident on or after 21 March 2005 (subject to section 107(2)(a)(i) and (ii)); and as from the income year corresponding to the 2005–06 tax year.
(b) 1297 Part F s FCB 3 Income Tax Act 2004 Reprinted as at 29 August 2011 FCB 3 Emigrating company treated as disposing of property and immediately reacquiring property An emigrating company is treated as, immediately before the emigration time for the emigrating company,— (a) disposing of the property of the emigrating company to another person for consideration equal to the market value of the property at the emigration time; and acquiring the property referred to in paragraph (a) from the other person for consideration equal to the amount referred to in paragraph (a).
(b) Subpart FCB (comprising sections FCB 1 to FCB 3) was inserted, as from 3 April 2006, by section 107(1) Taxation (Depreciation, Payment Dates Align- ment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

See section 107(2) and (3) of that Act as to the application of this amendment: to a com- pany that becomes a non-resident on or after 21 March 2005 (subject to section 107(2)(a)(i) and (ii)); and as from the income year corresponding to the 2005–06 tax year.
Subpart FD—Consolidation of companies Contents Page 1299 1299 1300 1301 1303 1304 1304 1307 1309 1310 1317 FD 1 Purpose and application of consolidated grouping provisions Interpretation FD 2 FD 3 Companies which may constitute consolidated group FD 4 FD 5 Company may not be member of more than 1 consolidated Formation of consolidated group group FD 6 Nominated companies FD 7 FD 8 FD 9 Joining existing consolidated group Leaving consolidated group Part income year accounts and part tax year income allocation FD 10 Special provisions relating to dispositions of property FD 11 Application of international tax rules 1298 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FD 2 FD 1 Purpose and application of consolidated grouping provisions Subject to the express provisions of the consolidation rules, those rules are intended to result in the provisions of this Act applying, except where otherwise expressly provided or where the context otherwise requires, to 2 or more companies which are a wholly-owned group of companies that elect to be treated as a consolidated group of companies as if those companies were a single company, and this Act must be read accordingly.
Compare: 1994 No 164 s FD 1 FD 2 Interpretation (1) (b) For the purposes of the consolidation rules, any reference in those rules to— (a) income, assessable income, net income, or taxable in- come of a consolidated group; or an attributed CFC net loss or a FIF net loss, or a net loss of a consolidated group; or tax payable by a consolidated group; or (c) (d) a tax credit available to a consolidated group— is, unless the context otherwise requires, interpreted as a ref- erence to the income, assessable income, net income, taxable income, attributed CFC net loss, FIF net loss, net loss, tax payable, or tax credit available determined in respect of that consolidated group on a single assessment basis in accordance with those rules as if the group were 1 company.
For the purposes of the application of those provisions of the consolidation rules that require provisions of this Act to apply to a consolidated group as if it were a single company, the shares or options over shares in respect of that single company are deemed to comprise all shares or options over shares in respect of companies which were at the relevant time members of that consolidated group.
(2) (3) Notwithstanding any provisions of the consolidation rules other than any of those provisions that expressly otherwise provide, dividends paid by 1 member of a consolidated group to another member of the group continue to be taken into account for the purposes of— (a) the imputation rules; and 1299 Part F s FD 3 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) (b) (c) (d) the dividend withholding payment rules; and subpart MF; and sections GC 24, GC 26, HB 2(1)(a)(vi), ME 10 to ME 14, MG 13 to MG 16, NH 5, and NH 6; and sections 73 and 74 of the Tax Administration Act 1994.
(e) For the purposes of sections GC 24, ME 10 to ME 14, ME 25 to ME 28, MF 7 to MF 10, MG 13 to MG 16, NH 5, and NH 6, and sections 73 and 74 of the Tax Administration Act 1994, unless the context otherwise requires, sections ME 2, MG 1, and OB 6(1)(f) apply as if references in those provisions— (a) to the imputation rules were references to sections ME 10 to ME 14: to the dividend withholding payment rules were refer- ences to sections MG 13 to MG 16, NH 5, and NH 6.
(b) Compare: 1994 No 164 s FD 2 FD 3 Companies which may constitute consolidated group For the purposes of this Act, any 2 or more eligible companies are entitled to be members of the same consolidated group at any time only where— (a) (b) (c) (d) (e) at that time those companies are a wholly-owned group of companies; and if at that time any of the companies has a non-standard balance date, at that time all the companies have the same non-standard balance date; and if at that time any of the companies is a qualifying com- pany, at that time all the companies are qualifying com- panies; and if at that time any of the companies is a mining company, at that time all the companies are mining companies; and at that time, no shares in those companies have— (i) been subject to any arrangement or series of re- lated or connected arrangements; or had any rights attaching to them extinguished or altered, directly or indirectly, by any means what- ever,— (ii) in either case for the purpose, or for purposes including the purpose, of enabling the companies to be entitled to be mem- 1300 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FD 4 bers of the same consolidated group so as to defeat the intent and application of the consolidation rules.
Compare: 1994 No 164 s FD 3 FD 4 Formation of consolidated group (1) Any 2 or more eligible companies that are entitled to be mem- bers of the same consolidated group may elect to form and be treated as a consolidated group for the purposes of this Act by giving notice to the Commissioner in such form as the Com- missioner may approve.
(2) Any notice given under subsection (1) must— (a) (b) nominate 1 of the companies as agent of the consoli- dated group for the purposes of this Act; and contain an agreement by each company to be jointly and severally liable with other members of the consolidated group for any income tax payable by the consolidated group (which agreement may be expressed as subject to, or in terms of an approval given under, section HB 1(2) to (5)).
(b) (3) Where any 2 or more companies have elected under this sec- tion to form a consolidated group, those companies are treated for the purposes of this Act as members of a consolidated group from— (a) the beginning of the income year immediately succeed- ing that in which the notice is received by the Commis- sioner; or if the notice— (i) is received by the Commissioner within 63 work- ing days after the beginning of an income year, or within such further period as the Commissioner may allow under subsection (6); and speciﬁes that the election applies for that income year,— the beginning of that income year.
(4) Notwithstanding subsection (3), where— (ii) (a) any 2 or more companies that have elected under this section to form a consolidated group are each incorpor- ated or otherwise formed during the same income year; and 1301 Part F s FD 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) the notice of election— (i) is received by the Commissioner within 63 work- ing days after the latest of those incorporations or other formations, or within such further period as the Commissioner may allow under subsection (6); and speciﬁes that the election applies for the income year in which the incorporations or other forma- tions occurred,— (ii) those companies are treated for the purposes of this Act as members of a consolidated group from the ﬁrst day of that income year.
(5) Notwithstanding subsection (3), where— (a) (b) any 2 or more companies have in any income year elected under this section to form a consolidated group during that income year; and the notice of election— (i) is received by the Commissioner within 63 work- ing days after the date the companies ﬁrst became entitled to so elect, or within such further period as the Commissioner may allow under subsection (6); and speciﬁes that the election applies from that date of ﬁrst entitlement,— (ii) those companies are treated for the purposes of this Act as members of a consolidated group from that date of ﬁrst en- titlement provided that adequate part income year accounts in respect of each company’s net income or net loss for each rele- vant part income year are furnished to the Commissioner in accordance with section FD 9.
The Commissioner may in any particular case extend the period of 63 working days speciﬁed in any of subsections (3)(b), (4)(b), and (5)(b) where the relevant company or com- panies satisfy the Commissioner that in all the circumstances the notice of election could not reasonably be expected to be, or to have been, furnished within that period.
(6) (7) Nothing in this section applies to treat as members of a con- solidated group any 2 companies that have made an election under this section, unless,— 1302 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FD 5 (a) (b) in the case of companies to which subsection (3)(a) would apply, the companies remain eligible companies entitled to be members of the same consolidated group at the beginning of the income year referred to in that provision; or in the case of companies to which any of subsections (3)(b), (4), and (5) would apply, the companies (once in existence) are eligible companies entitled to be members of the same consolidated group throughout the period that— (i) (ii) commences with the date on which they would, under the relevant one of those provisions, be treated as being members of a consolidated group; and ends with the date on which the notice of election is received by the Commissioner.
Subsection (5) does not apply where it can reasonably be con- cluded that any arrangement has been entered into for the pur- pose, or for purposes including the purpose, of enabling the company to meet the requirements of that subsection so as to defeat the intent and application of the consolidation rules.

Compare: 1994 No 164 s FD 4 (8) FD 5 Company may not be member of more than 1 consolidated group (1) No company may at any time be a member of more than 1 consolidated group.
(2) Where any company would, but for this section, be treated at any time as being a member of more than 1 consolidated group, either— (a) the company is treated as being at that time a member only of the group of which it was ﬁrst a member; or (b) where paragraph (a) does not apply by virtue of a com- pany becoming a member of 2 or more groups simul- taneously, the company is treated as being a member only of such one of the consolidated groups as the Com- missioner may specify having regard to all the circum- stances.
Compare: 1994 No 164 s FD 5 1303 Part F s FD 6 Income Tax Act 2004 Reprinted as at 29 August 2011 FD 6 Nominated companies (1) The nominated company for a consolidated group at any time is treated for the purposes of this Act and the Tax Administration Act 1994 as the agent at that time of the consolidated group and of each company which is at that time a member of the consolidated group, except where this Act or that Act otherwise expressly provides or the context otherwise requires.
(2) No company is at any time a nominated company for a con- solidated group unless, at that time, that company is a member of that consolidated group.
(3) Where any company which is at any time a nominated com- pany for a consolidated group gives notice to the Commis- sioner in such form as the Commissioner may approve that it is to cease to be the agent for that group and that another company is to become the agent for that group, the notifying company ceases to be the agent for the group, and the other company becomes the agent for the group, from the date of receipt by the Commissioner of the notice or from such later date as may be speciﬁed in the notice.
Compare: 1994 No 164 s FD 6 FD 7 Joining existing consolidated group (1) Where at any time— (a) (b) any 2 or more companies have formed a consolidated group; and at least 1 company remains a member of that consoli- dated group,— any other eligible company which is at that time entitled to be a member of the same consolidated group may elect to join and be treated as a member of that consolidated group by giving notice to the Commissioner in such form as the Commissioner may allow.
(2) Any such notice must contain the agreement of the company to be jointly and severally liable for any income tax payable by the consolidated group (which agreement may be expressed as subject to, or in terms of an approval given under, section HB 1(2) to (5)).
1304 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FD 7 (b) (3) A company that has elected to join and be treated as a member of a consolidated group is treated for the purposes of this Act as a member of the consolidated group from— (a) the beginning of the income year immediately succeed- ing the income year in which the notice is received by the Commissioner; or if the notice— (i) is received by the Commissioner within 63 work- ing days after the beginning of an income year, or within such further period as the Commissioner may allow under subsection (6); and speciﬁes that the election applies for that income year,— the beginning of that income year.
(4) Notwithstanding subsection (3), where— (ii) (a) (b) an eligible company makes an election to join and be treated as a member of a consolidated group in the in- come year in which that company is incorporated or otherwise formed; and the notice of election— (i) is received by the Commissioner within 63 work- ing days after the date of that incorporation or other formation, or within such further period as the Commissioner may allow under subsection (6); and speciﬁes that the election applies for the income year in which the incorporation or other forma- tion occurs,— (ii) that company is treated for the purposes of this Act as a mem- ber of the consolidated group from the ﬁrst day of that income year.
(5) Notwithstanding subsection (3), where— (a) (b) a company ﬁrst becomes entitled to be a member of a speciﬁed consolidated group at any time during an income year; and the notice of election to join the group— (i) is received by the Commissioner within 63 work- ing days after that date of ﬁrst entitlement, or 1305 Part F s FD 7 Income Tax Act 2004 Reprinted as at 29 August 2011 within such further period as the Commissioner may allow under subsection (6); and speciﬁes that the election applies from that date of ﬁrst entitlement,— (ii) the company is treated for the purposes of this Act as a member of the consolidated group from that date of ﬁrst entitlement provided that adequate part income year accounts in respect of the company’s net income or net loss for each relevant part income year are furnished to the Commissioner in accordance with section FD 9.
The Commissioner may in any particular case extend the period of 63 working days speciﬁed in any of subsections (3)(b), (4)(b), and (5)(b) where the company satisﬁes the Commissioner that in all the circumstances the notice of election could not reasonably be expected to be, or to have been, furnished within that period.
(6) (7) Nothing in this section applies to treat a company as a member of a consolidated group, unless,— (a) in the case of a company to which subsection (3)(a) would apply,— (i) the company remains an eligible company en- titled to be a member of the consolidated group at the beginning of the income year referred to in that provision; and at least 1 other company remains a member of the consolidated group until the beginning of that income year; or (ii) (b) in the case of a company to which any of subsections (3)(b), (4), and (5) would apply, the company is an eli- gible company entitled to be a member of the consoli- dated group throughout the period that— (i) commences with the date on which the company would, under the relevant one of those subsec- tions, be treated as being a member of the con- solidated group; and ends with the date on which the company’s notice of election to join the group is received by the Commissioner.
(ii) 1306 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FD 8 (8) Subsection (5) does not apply where it can reasonably be con- cluded that any arrangement has been entered into for the pur- pose, or for purposes including the purpose, of enabling the company to meet the requirements of that subsection so as to defeat the intent and application of the consolidation rules.
Compare: 1994 No 164 s FD 7 FD 8 Leaving consolidated group (1) A company that is a member of a consolidated group ceases to be a member of that group if— (a) (b) (c) the company so elects, by notice to the Commissioner in such form as the Commissioner may approve; or the company ceases to be an eligible company; or the company, not being the nominated company for the consolidated group, ceases to be entitled to be a member of the same consolidated group as the nominated com- pany; or the company is a member of a consolidated group that has ceased to have a nominated company.
(2) A company that elects to cease to be a member of a consoli- dated group is treated as having ceased to be a member of the group with effect from— (a) (d) (b) the beginning of the income year in which the notice of election is received by the Commissioner (or, where appropriate, such later time as the company was ﬁrst treated as being a member of the group); or if the company so speciﬁes in the notice of election, the beginning of the income year immediately succeeding that in which the notice was furnished to the Commis- sioner (or, where appropriate, such earlier time as the company is treated under this section as having ceased to be a member of the group).
(3) A company that ceases to be an eligible company is treated as having ceased to be a member of the consolidated group with effect from— (a) the beginning of the income year during which the com- pany ceased to be an eligible company (or, where appro- priate, such later time as the company was ﬁrst treated as being a member of the group); or 1307 Part F s FD 8 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) if subsection (6) applies, the beginning of the day on which the company ceased to be an eligible company.
(4) Where any company, not being the nominated company for the consolidated group, ceases to be entitled to be a member of the same consolidated group as the nominated company, the company is treated as having ceased to be a member of the group with effect from— (a) the beginning of the income year during which the ces- sation occurred (or, where appropriate, such later time as the company was ﬁrst treated as being a member of the group); or if subsection (6) applies in respect of the company, the beginning of the day on which the cessation of entitle- ment occurred.
(b) (5) Where at any time during an income year there is no nomin- ated company for a consolidated group, all the companies in the group are treated as having ceased to be members of the group with effect from the beginning of the income year: pro- vided that neither this subsection nor subsection (1)(d) applies where— (a) the nominated company ceases to be such by reason of being liquidated; and (b) within 20 working days after that liquidation, or within such further period as the Commissioner may allow, the other companies in the group have selected another nominated company and notiﬁed the Commissioner ac- cordingly (in which case the selected company is treated as the nominated company with effect from the time of the liquidation).
(6) Notwithstanding subsections (3) and (4), where— (a) a company which has at any time been a member of a consolidated group ﬁrst ceases— (i) (ii) to be an eligible company; or to be entitled to be a member of the same con- solidated group as the nominated company of the group— at any time during an income year (such time being re- ferred to in this subsection as the time of cessation); and 1308 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FD 9 (b) (c) the company elects, by notice to the Commissioner in such form as the Commissioner may allow, that this sub- section applies with respect to the company, the consoli- dated group, and the income year; and the notice is received by the Commissioner within 20 working days after the time of cessation, or within such further period as the Commissioner may allow as rea- sonable in all the circumstances,— the company is treated for the purposes of this Act as ceasing to be a member of the consolidated group with effect from the time of cessation provided that adequate part income year ac- counts in respect of the company’s net income or net loss for each relevant part income year are furnished to the Commis- sioner in accordance with section FD 9.
Subsection (6) does not apply where it can reasonably be con- cluded that any arrangement has been entered into for the pur- pose, or for purposes including the purpose, of enabling the company to meet the requirements of that subsection so as to defeat the intent and application of the consolidation rules.
(7) (8) Where a company ceases to be a member of a consolidated group by virtue only of being liquidated,— (a) nothing in subsections (2) to (4) applies to treat the com- pany as having so ceased to be a member with effect from the beginning of the income year in which the li- quidation occurred; and nothing in subsection (6) applies to require the furnish- ing of adequate part income year accounts in relation to the company.
(b) (9) If at any time a consolidated group ceases to have any member company or companies, that consolidated group is treated as having ceased to exist.
Compare: 1994 No 164 s FD 8 FD 9 Part income year accounts and part tax year income allocation (1) Where a company joins or leaves a consolidated group part way through an income year, or is or has been a member of a consolidated group that is formed or ceases to exist part way through an income year, any part income year accounts with 1309 Part F s FD 10 Income Tax Act 2004 Reprinted as at 29 August 2011 respect to the company required to be furnished by any of sec- tions FD 4(5), FD 7(5), and FD 8(6) must— (a) be incorporated in the return of income for the income year furnished to the Commissioner— (i) (ii) (iii) by the company, where such part income year accounts are for a period in which the company is not a member of any consolidated group; or by the consolidated group, where such part in- come year accounts are for a period in which the company is a member of the consolidated group; or by any other consolidated group, where such part income year accounts are for a period in which the company is a member of another consolidated group; and (2) (b) sufﬁciently detail in accordance with subsection (2) the annual gross income and annual total deduction (and, where required, the income tax liability) of the company in respect of any relevant part of the income year.
The annual gross income, annual total deduction, income tax liability, or net loss of a company attributable to a part of an in- come year referred to in subsection (1) are determined, to the extent fair and reasonable and with any necessary modiﬁca- tions, by treating that part income year as a complete income year for the purposes of applying the provisions of this Act.
Compare: 1994 No 164 s FD 9 FD 10 Special provisions relating to dispositions of property (1) Where any company (in this subsection referred to as the transferor) disposes of any property to another company (in this subsection referred to as the transferee) that is a member of the same consolidated group when the disposition takes place, being property that is— (a) (b) depreciating property of the transferor; or any property (being neither trading stock for either the transferor or the transferee nor a ﬁnancial arrangement to which the ﬁnancial arrangements rules apply) where, if the transferor or transferee were to dispose of that property, the consideration would (but for this section 1310 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FD 10 or section HB 2) be income of the transferor or trans- feree,— then, for the purpose of determining income and deductions, in respect of any subsequent disposal of the property or in respect of depreciation or amortisation of the acquisition cost of the property under any of sections EE 1, EZ 5, and EZ 6 or any other amortisation provisions of this Act,— (c) the transferee is deemed to have acquired the property on the day on which it was acquired by the transferor; and the transferee is, where the transferor entered into a binding contract to purchase or construct any depre- ciable property before 16 December 1991, deemed to have entered into that binding contract on the same date as the transferor; and the transferee is deemed to have acquired the property from the transferor for consideration equal to,— (i) (d) (e) except where the property forms all or part of a pool of property that is depreciated by the trans- feror in accordance with sections EE 20 to EE 24, the aggregate of the following amounts of ex- penditure incurred by the transferor in respect of the property before the disposition to the trans- feree in fact takes place, being in every case ex- penditure in respect of which no deduction has been allowed under this Act (other than by way of
 depreciation or amortisation of the acquisition cost of the property under any of sections EE 1, EZ 5, and EZ 6 or any other amortisation provi- sions of this Act): (A) (B) the original purchase price of the property; and any expenditure incurred in purchasing or improving the property; and any expenditure incurred in securing or improving the legal rights of the transferor in relation to the property: (ii) where the property forms the whole of a pool of property that is depreciated by the transferor in (C) 1311 Part F s FD 10 Income Tax Act 2004 Reprinted as at 29 August 2011 accordance with sections EE 20 to EE 24, the adjusted tax value of the pool immediately before the property was disposed of to the transferee: (iii) where the property forms part only of any such pool, the lesser of— (A) (B) the market value of the property disposed of to the transferee; and the adjusted tax value of the whole of the pool immediately before the property was disposed of to the transferee.
(2) Where any company (in this subsection referred to as the trans- feror) disposes of any depreciating property (other than pooled property) to another company (in this subsection referred to as the transferee) that is a member of the same consolidated group when the disposition takes place, for the purposes of sections EE 1, EE 39 to EE 44, EZ 5, and EZ 6 and any other amortisa- tion provisions of this Act in respect of the calculation of the net income of the transferee for any income year, the trans- feree is deemed to have been allowed deductions for amounts of depreciation loss or deductions under section EZ 5 or EZ 6 or any other amortisation provision of the same amounts as, in respect of or in relation to the property, the transferor has been allowed.
(3) Where and to the extent that in any income year— disposes of any land; or ceases to carry on a business; and a company (in this subsection referred to as the trans- feror)— (i) (ii) but for this subsection, the disposal or cessation would prevent the transferor from being allowed a deduction under any of sections DO 4, DO 4B, DO 4C, DO 6, and DP 3; and after the disposal or cessation and for the remainder of the income year— (i) (ii) by another company which is a member of the same consolidated group as the transferor for the whole of the income year,— the land is held; or the business is carried on— (a) (b) (c) 1312 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FD 10 the transferor is not prevented by the disposal or cessation from being allowed such a deduction.
(4) Despite sections EW 38 and GD 11, for the purposes of this Act, a company (referred to as the transferor) that disposes of a ﬁnancial arrangement to another company (referred to as the transferee) that is a member of the same consolidated group on the date of disposition must— apply subsection (4A) if— (a) (i) (ii) (iii) (iv) (v) the ﬁnancial arrangements rules apply to the ﬁ- nancial arrangement; and the method of calculating income and expend- iture under the ﬁnancial arrangement remains the same despite the disposition; and the nominated company of the group so elects by ﬁling the group’s return of income for the income year; and the transferor and the transferee are members of the same consolidated group at all times in the income year; and the transferor and the transferee are not entitled, under section IE 1 or IF 1, to carry forward and offset, in a later income year, a net loss of the company for any preceding income year, unless the whole of that net loss may be offset against the net income of the consolidated group for the income year under section IG 6: (4A) in any other case, apply either subsection (4B) or (4C).
(b) In the income year in which the disposition occurs and in each subsequent income year,— (a) the transferor is treated as if it had never been a party to the ﬁnancial arrangement prior to the disposition, and section EW 31 does not apply to the transferor with respect to the disposition; and the transferee is treated as if it had— (i) entered into the ﬁnancial arrangement on the same date and for the same amount of consider- ation as the transferor; and (b) 1313 Part F s FD 10 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) (iii) (4B) incurred all expenditure and derived all income incurred or derived by the transferor under the ﬁnancial arrangement before the disposition; and included in its return of income the same amounts of expenditure and income under the ﬁnancial arrangement as were included by the transferor.
If the method of calculating the income or expenditure under the ﬁnancial arrangement remains the same despite the dis- position, the consideration for the disposition in the trans- feror’s base price adjustment calculation is a fair and reason- able amount of the income or expenditure that the transferor would have derived or incurred in the income year of dispos- ition had the disposition not taken place.
In any other case, the consideration for the disposition is the market value of the ﬁnancial arrangement on the date of dis- position.
(5) Where— (a) (4C) any company (in this subsection referred to as the trans- feror) disposes of any trading stock to another company (in this subsection referred to as the transferee) that is a member of the same consolidated group when the dis- position takes place; and the nominated company has elected that this subsection applies, by notice to the Commissioner in such form as the Commissioner may approve given within the time within which the consolidated group is required to fur- nish a return of income for that income year or within such further time as the Commissioner may allow; and the property and its ownership is, at any time, able to be speciﬁcally identiﬁed,— (b) (ba) then, for the purpose of calculation of the net income of the transferor and the transferee, the consideration for which the disposition has taken place is deemed to be,— (c) in any case where the trading stock was held by the transferor at the beginning of the income year, the value of that trading stock as at the beginning of the income year as determined in accordance with subpart EB; and in any other case, the cost to the transferor of that trading stock.
(d) 1314 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FD 10 (6) (7) For the purpose of bringing into account tax liabilities arising from dispositions of property within a consolidated group to the extent that they have not previously been taken into ac- count by virtue of this section or section HB 2(1), where at any time— (a) a company ceases to be a member of a consolidated group (other than by virtue only of being liquidated); and the company holds any property (whether that property is held as a separate item of property or is part of some other property) which has at any time been the subject of a disposition between members of that consolidated group to which any of subsections (1), (2), (4)(a), (4)(b), and (5) has applied,— (b) then, for the purposes of this Act, the company is deemed to have disposed of that item of property immediately prior to that time to a person not associated with the company and to have immediately thereafter reacquired it, in each case for a consideration equal to the market value of that property at that time.
For the purposes of subsection (6), where— (a) any property to which that subsection applies is, at the time of the disposition deemed to occur under that sub- section, part of or absorbed into some other property; and its market value at that time cannot separately be deter- mined,— (b) it is treated as if disposed of and reacquired for a consideration equal to its market value at the time of the disposition to which any of subsections (1), (2), (4)(a), (4)(b), and (5) has applied (or, if there has been more than 1 such disposition between members of the consolidated group, equal to its market value at the time of the latest in time of those dispositions at which its market value can separately be determined), and the treatment under this Act of that other property is adjusted accordingly.
(8) Where and to the extent that— (a) any company (in this subsection referred to as the trans- feror) disposes of any shares in another company (in this subsection referred to as the related company); and 1315 Part F s FD 10 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) if that disposition were by way of sale, the consideration from the sale would be included in the transferor’s in- come (not being income not taken into account by virtue of section HB 2); and the consideration received by the transferor for that disposition is lower than the consideration that would have been received in an arm’s length disposition had not any reduction in the value of the net assets of the related company occurred as a result of any 1 or more dividends, distributions, payments, arrangements, or transactions between the related company and any other company that was at the time of the dividend, distribution, payment, arrangement, or transaction a member of the same consolidated group as the related company,— for the purposes of this Act the consideration received by the transferor is deemed to be equal to the consideration that would have been received in an arm’s length disposition had that re- duction in value not occurred.
(9) Notwithstanding the preceding subsections of this section, where— (a) (b) (c) (d) (e) (f) 1316 any company joins a consolidated group; and at the time of joining that consolidated group the com- pany holds any property; and after joining the consolidated group, the company dis- poses of the property to another member of the consoli- dated group; and any of subsections (1), (2), (4)(a), (4)(b), and (5) would apply to that disposition but for the application of this subsection; and after the time of that disposition, the company ceases to be a member of the consolidated group (including by virtue of being liquidated); and it can reasonably be concluded that there was an ar- rangement having a purpose or effect of defeating the intent and application of the consolidation rules which involved that company joining the consolidated group, disposing of the property, and ceasing to be a member of the consolidated group,— Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FDA 1 the relevant subsection of this section which would have ap- plied to that disposition but for the application of this subsec- tion does not apply to that disposition.
Compare: 1994 No 164 s FD 10 Subsection (3)(b) was amended, as from 1 October 2005, by section 201 Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting the expressions “DO 4B, DO 4C,” after the expression “DO 4,”.

FD 11 Application of international tax rules The international tax rules apply, with any necessary modiﬁ- cations, as if the consolidated group were a single company, and the income and deductions of the consolidated group are determined accordingly.
Compare: 1994 No 164 s CG 2 Subpart FDA—Imputation group of companies Contents FDA 1 Companies that may constitute imputation group FDA 2 Formation, entry, and combination of imputation groups FDA 3 Membership of groups FDA 4 Liability of members of imputation group FDA 5 Nominated company FDA 6 Leaving imputation group Page 1317 1319 1320 1320 1320 1321 FDA 1 Companies that may constitute imputation group (1) A company that is not a member of a consolidated group is eligible at a time to be a member of an imputation group with other companies if, assuming the company and the other com- panies to be members of the group, at the time,— (a) each member of the group is a company that is resident in New Zealand or Australia and— (i) is not, for a purpose of taxation in New Zealand or Australia, treated by a double tax agreement as being resident in a country that is not New Zealand or Australia; and 1317 Part F s FDA 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) (d) (f) (ii) is required by section ME 1 to maintain an im- putation credit account or is subject to an election under section ME 1A to maintain an imputation credit account; and is not a loss attributing qualifying company; and (iii) the members of the group are a wholly-owned group of companies; and no member of the group is a qualifying company or all members of the group are qualifying companies; and no member of the group is a mining company or all members of the group are mining companies; and (e) no member of the group has shares that, for purposes including the purpose of enabling a company to be a member of the same imputation group as another mem- ber of the group so as to defeat the intent and application of the imputation rules, have— (i) been subject to an arrangement or series of re- lated or connected arrangements: had rights attaching to them that have been extin- guished or altered, directly or indirectly, by any means whatever.
(ii) (2) A company that is a member of a consolidated group is eligible at a time to be a member of an imputation group with other companies if, at the time,— (a) all the requirements of subsection (1)(a) to (f) are or would be satisﬁed by the imputation group; and all members of the consolidated group are or would be members of the imputation group; and for an imputation group that contains or will contain members of more than 1 consolidated group, all the members of the consolidated groups have been mem- bers of a single wholly-owned group of companies throughout the period that— (i) began on the earliest date on which there arose a credit that, at the time, remains uncancelled in the imputation credit account of a consolidated group or imputation group, all of whose members are or would be in the imputation group; and (ab) (b) 1318 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FDA 2 (ii) ended at the time.
Compare: 1994 No 164 s FDB 1 Subsection (1)(e) was repealed, as from 1 October 2005, by section 202(1) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Subsection (2)(ab) was inserted, as from 1 October 2005, by section 202(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Subsection (2)(b) was amended, as from 1 October 2005, by section 202(3) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “for an imputation group that contains or will contain members of more than 1 consolidated group, all the members of the consolidated groups have been members of a single wholly-owned group of companies throughout the period that—” for “the company and the other companies that are each a member of a consolidated group and are, or would be, members of the imput- ation group have been members of a single wholly-owned group of companies throughout the period that—”.
FDA 2 Formation, entry, and combination of imputation groups (1) Any 2 or more companies that are not members of a consoli- dated group and are eligible to be members of an imputation group may give to the Commissioner, in a form that is accept- able to the Commissioner, a notice of election to form the im- putation group.
(3) (2) A company that is not a member of a consolidated group and is eligible to be a member of an existing imputation group may give to the Commissioner, in a form that is acceptable to the Commissioner, a notice of election to join the imputation group.
The nominated company of a consolidated group may give to the Commissioner, in a form that is acceptable to the Com- missioner, a notice of election by all the members of the con- solidated group to form an imputation group with companies that are not members of the consolidated group, or to join an existing imputation group, if the companies that are to be the members of the proposed imputation group are at the time of the election eligible under section FDA 1 to be members of the proposed imputation group.
(4) A notice of election under subsection (1) or (3) to form an im- putation group must nominate 1 of the companies as agent of the imputation group for the purposes of the imputation rules.

1319 Part F s FDA 3 Income Tax Act 2004 Reprinted as at 29 August 2011 (5) A notice of election under any of subsections (1) to (3) has effect from the beginning of the imputation year that contains the date on which the Commissioner receives the notice.
Compare: 1994 No 164 s FDB 2 FDA 3 Membership of groups (1) A resident imputation subgroup is associated with a trans-Tas- man imputation group and consists of the members of the trans-Tasman imputation group that are not Australian imput- ation credit account companies.

(2) An imputation group may not be formed with 1 member com- pany but may continue to exist if the number of its members is reduced to 1.

(3) A resident imputation subgroup may be formed and continue (4) to exist with 1 member company.
If at any time an imputation group or resident imputation sub- group has no member company, that imputation group or resi- dent imputation subgroup ceases to exist.
Compare: 1994 No 164 s FDB 3 FDA 4 Liability of members of imputation group A company that is a member of an imputation group is jointly and severally liable, with the other members of the imput- ation group, for further income tax, civil penalties, and interest under Part 7 of the Tax Administration Act 1994 arising from the operation of the imputation credit account of the imput- ation group.
Compare: 1994 No 164 s FDB 4 FDA 5 Nominated company (1) The nominated company for an imputation group at any time must be a member of the imputation group at the time.

The nominated company for a trans-Tasman imputation group— (a) must not be an Australian imputation credit account company: (2) 1320 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FDA 6 (3) (b) is also the nominated company for the resident imput- ation subgroup that is associated with the trans-Tasman imputation group.
For the purpose of the imputation rules, the nominated com- pany for an imputation group at any time is the agent at that time of the imputation group and of each company that is at that time a member of the imputation group.
(4) A nominated company for an imputation group may at any time give notice to the Commissioner, in a form acceptable to the Commissioner, that the company is to cease to be the nominated company for the imputation group and that another company is to become the nominated company for the imput- ation group.

(5) A notice under subsection (4) has effect from the date that is 30 days after the date on which the Commissioner receives the notice.
Compare: 1994 No 164 s FDB 5 FDA 6 Leaving imputation group (1) A company that is a member of an imputation group ceases to be a member of that group if— (a) the company elects to cease to be a member of the group, by notice to the Commissioner in a form accept- able to the Commissioner: the company ceases to be eligible to be a member of the group: the company is not the nominated company for the group and ceases to be eligible to be a member of the same imputation group as the nominated company: the company is a member of an imputation group that ceases to have a nominated company, subject to subsec- tion (6).
(b) (c) (d) (2) Subject to subsection (9), a company that elects to cease to be a member of an imputation group ceases to be a member of the group with effect from,— (a) if the notice of election speciﬁes a date on which the election is to take effect and on that date the company would otherwise be a member of the group, the begin- ning of the day speciﬁed in the notice of election: 1321 Part F s FDA 6 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) otherwise, the later of— (i) the beginning of the imputation year in which the notice of election is received by the Commis- sioner: the time at which the company becomes a mem- ber of the group.
(ii) Subject to subsection (9), a company that ceases to be eligible to be a member of an imputation group ceases to be a member of the group with effect from,— (a) if subsection (7) is satisﬁed, the beginning of the day on which the company’s eligibility ceases: otherwise, the later of— (i) (b) the beginning of the imputation year in which the company’s eligibility ceases: the time at which the company becomes a mem- ber of the group.
(ii) Subject to subsection (9), a company that is not the nominated company for a group and that ceases to be eligible to be a member of the same group as the nominated company ceases to be a member of the group with effect from,— (a) if subsection (7) is satisﬁed in respect of the company, the beginning of the day on which the company’s eligi- bility ceases: otherwise, the later of— (i) the beginning of the imputation year in which the company’s eligibility ceases: the time at which the company becomes a mem- ber of the group.
(ii) (b) If at any time during an imputation year there is no nominated company for an imputation group and a replacement nomin- ated company is not appointed under subsection (6), the com- panies in the group cease to be members of the group with effect from the beginning of the imputation year.
If the nominated company for an imputation group is liqui- dated and the other companies of the group select another com- pany as a replacement, the replacement company is the nom- inated company for the group from the date of the liquidation if the Commissioner is notiﬁed of the selection within 30 days (3) (4) (5) (6) 1322 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FDA 6 (7) after that date, or within such further period as the Commis- sioner may allow.
If a company ceases to be eligible to be a member of an imput- ation group, or ceases to be eligible to be a member of the same group as the nominated company of an imputation group, and makes a valid election that this subsection apply, the company is treated for the purposes of this Act as ceasing to be a mem- ber of the imputation group with effect from the date on which the eligibility ceases.
(8) An election under subsection (7) is valid if— (a) (b) the election is made by notice to the Commissioner in a form that is acceptable to the Commissioner and is received by the Commissioner within— (i) 30 days after the date on which the company ceases to be eligible to be a member of the group or ceases to be entitled to be a member of the same group as the nominated company: such further period as the Commissioner may al- low as reasonable in all the circumstances; and (ii) the Commissioner cannot reasonably conclude that an arrangement has been entered into for the purpose, or for purposes including the purpose, of enabling the company to meet the requirements of subsection (7) so as to defeat the intent and application of the imputation rules.
(9) If a company ceases to be a member of an imputation group by virtue only of being liquidated, nothing in subsections (2) to (4) applies to treat the company as having so ceased to be a member with effect from the beginning of the tax year in which the liquidation occurred.
Compare: 1994 No 164 s FDB 6 Subpart FE—Amalgamation Contents FE 1 Amalgamation of companies: purpose FE 2 Cancellation of shares held by amalgamating company on amalgamation Page 1324 1325 1323 Part F s FE 1 Income Tax Act 2004 Reprinted as at 29 August 2011 FE 3 Deduction to amalgamated company for bad debts and 1325 expenditure FE 4 Amalgamated company to assume unexpired accrual 1326 expenditure and proﬁts or gains of amalgamating company Transfer of property or obligations under ﬁnancial arrangements deemed to be at market value FE 6 Acquisition of property by amalgamated company on FE 5 qualifying amalgamation FE 6A Deduction to amalgamating company for depreciable FE 7 property transferred Succession of obligations of amalgamating company under ﬁnancial arrangement on amalgamation 1326 1327 1331 1331 FE 8 Amalgamated company to assume rights and obligations 1333 of amalgamating company FE 9 Amalgamation not to result in deemed income or remission of liabilities FE 10 Treatment of ﬁnancial arrangements between amalgamating companies 1333 1334 FE 1 Amalgamation of companies: purpose (1) (b) Subject always to the express provisions of the amalgamation provisions, those provisions are intended— (a) to specify certain taxation consequences of the amal- gamation of companies; and in the case of a qualifying amalgamation, to permit cer- tain property to be transferred to an amalgamated com- pany on a concessional taxation basis and an amalga- mated company to succeed to the net losses and imput- ation credit account and other credits of amalgamating companies, subject to tests of continuity and common- ality of ownership being met; and to apply notwithstanding anything to the contrary in sec- tion 225(d) of the Companies Act 1993.
In this section, amalgamation provisions means— (a) sections CD 25, CD 32(23) and (24), CD 33(8), DB 8(3) to (5), DV 13, FE 2 to FE 10, IF 4 to IF 6, IG 8, IG 9, LC 8 to LC 12, MB 34, MD 2(8) and (9), ME 29, MF (c) (2) 1324 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FE 3 16, MG 17, NC 15(7), ND 1R, ND 3(7), ND 4(7), and NH 4(8) and (9); and sections 75 and 76 of the Tax Administration Act 1994.
(b) Compare: 1994 No 164 s FE 1 Subsection (2)(a) was amended, as from 1 October 2006, by section 108(1) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3) by substituting the expression “MB 34” for the expression “MB 11” with application as from the income year corresponding to the 2007–08 tax year.
FE 2 Cancellation of shares held by amalgamating company on amalgamation Where shares in any amalgamating company are— held by another amalgamating company; and (a) (b) cancelled on the amalgamation,— then, for the purposes of this Act, the shares are deemed to have been disposed of by the shareholder amalgamating com- pany immediately before the amalgamation for a consideration equal to the cost of the shares to the shareholder amalgamating company.
Compare: 1994 No 164 s FE 2 FE 3 Deduction to amalgamated company for bad debts and expenditure Where— (a) (b) (c) any amalgamating company ceases to exist on a quali- fying amalgamation; and the amalgamated company in any period— (i) writes off as a bad debt any debt acquired from the amalgamating company at the time of the amalgamation; or incurs any expenditure or loss (including an amount of depreciation loss) by virtue of any- thing done or not done by the amalgamating company; and (ii) the amalgamated company would but for this subsec- tion have been denied a deduction for the amount of the bad debt, expenditure, or loss (including an amount of depreciation loss); and 1325 Part F s FE 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) the amalgamating company would have been allowed a deduction for the amount but for the amalgamation,— the amalgamated company is allowed a deduction for the amount for the period.
Compare: 1994 No 164 s FE 3 FE 4 Amalgamated company to assume unexpired accrual expenditure and proﬁts or gains of amalgamating company Where any amalgamating company ceases to exist on an amal- gamation during any tax year,— (a) the unexpired portion of any amount of accrual expend- iture of the amalgamating company for the tax year is deemed to be the unexpired portion of an amount of ac- crual expenditure of the amalgamated company for the tax year, and not of the amalgamating company; and any amount derived by the amalgamated company at any time after the amalgamation which— (i) is derived by virtue of anything done or not done by the amalgamating company; and (b) (ii) would have been income of the amalgamating company but for the amalgamation,— is income at the time of the amalgamated company.
Compare: 1994 No 164 s FE 4 FE 5 Transfer of property or obligations under ﬁnancial arrangements deemed to be at market value (1) Where any amalgamated company, on an amalgamation other than a qualifying amalgamation, acquires any property of an amalgamating company, or succeeds to any obligations of an amalgamating company in respect of a ﬁnancial arrangement to which the amalgamating company is a party, for the pur- poses of this Act,— (a) the amalgamating company is treated as having dis- posed of the property or relieved itself of the obligations immediately before the amalgamation; and the amalgamated company is treated as having ac- quired the property or assumed the obligations from the (b) 1326 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FE 6 (2) amalgamating company immediately after the amal- gamation— for a consideration equal to the market value of the property, or market price for assuming such obligations, at the time.
This section is overridden by section EE 34(2) for the purposes of determining the cost of an item to an amalgamated company under that section, unless the context requires otherwise.

Compare: 1994 No 164 s FE 5 Subsection (2) was substituted, as from 1 April 2005, by section 88 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
FE 6 Acquisition of property by amalgamated company on qualifying amalgamation (1) Where any amalgamated company, on a qualifying amalgam- ation, acquires any property of an amalgamating company, then, for the purposes of this Act with effect from the date of acquisition and except where otherwise provided in the suc- ceeding subsections of this section,— (a) (b) (c) the amalgamated company is deemed to have acquired the property on the date on which it was acquired by the amalgamating company; and the amalgamated company is, where the amalgamating company entered into a binding contract to purchase or construct any depreciable property before 16 December 1991, deemed to have entered into that binding contract on the same date as the amalgamating company; and the amalgamated company is deemed to have acquired the property from the amalgamating company for a con- sideration equal to,— (i) except where the property forms all or part of a pool of property that is depreciated by the amal- gamating company in accordance with sections EE 20 to EE 24, the aggregate of the follow- ing amounts of expenditure incurred by the amal- gamating company in respect of the property be- fore the amalgamation, being in every case ex- penditure in respect of which deductions are de- nied under this Act (other than by way of a deduc- tion in respect of the depreciation or amortisation 1327 Part F s FE 6 Income Tax Act 2004 Reprinted as at 29 August 2011 (B) of the acquisition cost of the property under any of sections EE 1, EZ 5, and EZ 6 or any other amortisation provisions of this Act): (A) the original purchase price of the property; and any expenditure incurred in purchasing or improving the property; and any expenditure incurred in securing or improving the legal rights of the amalgam- ating company in relation to the property: (ii) where the property forms the whole of a pool of property that is depreciated by the amalgamating company in accordance with sections EE 20 to EE 24, the adjusted tax value of the pool imme- diately
 before the amalgamation: (C) (iii) where the property forms part only of any such pool, the lesser of— (A) (B) the market value of the property acquired by the amalgamated company; and the adjusted tax value of the whole of the pool immediately before the amalgam- ation.
(b) (1A) Where any amalgamated company, on a qualifying amalgam- ation, acquires any property of an amalgamating company, then, for the purposes of this Act and except where otherwise provided in the succeeding subsections of this section,— (a) the amalgamating company is deemed to have disposed of the property immediately before the amalgamation; and the amalgamating company is deemed not to derive any income or to have any deductions in respect of that dis- position under sections EE 37 to EE 44.
(2) Where an amalgamated company, on a qualifying amalgam- ation, acquires any property of an amalgamating company which is trading stock for both the amalgamating company and the amalgamated company, for the purposes of this Act the amalgamating company is deemed to have disposed of the trading stock and the amalgamated company is deemed to have acquired the trading stock for a consideration equal 1328 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FE 6 to the value of the trading stock under subpart EB to the amalgamating company, at the time of the amalgamation.
(3) Where an amalgamated company, on a qualifying amalgam- ation, acquires any property of an amalgamating company which is revenue account property of the amalgamating com- pany and is not revenue account property of the amalgamated company, for the purposes of this Act the amalgamating company is deemed to have disposed of the property and the amalgamated company is deemed to have acquired the property at the time of the amalgamation for a consideration equal to its market value at that time.
(3A) Subsection (3) does not apply where the property is land that is (or may be) revenue account property of the amalgamating company only by virtue of the 10 year rule in any of sections CB 7 to CB 9 and CB 12 but, if the amalgamated company disposes of the property within 10 years after the date of its ac- quisition by the amalgamating company, any amount derived from the disposition is income of the amalgamated company under the relevant one of sections CB 5 to CB 12 (subject to sections CB 13 to CB 21).
(3B) Where an amalgamated company, on a qualifying amalgam- ation, acquires any land of an amalgamating company which is not revenue account property of the amalgamating company but is (to the extent that its sale or disposition would give rise to income under any of sections CB 5 to CB 12) revenue ac- count property of the amalgamated company, for the purposes of this Act the amalgamating company is deemed to have dis- posed of the land and the amalgamated company is deemed to have acquired the land at the time of the amalgamation for a consideration equal to its market value at that time.
(4) Where an amalgamated company, on a qualifying amalgam- ation, acquires property from an amalgamating company which was depreciating property (other than pooled property) then, for the purposes of of the amalgamating company, sections EE 1, EE 37 to EE 44, EZ 5, and EZ 6 and any other amortisation provisions of this Act in respect of the calcula- tion of the net income for any tax year of the amalgamated company, the amalgamated company is deemed to have been allowed deductions for amounts of depreciation loss or de- 1329 Part F s FE 6 Income Tax Act 2004 Reprinted as at 29 August 2011 ductions under section EZ 5 or EZ 6 or any other amortisation provision of the same amounts as, in respect of or in relation to the property, the amalgamating company has been allowed.
(5) Despite sections EW 43 and GD 11, for the purposes of this Act, an amalgamated company that acquires, during a tax year, a ﬁnancial arrangement of an amalgamating company must— (a) apply subsection (6) if— (i) (ii) (iii) (iv) (v) (vi) the ﬁnancial arrangements rules apply to the ﬁ- nancial arrangement; and the amalgamation is a qualifying amalgamation; and the method of calculating income and expend- iture under the ﬁnancial arrangement remains the same despite the amalgamation; and the amalgamated company so elects by ﬁling its return of income for the tax year; and the amalgamating company and the amalga- mated company were members of the same whollyowned group of companies at all times in the tax year before the amalgamation; and the amalgamating company is not entitled, under section IE 1 or IF 1, to carry forward and offset, in a later tax year, a net loss of the company for any preceding tax year, unless the whole of that net loss may be offset against the net income of the amalgamated company for the tax year under section IF 4: (b) apply either subsection (7) or (8) for any other qualify- ing amalgamation.
In the tax year of amalgamation and in each subsequent tax year,— (a) the amalgamating company is treated as if it had never been a party to the ﬁnancial arrangement prior to the amalgamation, and section EW 31 does not apply to the amalgamating company with respect to the disposition; and the amalgamated company is treated as if it had— (b) (6) 1330 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FE 7 (i) (ii) (iii) entered into the ﬁnancial arrangement on the same date and for the same consideration as the amalgamating company; and incurred all expenditure and derived all income incurred or derived by the amalgamating com- pany under the ﬁnancial arrangement before the amalgamation; and included in its return of income the same amounts of expenditure and income under the ﬁnancial ar- rangement as were included by the amalgamating company.
(7) (8) If the method of calculating the income or expenditure under the ﬁnancial arrangement remains the same despite the amal- gamation, the consideration for the disposition in the amal- gamating company’s base price adjustment calculation is a fair and reasonable amount of the income or expenditure that the amalgamating company would have derived or incurred in the tax year of disposition had the disposition not taken place.
In any other case, the consideration for the disposition is the market value of the ﬁnancial arrangement on the date of dis- position.
Compare: 1994 No 164 s FE 6 FE 6A Deduction to amalgamating company for depreciable property transferred In respect of a qualifying amalgamation, an amalgamating company is allowed a deduction for an amount of depreciation loss for property transferred to the amalgamated company for the period beginning on the ﬁrst day of the income year in which the amalgamation takes place and ending on the day before the date of the amalgamation.
Compare: 1994 No 164 s FE 6B FE 7 Succession of obligations of amalgamating company under ﬁnancial arrangement on amalgamation (1) Despite sections EW 43 and GD 11, an amalgamated company that succeeds to the obligations of an amalgamating company in respect of a ﬁnancial arrangement subject to the ﬁnancial arrangements rules must— 1331 Part F s FE 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) apply subsection (2) if— (i) (ii) (iii) (iv) (v) the amalgamation is a qualifying amalgamation; and the method of calculating income and expend- iture under the ﬁnancial arrangement remains the same despite the amalgamation; and the amalgamated company so elects by ﬁling its return of income for the tax year; and the amalgamating company and the amalga- mated company were members of the same whollyowned group of companies at all times in the tax year before the amalgamation; and the amalgamating company is not entitled, under section IE 1 or IF 1, to carry forward and offset, in a later tax year, a net loss of the company for any preceding tax year, unless the whole of that net loss may be offset against the net income of the amalgamated company for the tax year under section IF 4: (b) apply either subsection (3) or (4) for any other qualify- ing amalgamation.
In the tax year of amalgamation and in each subsequent tax year,— (a) the amalgamating company is treated as if it had never been a party to the ﬁnancial arrangement prior to the amalgamation, and section EW 31 does not apply to the amalgamating company with respect to the succession; and the amalgamated company is treated as if it had— (i) (b) entered into the ﬁnancial arrangement on the same date and for the same consideration as the amalgamating company; and incurred all expenditure and derived all income incurred or derived by the amalgamating com- pany under the ﬁnancial arrangement before the succession; and included in its return of income the same amounts of income and expenditure under the ﬁnancial ar- (ii) (iii) (2) 1332 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FE 9 (3) (4) rangement as were included by the amalgamating company.
If the method of calculating the income or expenditure under the ﬁnancial arrangement remains the same despite the amal- gamation, the consideration for the disposition in the amal- gamating company’s base price adjustment calculation is a fair and reasonable amount of the income or expenditure that the amalgamating company would have derived or incurred in the tax year of disposition had the disposition not taken place.
In any other case, the consideration for the disposition is the market value of the ﬁnancial arrangement on the date of dis- position.
Compare: 1994 No 164 s FE 7 FE 8 Amalgamated company to assume rights and obligations of amalgamating company Where any amalgamating company ceases to exist on an amalgamation, the amalgamated company must, in accord- ance with section 209G of the Companies Act 1955 or section 225 of the Companies Act 1993, comply with all obligations of and meet all liabilities of, and be entitled to all rights, powers, and privileges of, the amalgamating company under the Inland Revenue Acts with respect to the tax year in which the amalgamation occurs and all preceding tax years.
Compare: 1994 No 164 s FE 8 FE 9 Amalgamation not to result in deemed income or remission of liabilities Sections CG 2 and DB 38 do not apply merely by virtue of an amalgamated company succeeding to a liability of an amal- gamating company on an amalgamation.

Compare: 1994 No 164 s FE 9 Section FE 9 was amended, as from 1 October 2005, by section 203 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “DB 38” for the expression “IE 1(4)”.
1333 Part F s FE 10 Income Tax Act 2004 Reprinted as at 29 August 2011 FE 10 Treatment of ﬁnancial arrangements between amalgamating companies This section applies if the parties to a ﬁnancial arrangement are amalgamating companies and the ﬁnancial arrangement exists on the date of the amalgamation.
If immediately before the amalgamation the amalgamating company that is the borrower under the ﬁnancial arrangement is solvent or likely to meet its obligations under the ﬁnancial arrangement, the ﬁnancial arrangement is, for the purposes of section EW 31, discharged immediately before the amal- gamation and the amalgamating company is treated as having paid to the other party to the arrangement, in consideration for the discharge,— (a) in the case of a qualifying amalgamation, the amalgam- ating company’s outstanding accrued balance for the ﬁ- nancial arrangement: in any other case, the market value of the ﬁnancial ar- rangement on the date of the amalgamation.
(b) If subsection (2) applies, the other party to the ﬁnancial ar- rangement is treated as not having remitted an amount merely by virtue of the discharge.
If immediately before the amalgamation the amalgamating company that is the borrower under the ﬁnancial arrangement is insolvent and unlikely to meet its obligations under the ﬁnancial arrangement, the ﬁnancial arrangement is, for the purposes of section EW 31, discharged immediately before the amalgamation and the amalgamating company is treated as having paid to the other party to the ﬁnancial arrangement, in consideration for the discharge, the market value of the ﬁnancial arrangement on the date of the amalgamation.
If subsection (4) applies, the other party to the ﬁnancial ar- rangement is treated as having remitted the excess (over mar- ket value) of the other party’s outstanding accrued balance for the ﬁnancial arrangement.
For the purposes of this section,— (a) the amalgamating company’s outstanding accrued bal- ance for the ﬁnancial arrangement is calculated using the formula— (1) (2) (3) (4) (5) (6) 1334 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FE 10 consideration + prior expenditure + expenditure accrued in year of amalgamation – income accrued in year of amalgamation – consideration paid before amalgamation where— consideration prior expenditure expenditure accrued in year of amalgamation is the consideration paid to the amalgamating company under the ﬁnancial arrangement is expenditure incurred less income derived by the amalgamating company under the ﬁnancial arrangement under a spreading method or section EW 53 in all previous tax years since the ﬁnancial arrangement was entered into is expenditure accrued by the amalgamating company under the ﬁnancial arrangement for the period beginning on the ﬁrst day of the tax year in which the amalgamation occurs and ending on the date of the amalgamation, calculated,— (i) if the amalgamating company was a party to the ﬁnancial arrangement in a prior tax year, using the spreading method the amalgamating company used to calculate income and expenditure under the ﬁnancial arrangement in that tax year; and 1335 Part F s FE 10 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) in any other case, using a spreading method the amalgamating company chooses, if the method could have been used had the tax year ended immediately before the amalgamation is the income accrued by the amalgamating company under the ﬁnancial arrangement for the period beginning on the ﬁrst day of the tax year in which the amalgamation occurs and ending on the date of the amalgamation, as calculated under paragraph (i) or (ii) of the item “expenditure accrued in year of amalgamation” is the consideration paid by the amalgamating company for the ﬁnancial arrangement before the amalgamation: income accrued in year of amalgamation consideration paid before amalgamation (b) the other party’s
 outstanding accrued balance for the ﬁnancial arrangement is calculated using the formula— consideration + prior income + income accrued in year of amalgamation – expenditure accrued in year of amalgamation – consideration paid before amalgamation 1336 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FE 10 where— consideration prior income income accrued in year of amalgamation is the consideration paid by the party under the ﬁnancial arrangement is income derived less expenditure incurred by the other party to the ﬁnancial arrangement under a spreading method or section EW 53 in all previous tax years since the ﬁnancial arrangement was entered into is income accrued by the party for the period beginning on the ﬁrst day of the tax year in which the amalgamation occurs and ending on the date of the amalgamation, calculated,— (i) (ii) if the party was a party to the ﬁnancial arrangement in a prior tax year, using the spreading method the party used to calculate income and expenditure under the ﬁnancial arrangement in that tax year; and in any other case, using a spreading method the party chooses, if the method could have been used had the tax year ended immediately before the amalgamation 1337 Income Tax Act 2004 Reprinted as at 29 August 2011 expenditure accrued in year of amalgamation is the expenditure accrued by the party to the ﬁnancial arrangement for the period beginning on the ﬁrst day of the tax year in which the amalgamation occurs and ending on the date of the amalgamation, as calculated under paragraph (i) or (ii) of the item “income accrued in year of amalgamation” consideration paid before amalgamation is the consideration paid to the party under the ﬁnancial arrangement before the amalgamation : (c) a company is treated as being insolvent if it does not satisfy the solvency test in section 4 of the Companies Act 1993.
Compare: 1994 No 164 s FE 10 Subpart FF—Transfers under relationship agreements The heading to subpart FF was substituted, as from 26 April 2005, by sec- tion 3(1) Income Tax Amendment Act 2005 (2005 No 11).

It previously read “Matrimonial transfers”.
Contents Shares or options Financial arrangements Business stock in hand Personal property Commercial bills Land FF 1 FF 2 FF 3 FF 4 FF 5 FF 6 FF 7 Disposal of timber under relationship agreement FF 8 FF 9 FF 10 Non-speciﬁed livestock FF 11 High-priced livestock FF 12 Bloodstock Patent applications and patent rights Speciﬁed livestock 1338 Page 1339 1339 1340 1340 1340 1341 1343 1344 1345 1345 1347 1348 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FF 2 FF 13 Trading stock FF 14 Leased assets FF 15 Amount of depreciation loss for qualifying assets FF 16 Depreciable property FF 17 Pensions FF 18 Land used in speciﬁed activity FF 19 Mining assets 1348 1349 1350 1351 1352 1353 1354 FF 1 Shares or options (1) The provisions of this section apply only to modify the provi- sions of sections OD 3 and OD 4 for the purpose of the appli- cation of the continuity provisions.
(2) Where any share or option over a share in a company is trans- ferred to any person from a spouse, civil union partner or de facto partner or former spouse, civil union partner or de facto partner in accordance with a relationship agreement, the trans- feree is deemed to have acquired that share or option on the date on which that share or option was acquired, or deemed under section OD 5 to have been acquired, by the transferor, and to have held it at all times until the date of transfer.
Compare: 1994 No 164 s FF 1 Subsection (2) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner” for “spouse” in both places it occurs.

Subsection (2) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
Subsection (2) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner” for “spouse or civil union partner” in both places it occurs.

FF 2 Financial arrangements The ﬁnancial arrangements rules do not apply in relation to a ﬁnancial arrangement transferred in accordance with a rela- tionship agreement in the circumstances speciﬁed in section EW 10(6).
Compare: 1994 No 164 s FF 2 Section FF 2 was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
1339 Part F s FF 3 Income Tax Act 2004 Reprinted as at 29 August 2011 FF 3 Business stock in hand For the purposes of section CB 1, where any business is trans- ferred in accordance with a relationship agreement, the value of stock in hand in relation to that business is an amount equal to the amount at which that stock is deemed by section FF 13 to have been sold.
Compare: 1994 No 164 s FF 3 Section FF 3 was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
FF 4 Personal property For the purposes of sections CB 3 and CB 4, where any per- sonal property or any interest in personal property to which those sections apply is transferred in accordance with a rela- tionship agreement,— (a) the transferor is deemed to have disposed of that per- sonal property or that interest for a consideration equal to the cost of that personal property or that interest to the transferor: the transferee is deemed to have acquired that personal property or that interest at a cost equal to the amount of the consideration determined under paragraph (a): where in any tax year the transferee sells or otherwise disposes of that personal property or that interest, the transferee is, in relation to that personal property or that interest, and to that sale or other disposition, deemed, for the purposes of sections CB 3 and CB 4, to be en- gaged in a business comprising dealing in such property.
(b) (c) Compare: 1994 No 164 s FF 4 Section FF 4 was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
FF 5 Commercial bills For the purposes of section CZ 6, where any commercial bill is transferred in accordance with a relationship agreement, the transferor is deemed to have disposed of the commercial bill, 1340 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FF 6 and the transferee is deemed to have purchased it, at a cost equal to the cost at which the transferor purchased the bill.
Compare: 1994 No 164 s FF 5 Section FF 5 was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
FF 6 Land (1) Where any land is transferred in accordance with a relationship agreement,— (a) for the purposes of sections BD 2, CB 5 to CB 10, CB 12, CB 15, CB 18, and CB 21,— (i) the transferor is deemed to have disposed of that land for a consideration equal to the total amount that would, if that land had been sold by the trans- feror on the date of the transfer, have been the cost price of the land to the transferor; and the transferee is deemed to have incurred expend- iture, in the acquisition of that land, of an amount equal to the consideration for which that land is, under subparagraph (i), deemed to have been dis- posed of by the transferor; and the transferee is deemed to have acquired that land on the day on which it was acquired by the transferor; and (ii) (iii) (b) (iv) where the transferor and the transferee are not as- sociated persons and the transferee subsequently sells or otherwise disposes of that land, section CB 13(1) has effect as if the transferor and the transferee were associated persons: for the purposes of sections BD 2 and CB 11,— (i) the transferor is deemed to have disposed of that land for a consideration equal to the sum of— (A) the market value of the land, at the date of the commencement of any undertaking or scheme of the kind referred to in section CB 11, commenced, carried on, or carried out by the transferor prior to the transfer; and 1341 Part F s FF 6 Income Tax Act 2004 Reprinted as at 29 August 2011 (B) expenditure incurred by the transferor prior to the transfer in the carrying on or carrying out, in relation to that land, of any undertaking or scheme of the kind referred to in section CB 11: (ii) where the land is acquired from any transferor to whom subparagraph (i) applies, the transferee is— (A) (B) deemed to have incurred expenditure, in the acquisition of that land, of an amount equal to the market value referred to in subparagraph (i)(A); and deemed to have incurred expenditure, in the carrying on or carrying out of the undertaking or scheme which was carried
 on or carried out by the transferor prior to the transfer, of an amount equal to the expenditure referred to in subparagraph (i)(B): (iii) where the land is acquired from any transferor to whom subparagraph (i) does not apply, the trans- feree is deemed to have incurred expenditure, in the acquisition of that land, of an amount equal to the consideration for which that land is, under paragraph (a)(i), deemed to have been disposed of by the transferor: (iv) where the transferor and the transferee are not as- sociated persons and the transferee subsequently sells or otherwise disposes of that land, section CB 13(1) has effect as if the transferor and the transferee were associated persons.
Every reference in this section to a sale or other disposition of any land by any person is deemed to include a reference to a sale or other disposition of any land by or on behalf of any other person where that other person is, in relation to a mortgage secured on that land, a mortgagee and that sale or other disposition by or on behalf of that other person is made in consequence of the default of the person under that mortgage.
Compare: 1994 No 164 s FF 6 (2) 1342 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FF 7 Subsection (1) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.

(2) (3) FF 7 Disposal of timber under relationship agreement (1) (c) (b) Subsection (2) applies when timber or a right to take timber is transferred under a relationship agreement.
The transfer of timber or a right to take timber is treated— (a) as if the transferor sold the timber or the right to take timber to the transferee; and as if the transferee gave the transferor consideration; and as if the amount of the consideration equalled the costs of timber to the transferor or the costs of the right to take timber to the transferor.

The costs are worked out as at the date of transfer.
Subsection (4) applies when— (a) land with standing timber on it is transferred under a relationship agreement; 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) (4) A transfer of land with standing timber on it is treated, so far as the standing timber is concerned,— (a) (b) as if the transferor sold the timber to the transferee; and as if the transferee gave the transferor consideration; and as if the amount of the consideration equalled the costs of timber to the transferor.

The costs are worked out as at the date of transfer.
(c) (5) The amount treated as consideration is,— (a) (b) as far as the transferor is concerned, income; and as far as the transferee is concerned, the cost of acquir- ing the timber or the cost of acquiring the right to take timber.

Compare: 1994 No 164 s FF 7 The heading to section FF 7 was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relation- ship agreement” for “matrimonial agreement”.
1343 Part F s FF 8 Income Tax Act 2004 Reprinted as at 29 August 2011 Subsection (1) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.

Subsection (3)(a) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agree- ment” for “matrimonial agreement”.
FF 8 Patent applications and patent rights For the purposes of sections CB 26 and DB 29 to DB 31, where any patent applications with complete speciﬁcations or patent rights are transferred in accordance with a relationship agree- ment,— (a) the transferor is deemed to have sold those patent ap- plications with complete speciﬁcations or patent rights in the income year of transfer for a consideration equal to the amount (if any) of the expenditure of the kind re- ferred to in section DB 29 or, as the case may be, of the total cost of the kind referred to in section DB 30, for which the transferor has been denied a deduction; and the transferor is denied a deduction of the amount ﬁrst mentioned in paragraph (a) in any tax year; and the transferee is deemed to have incurred expenditure, in the acquisition of those patent applications with com- plete speciﬁcations or patent rights in that tax year, of an amount equal to the value of the consideration for which, under paragraph (a), they are deemed to have been sold by the transferor.
(b) (c) Compare: 1994 No 164 s FF 8 The heading to section FF 8 was substituted, as from 21 June 2005, by sec- tion 53(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application to patent applications that are lodged for the ﬁrst time on or after 21 June 2005.

Section FF 8 was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
Section FF 8 was amended, as from 21 June 2005, by section 53(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “patent applications with complete speciﬁcations or patent rights” for “patent rights” wherever they appear with application to patent applications that are lodged for the ﬁrst time on or after 21 June 2005.
1344 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FF 10 FF 9 Speciﬁed livestock For the purposes of subpart EC and section EZ 4, where any speciﬁed livestock is transferred in accordance with a relation- ship agreement, and— (a) that livestock was used by the transferor in any business carried on by the transferor, and was held by the trans- feror at the beginning of the income year of transfer; and its value at the end of the preceding income year was determined by the transferor under the herd scheme; and its value at the end of the income year in which the transfer occurred is determined by the transferee under the herd scheme,— (b) (c) then, notwithstanding section FF 13, the transferee is deemed to have acquired the livestock during the income year in which the transfer occurred at a price equal to the national average market value of that livestock for that income year multiplied by the herd value ratio (if any) applying to the livestock in the hands of the transferor in the preceding income year.
Compare: 1994 No 164 s FF 9 Section FF 9 was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
FF 10 Non-speciﬁed livestock (1) For the purposes of sections EC 28 to EC 31,— (a) where in any income year— (i) (ii) any non-speciﬁed livestock is transferred in ac- cordance with a relationship agreement; and by virtue of that transfer the transferee com- mences or recommences to derive income from non-speciﬁed livestock in that income year,— the transferee is, except for the purpose of determining whether any subsequent acquisition of livestock by the trans- feree constitutes the commencement or recommencement by the transferee of the deriving of income from non-speciﬁed livestock, deemed not to have so commenced or recommenced to derive income from non-speciﬁed livestock by virtue of that transfer: (b) where any land is transferred in accordance with a re- lationship agreement, the transferee is deemed to have 1345 Part F s FF 10 Income Tax Act 2004 Reprinted as at 29 August 2011 acquired that land on the day on which it was acquired by the transferor.
(2) Where— (a) (b) (c) any non-speciﬁed livestock is transferred in accordance with a relationship agreement and is then used by the transferee in the deriving of income from livestock; and the transferee was not, immediately before the transfer, deriving income from non-speciﬁed livestock; and if the livestock had been retained by the transferor and had not been so transferred, section EC 31(2)(a) or (b) would have applied to the valuation of that livestock in the hands of the transferor,— then the value to be taken into account under section EC 31 by the transferee in respect of that livestock is, notwithstanding section EC 31(2) (but subject to subsection (1)), increased,— for the income year of transfer, by an amount equal to (d) either— (i) (ii) the amount that would have been the transferor’s amount of two-thirds of the difference between the cost price of the livestock and the standard value in relation to that livestock and the income year of transfer, where that income year is the income year in which section EC 31(2)(a) would have applied to the transferor if the transferor had retained the livestock; or one-third of the amount that would have been the transferor’s amount of two-thirds of the differ- ence between the cost price of the livestock and the standard value in relation to that livestock and the income year of transfer where that in- come year is the income year in which section EC 31(2)(b) would have applied to the transferor if the transferor had retained the livestock: for the income year following the income year of trans- fer, by an amount equal to one-third of the amount (if any) that would have been the transferor’s amount of two-thirds of the difference between the cost price of the livestock and the standard value in relation to that live- stock and that following income year if, had the trans- (e) 1346 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FF 11 feror retained the livestock, section EC 31(2)(b) would have applied in relation to the transferor and that live-
 stock.
Compare: 1994 No 164 s FF 10 Subsection (1)(a)(i) was amended, as from 26 April 2005, by section 3(1) In- come Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.

Subsection (1)(b) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agree- ment” for “matrimonial agreement”.
Subsection (2)(a) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agree- ment” for “matrimonial agreement”.
FF 11 High-priced livestock For the purposes of sections EC 32 to EC 37, where any highpriced livestock is transferred to any taxpayer in accordance with a relation- ship agreement,— (a) the transferee is deemed to have acquired the livestock— (i) on the day on which it was acquired by the transferor; and at a cost equal to the cost of the livestock to that trans- feror; and (ii) (b) (c) the value of the high-priced livestock to be taken into account at the end of the income year of transfer by the transferee is, notwithstanding section EC 34(1), the amount of the value at which it is so transferred to the transferee (as that value is determined in accordance with section FF 13), reduced by an amount equal to the depreciation percentage of its cost price; and where the transferor had elected under section 86I(7) of the Income Tax Act 1976 to adopt in respect of the high-priced livestock a speciﬁed writedown based on diminishing value, or had chosen to apply section EC 34(3), the transferee is deemed also to have made such an election or choice; and (d) where the transferor had not so elected to adopt a speciﬁed writedown based on diminishing value, or had not chosen to apply section EC 34(3), the transferee is not entitled to make a choice between section EC 34(2) and 1347 Part F s FF 12 Income Tax Act 2004 Reprinted as at 29 August 2011 3unless the high-priced livestock was acquired by the trans- feror in the income year of transfer.
Compare: 1994 No 164 s FF 11 Section FF 11 was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
FF 12 Bloodstock For the purposes of sections EC 38 to EC 45, where any blood- stock is transferred in accordance with a relationship agree- ment, and that bloodstock has been used for breeding purposes in New Zealand by the transferor, that bloodstock is deemed not to have been used for breeding purposes in New Zealand by the transferor.
Compare: 1994 No 164 s FF 12 Section FF 12 was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
FF 13 Trading stock (1) Where any trading stock is transferred in accordance with a relationship agreement, the trading stock is deemed for the purposes of this Act to have been sold at and to have realised during the tax year of transfer,— (a) where that trading stock was used by the transferor in any business carried on by that person and was held by that person at the commencement of the tax year, an amount equal to,— (i) in relation to any trading stock that is speciﬁed livestock other than livestock used in dealing operations, the value taken into account by the transferor in respect of that trading stock, under subpart EC, at the end of the last preceding tax year: in relation to any trading stock other than trad- ing stock to which subparagraph (i) applies, the greater of— (A) the value taken into account by the trans- feror in respect of that trading stock, under (ii) 1348 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FF 14 (B) subpart EB, at the end of the last preceding tax year: the value of that trading stock to be taken into account by the transferee at the end of the income year of transfer, determined under subpart EB or, as the case may be, subpart EC; and (b) where that trading stock was used by the transferor in any business carried on by the transferor and was ac- quired by the transferor during the tax year of transfer, an amount equal to the price at which that trading stock was so acquired; and where that trading stock was not used by the transferor in any business carried on by the transferor, an amount equal to the cost price at which that trading stock was acquired by the transferor,— (c) and for the purposes of this Act that trading stock is deemed to have been purchased by the transferee, during the tax year of transfer, at a price equal to the amount which that trading stock is so deemed to have realised.
(2) Where any trading stock to which subsection (1)(a) or (b) ap- plies is not used by the transferee in the carrying on by the transferee of any business and is in any tax year sold or other- wise disposed of by the transferee, that sale or other disposal is, for the purposes of this Act, deemed to be a sale of trading stock used by the transferee in the carrying on by the trans- feree of a business.
Section GD 1 does not apply in respect of any trading stock which is transferred to any person in accordance with a rela- tionship agreement.

Compare: 1994 No 164 s FF 13 (3) Subsection (1) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
Subsection (3) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
FF 14 Leased assets Where— 1349 Part F s FF 15 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) (c) (d) any person has leased, rented, or hired any asset, being any plant or machinery (including a motor vehicle) or other equipment or a temporary building, and that per- son has been allowed a deduction in any tax year for the consideration paid or given in respect of that lease, rental, or hire; and that person, or any other person where that person and that other person are associated persons, at any time purchases or otherwise acquires that asset; and that person or that other person who so purchases or otherwise acquires that asset transfers that asset to any further person in accordance with a relationship agree- ment; and the transferee sells or otherwise disposes of that asset for a consideration in excess of an amount equal to the value to which, at the commencement of the income year of transfer, the asset has been reduced by deduc- tions for amounts of depreciation loss of that asset or, where the asset was purchased or otherwise acquired by the transferor during the tax year of transfer, an amount equal to the consideration for which the transferor pur- chased or otherwise acquired that asset,— the income under section FC 5 of the transferee derived in the tax year in which the asset is sold or otherwise disposed of by the transferee includes an amount equal to the excess or the total amount of the deductions that the person ﬁrst mentioned in this section has been allowed, whichever is the less.
Compare: 1994 No 164 s FF 14 Paragraph (c) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.

FF 15 Amount of depreciation loss for qualifying assets (1) This section applies when a qualifying asset or an item to which a qualifying improvement has been made is transferred under a relationship agreement.
(2) After the transfer, the transferee has an amount of depreciation loss under section EZ 16 as if the transferee were the transferor.

1350 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FF 16 (3) The amount of the transferee’s depreciation loss for the asset or item for the income year in which it is transferred is the amount of depreciation loss for the asset or item for the income year under section EZ 16 minus the amount that the transferor has for the income year.
Compare: 1994 No 164 s FF 15 Subsection (1) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.

FF 16 Depreciable property (1) This section applies when a transferor who has an amount of depreciation loss for an item transfers the item under a rela- tionship agreement.
(3) (2) Whether or not the transferor has in fact had an amount of depreciation loss, the transferee has an amount of depreciation loss for the item from the time of the transfer.

The transferee is treated as having incurred, in acquiring the item, expenditure of the amount of the consideration for which the transferor is treated as having disposed of the item.

The consideration is described in subsection (4) or section FF 19.
The transferor is treated as having disposed of the item for consideration, as follows: (a) (4) if the transferor acquired the item in the income year of transfer, a consideration equal to the item’s cost: in any other case, a consideration equal to the item’s ad- justed tax value at the start of the income year of trans- fer.

(b) (5) (6) (7) The depreciation loss that the transferee has when the item is a building must be determined having regard to its cost to the transferor originally.
In addition to the amount of depreciation loss that the trans- feree in fact has for the item, the transferee is treated as having had an amount of depreciation loss equal to all the amounts of depreciation loss that the transferor had for the item.

The transferee does not have a greater amount of depreciation loss than that which the transferor would have had if the trans- feror had kept the item.
1351 Part F s FF 17 Income Tax Act 2004 Reprinted as at 29 August 2011 (9) (8) An item acquired, erected, installed, altered, extended, im- proved, or attached by the transferor in the income year in which the item is transferred is treated as if it were acquired, erected, installed, altered, extended, improved, or attached by the transferee in the income year.
If any of the following conditions applied to the item when the transferor acquired or erected it, the condition is treated as applying to the item at the time it is transferred: (a) the item had not previously been used by any person or acquired or held by a person for their use; and if the item is a building or part of a building, it had not previously been occupied.
(b) Compare: 1994 No 164 s FF 16 Subsection (1) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
FF 17 Pensions (1) For the purposes of section DC 2, where any part of the pen- sion otherwise payable by an employer to a former employee is paid by the employer to any person other than the employee in accordance with an agreement made between the former em- ployee and that other person under section 21 of the Property (Relationships) Act 1976 or in compliance with an order of the court made under section 25 of that Act, section DC 2(1) and (2) apply in the same manner and to the same extent to the amount of the part so paid as they would have applied if that amount had been, or formed part of, an amount paid by way of a pension to that former employee.
Subsection (3) applies if part of the pension, otherwise payable by a partnership or a taxpayer to a former partner, is paid by the partnership or the taxpayer to a person other than the former partner in accordance with an agreement made between the former partner and the person under section 21 of the Property (Relationships) Act 1976 or in compliance with an order of the court made under section 25 of that Act.
Section DC 3 applies in the same manner and to the same ex- tent to the part of the pension so paid as it would have applied (2) (3) 1352 (2) Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FF 18 if the part had been paid by way of a pension to the former partner.
Compare: 1994 No 164 s FF 17 FF 18 Land used in speciﬁed activity (1) For the purpose of the deﬁnition of established activity in sec- tion IE 2(8), where any land is transferred in accordance with a relationship agreement where the transferee conducts on that land a speciﬁed activity or speciﬁed activities which the trans- feror conducted on 11 October 1982 which in the opinion of the Commissioner was the speciﬁed activity or 1 of the speci- ﬁed activities the conduct of which constituted, as at that date, the livelihood of the transferor and the transferor’s sole or prin- cipal source of income, then the transferee is deemed to have conducted on 11 October 1982 such speciﬁed activity or speci- ﬁed activities and such speciﬁed activity or speciﬁed activities are deemed to constitute the livelihood of the transferee and the transferee’s sole or principal source of income.
For the purposes of section IE 2(2), where the transferor, under a relationship agreement, of any land of the kind to which that subsection refers was an existing farmer immediately before the date of transfer, the transferee is deemed, as at the date of transfer, to have acquired or, as the case may be, commenced to hold that land on the ﬁrst day of the period throughout which the transferor owned or held that land, being the period that ended with the day immediately preceding the date of transfer: provided that in any case where the transferee commences to conduct, on that land, any speciﬁed activity that is of the same kind as any speciﬁed activity conducted on that land by the transferor immediately before the date of transfer, the trans- feree is not, in relation to that commencement by the transferee of the conduct of that speciﬁed activity, so deemed to have ac- quired or, as the case may be, commenced to hold that land on that ﬁrst day.
Compare: 1994 No 164 s FF 18 Subsection (1) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.

1353 Part F s FF 19 Income Tax Act 2004 Reprinted as at 29 August 2011 Subsection (2) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
FF 19 Mining assets For the purposes of this section and sections CU 12, DU 9, and IH 5, where any asset is transferred in accordance with a relationship agreement, the following provisions apply: (a) where the transferor is a resident mining operator and that asset is an asset that was used by the transferor immediately before that transfer, in deriving assessable income from mining, the transferor is deemed to have sold or otherwise disposed of that asset on the date of transfer for a consideration equal to the lesser of— (i) the amount of the expenditure incurred by the transferor in the acquisition of that asset: (ii) where the transferor has been allowed a deduc- tion for an amount of depreciation loss in respect of that asset, an amount equal to the value to which, at the commencement of the tax year of transfer, that asset has been reduced by all such deductions: (iii) where that asset is an asset acquired as a result of mining exploration expenditure or mining devel- opment expenditure incurred by the transferor in respect of which the transferor has been allowed a deduction under sections DU 1 and DU 9(1), the amount of that mining exploration expenditure or that mining development expenditure reduced by an amount equal to the sum of the amounts of all such deductions: in any case where paragraph (a) applies, the transferee is deemed to have incurred expenditure in the acquisition of that asset, when so transferred to the transferee, of an amount equal to the amount of the consideration for which the transferor is, under paragraph (a), deemed to have sold or otherwise disposed of that asset: where, in any case where paragraph (a) applies, the transferor is deemed to have sold or otherwise disposed of that asset for a consideration equal to the amount cal- (b) (c) 1354 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FF 19 (ii) (iii) culated in accordance with paragraph (a)(iii), and the transferee, being a transferee who, immediately after that transfer, is not a resident mining operator, at
 any time sells or otherwise disposes of that asset,— (i) the transferee is, in relation to that sale or other disposal, deemed to be a resident mining oper- ator; and that sale or other disposal is deemed to be a sale or other disposal to which, in relation to sections CU 3 and DU 2, sections CU 12(1) and DU 9(1) apply; and the value of the consideration received or receiv- able by the transferee for that sale or other dis- posal is, for the purposes of sections CU 1 to CU 11, DU 1 to DU 8, and IH 4, deemed to be an amount equal to the amount by which the value of the consideration received or receivable by the transferee for that sale or other disposal exceeds the amount of the consideration ﬁrst mentioned in this paragraph: (d) where the transferee is, immediately after the date of transfer, a resident mining operator, the transferee is deemed to have incurred expenditure in the acquisition of that asset, when so transferred, of an amount equal to the lesser of— (i) the amount of the expenditure incurred by the transferor in the acquisition of that asset: (ii) where the transferor has been allowed a deduc- tion for an amount of depreciation loss in respect of that asset, an amount equal to the value to which, at the commencement of the tax year of transfer, that asset has been reduced by all such deductions: (iii) where that asset is an asset acquired as a result of mining exploration expenditure or mining de- velopment expenditure incurred by the transferor in respect of which the transferor has been al- lowed any deduction under sections DU 1 and DU 9(1), the amount of that mining exploration 1355 Income Tax Act 2004 Reprinted as at 29 August 2011 (e) expenditure or that mining development expend- iture reduced by an amount equal to the sum of the amounts of all such deductions: where, in any case where paragraph (d) applies, the transferee is deemed to have incurred expenditure in the acquisition of that asset of an amount calculated in ac- cordance with
 paragraph (d)(iii), the transferee is, for the purposes of sections CU 3, CU 10, DU 2, and DU 6, deemed to have acquired that asset as a result of min- ing exploration expenditure or mining development ex- penditure incurred by the transferee.
Compare: 1994 No 164 s FF 19 Section FF 19 was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement” for “matrimonial agreement”.
Subpart FG—Apportionment of interest costs Contents Purpose of this subpart Entities to which interest deduction rules potentially apply FG 1 FG 2 FG 3 When interest apportioned under section FG 8 or annual total deduction adjusted under section FG 8B FG 4 Rules for calculating New Zealand group debt percentage FG 5 Rules for calculating worldwide group debt percentage FG 6 Concession for on-lending FG 7 Concession for exchange rate ﬂuctuations FG 8 Apportionment of interest deductions—taxpayer not in New Zealand banking group FG 8B Adjustment of annual total deduction—reporting bank FG 8C New Zealand banking group of registered bank FG 8D Reporting bank for New Zealand banking group FG 8E Measurement periods and measurement days FG 8F Financial value and regulatory value FG 8G New Zealand net equity of New Zealand banking group FG 8H Net equity threshold FG 8I Valuation of debt and risk-weighted exposures FG 8J Treatment of temporary change in New Zealand net equity or net equity threshold Page 1357 1357 1359 1360 1368 1371 1372 1372 1374 1376 1380 1380 1381 1382 1389 1389 1390 1356 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 2 Treatment of speciﬁed leases and interest expense FG 9 FG 10 Mode of elections 1390 1390 FG 1 Purpose of this subpart Subject always to the express provisions of this subpart, the purpose of this subpart is to ensure, in the case of a New Zealand taxpayer controlled by a single non-resident and which has a disproportionately high level of New Zealand group debt funding, an appropriate apportionment to the New Zealand taxpayer of the worldwide interest expenditure of the group of entities of which the New Zealand taxpayer is a part.
Compare: 1994 No 164 s FG 1 FG 2 Entities to which interest deduction rules potentially apply (1) A taxpayer is not subject for a tax year to the interest appor- tionment rule in section FG 8 or the adjustment of annual total deduction in section FG 8B unless, at a time in the taxpayer’s income year, the taxpayer— (a) (b) is a non-resident who is not a company: is a company that is a non-resident in which— (i) (ii) no person who is resident in New Zealand has a direct ownership interest that is equal to or greater than 50%: a non-resident has a direct ownership interest that, when aggregated with the direct ownership interests of persons associated with the non-resi- dent, is equal to or greater than 50%: (c) (d) is a company that is resident in New Zealand— (i) in which a non-resident has an ownership interest that is equal to or greater than 50%: of which a non-resident has control by any other means: (ii) is the trustee of a non-qualifying trust for which 50% or more in value of the settlements on the trust is settled by— (i) (ii) a non-resident: persons who are associated with the non-resident.
1357 Part F s FG 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) A person’s ownership interest in a company is equal to the sum of— (a) (b) (c) (d) any direct ownership interest held by the person in the company; and any direct ownership interest or interests held in the company by persons associated with the person; and any indirect ownership interest or interests held by the person in the company; and any indirect ownership interest or interests held in the company by persons associated with the person.
(4) (3) A person’s direct ownership interest in a company is equal to the highest percentage held by the person out of the categories listed in section EX 5(1) (applying that subsection as if the company were the foreign company referred to).
If a person has a direct ownership interest in a company (re- ferred to in this subsection as the upper company) and the upper company has an ownership interest in another company (referred to in this subsection as the lower company), then,— if the person’s direct ownership interest in the upper (a) company (when aggregated with the direct ownership interests of persons associated with the person) is less than 50%, the person is deemed to hold an indirect own- ership interest in the lower company calculated by mul- tiplying the person’s direct ownership interest in the upper company by the upper company’s ownership in- terest in the lower company; and if the person’s direct ownership interest in the upper company (when aggregated with the direct ownership interests of persons associated with the person) is equal to or greater than 50%, the person is deemed to hold an indirect ownership interest in the lower company equal to the upper company’s ownership interest in the lower company.
(b) If the application of subsection (2) or (4) to require a per- son’s ownership interest in a company to be calculated on a basis of aggregation with associated persons results in the same percentage shares or rights in respect of the company being counted more than once, the person’s ownership inter- (5) 1358 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 3 (6) (7) (8) est in the company is adjusted to the extent necessary to avoid multiple counting.
For the purposes of subsections (1)(a)(ii) and (2), a person not resident in New Zealand who does not hold any direct or indirect ownership interests in the company and any relative of that person resident in New Zealand are not associated persons in respect of that company.

For the purposes of this section, a foreign company is treated as not being resident in New Zealand.
Compare: 1994 No 164 s FG 2 The heading to section FG 2 was substituted, as from 1 July 2005, by sec- tion 54(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.

Subsection (1) was substituted, as from 1 July 2005, by section 54(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
Subsection (7) was repealed, as from 1 July 2005, by section 54(3) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FG 3 When interest apportioned under section FG 8 or annual total deduction adjusted under section FG 8B (1) A taxpayer who is not excluded by section FG 2 from the ap- plication of section FG 8 for a tax year is required to make an apportionment under section FG 8 of interest expenditure in- curred during the corresponding income year of the taxpayer if the taxpayer— (a) at no time in the income year— (i) is a reporting bank for a New Zealand banking group: is part of a New Zealand banking group for the purpose of section FG 8C; and (ii) (b) has a New Zealand group debt percentage for the in- come year that— (i) (ii) is greater than 75%; and if the taxpayer is a company or a trustee, exceeds the number obtained by multiplying the world- wide group debt percentage of the taxpayer by 1.1.
1359 Part F s FG 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) A taxpayer who is not excluded by section FG 2 from the ap- plication of section FG 8B for a tax year is treated as having an annual total deduction for the tax year of an amount that is given by section FG 8B if— (a) (b) at a time in the taxpayer’s corresponding income year the taxpayer is the reporting bank for a New Zealand banking group; and the New Zealand banking group has a New Zealand net equity, as deﬁned in section FG 8G, of less than the net equity threshold for the New Zealand banking group, as deﬁned in section FG 8H, on a measurement day for the taxpayer’s corresponding income year, as deﬁned in section FG 8E.
Section FG 3 was substituted, as from 1 July 2005, by section 55 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with ap- plication as from the 2005–06 income year.

(2) FG 4 Rules for calculating New Zealand group debt percentage The New Zealand group debt percentage is the percentage (1) which the amount of total debt represents of the amount of total assets for the taxpayer’s New Zealand group for the in- come year, and must be calculated under the rules in this sec- tion.
Total debt means the sum of the outstanding balances of all ﬁnancial arrangements entered into by the taxpayer (or another group member) on the relevant date chosen under subsection (5) if— (a) the ﬁnancial arrangement provides funds to the taxpayer (or another group member); and the ﬁnancial arrangement— (i) gives rise to an amount for which the taxpayer, or another group member, would be allowed a deduction, other than an amount that arises only from movement in currency exchange rates: is a stapled debt security that is held by a person resident in New Zealand and is stapled to shares other than shares of a company that is a propor- tional-stapling company.
(ii) (b) 1360 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 4 (3) (4) (5) Total assets for the income year means the aggregate on the relevant date chosen under subsection (5) of all assets of the taxpayer (or another group member), which (subject to the fol- lowing subsections) must be measured, by any combination, elected by the taxpayer, of— (a) the values shown in the ﬁnancial accounts of the tax- payer’s New Zealand group; or the net current value of the assets; or in the case of trading stock which is valued at mar- ket selling value in calculating the taxpayer’s (or group member’s) income tax liability for the income year, market selling value; or in the case of a speciﬁed lease or a ﬁnance lease that is not recognised as an asset under generally accepted ac- counting practice, the adjusted tax value of the personal property lease asset; or if permitted under generally accepted accounting prac- tice, a combination of the ﬁnancial account values and net current values.
(b) (c) (ca) (d) Except where either subsection (3)(c) or (ca) applies, the amount of total assets must be calculated under generally accepted accounting practice.
The amount of total debt and total assets for the income year must be measured, at the election of the taxpayer, on the basis of— (a) an average of the ﬁgures for the amount of total debt and total assets, respectively, calculated at the end of each day of the income year; or an average of the ﬁgures for the amount of total debt and total assets, respectively, calculated at the end of each complete consecutive 3 month period during the income year; or the amount of total debt and total assets, respectively, at the end of the income year.
(b) (c) (6) Notwithstanding subsection (5), if members of the taxpayer’s New Zealand group have different income tax balance dates, the election made by the taxpayer under subsection (5) applies as if the taxpayer’s income year were the same as that of the New Zealand parent (as deﬁned in subsection (10)).
1361 Part F s FG 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (7) The amount of total debt and the amount of total assets calcu- lated must be in New Zealand currency and, subject to section FG 7, any necessary currency conversions must be made at the close of trading spot exchange rate on the date as at which the amount is being calculated.
(8) Any temporary— (9) (10) (a) reduction in the outstanding balance of a ﬁnancial ar- rangement; or increase in the value of an asset— (b) must be excluded from the calculations if the reduction or in- crease has a purpose or effect of defeating the intent and ap- plication of this subpart.
If the taxpayer is a company, the amount of total debt and the amount of total assets must be calculated, on a consolidated basis for elimination of intra-group balances used under gener- ally accepted accounting practice for consolidation of a group of companies, for the group identiﬁed under subsections (10) to (13).
If the taxpayer is a company, the members of the group are determined in accordance with subsection (12) by— (a) the taxpayer, if the taxpayer is— (i) (ii) not resident in New Zealand; or a company in which— (A) (B) persons not resident in New Zealand have, under the rules set out in section FG 2, in aggregate a 50% or greater direct owner- ship interest; and no single person not resident in New Zealand and carrying on business in New Zealand through a ﬁxed establishment in New Zealand has a 50% or greater owner- ship interest: if paragraph (a) does not apply, the company— (i) that is either— (A) (B) resident in New Zealand; or not resident in New Zealand but carry- ing on business in New Zealand through a ﬁxed establishment in New Zealand; and (b) 1362 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 4 (ii) (iv) (iii) that has, under the rules set out in section FG 2 (but applied as if the rules for aggregation of the interests of associates set out in section FG 2(2)(b) and (d) were omitted), an ownership in- terest in the taxpayer; and in which a person not resident in New Zealand has, under those rules, a direct ownership inter- est; and in which, if paragraph (b)(i)(A) applies, a person not resident in New Zealand (being a person who has, under those rules, a 50% or greater owner- ship interest in the taxpayer) has a 50% or greater ownership interest; and in which no company satisfying the conditions of subparagraphs (i) to (iv) has, under those rules set out in section FG 2, a direct ownership interest: the taxpayer, if paragraph (a) does not apply and no company can be identiﬁed under paragraph (b): if more than 1 company is identiﬁed under paragraph (b), the company out of that set of companies where the highest ﬁgure is produced by multiplying— (i) (v) the aggregate direct ownership interests held in that company by persons not resident in New Zealand who also have a 50% or greater owner- ship interest in the taxpayer; and the ownership interest of that company in the tax- payer calculated
 under the rules set out in section FG 2 (but applied as if the rules for aggregation of the interests of associates set out in section FG 2(2)(b) and (d) were omitted): (ii) (c) (d) (e) if more than 1 company is identiﬁed under paragraph (d), the company out of that set of companies that was incorporated at the earliest time— (the party identiﬁed under paragraphs (a) to (e) being referred to in subsections (12) to (14D) as the New Zealand parent).
If a taxpayer is subject to the interest apportionment rule in section FG 8 solely by virtue of section FG 2(1)(b)(ii), section FG 4(10)(b) applies as if subparagraph (iii) were omitted and subparagraph (iv) read— (11) 1363 Part F s FG 4 Income Tax Act 2004 Reprinted as at 29 August 2011 “(iv) in which, if paragraph (b)(i)(A) applies, a person not resident in New Zealand who, under those rules, has control of the taxpayer by any other means whatsoever, has control by any other means whatsoever; and.” (12) Subject to subsections (14C) and (14D), the taxpayer’s New Zealand group comprises the taxpayer, the New Zealand par- ent (if different from the taxpayer), and all companies that— are resident in New Zealand or carrying on business (a) in New Zealand through a ﬁxed establishment in New Zealand; and are identiﬁed under subsection (13) or (14) as being controlled by the New Zealand parent; and are not members of the New Zealand banking group of a registered bank.
(b) (c) If the New Zealand parent elects that the relevant control per- centage is any percentage greater than 50%, the companies treated as being controlled by the New Zealand parent and to be included in the New Zealand group are those in which greater than 50% direct ownership interests are held collect- ively by any combination of— (a) (b) the New Zealand parent; and companies already included in the group as a result of paragraph (a) or this paragraph.
If the New Zealand parent elects that the relevant control percentage is 66% or any greater percentage, the companies treated as being controlled by the New Zealand parent and to be included in the New Zealand group are those in which 66% or greater direct ownership interests are held collectively by any combination of— (a) (b) the New Zealand parent; and a person not resident in New Zealand if— (i) (ii) the person has a 50% or greater ownership inter- est in both the taxpayer and the New Zealand par- ent; and the company included in the New Zealand group as a result would have been included in the New Zealand group under subsection (13) if the New Zealand parent had elected that subsection (13) applied; and (13) (14) 1364 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 4 (c) companies already included in the group, as a result of any or all of paragraph (a), (b), and this paragraph.
(14A) If the New Zealand parent fails to elect that either subsection (13) or (14) applies, the New Zealand parent is deemed to have elected that subsection (14) applies.

(14B) The New Zealand parent must and is deemed to make the same election whether subsection (13) or (14) applies for the income year with respect to any other taxpayer in respect of which it is determined to be the New Zealand parent.
(b) (14C) Notwithstanding subsections (12) to (14), if the taxpayer is not a company identiﬁed under subsection (13) or (14) as be- ing controlled by the New Zealand parent, the taxpayer’s New Zealand group comprises only the taxpayer and all companies that— (a) are resident in New Zealand or carrying on business in New Zealand through a ﬁxed establishment in New Zealand; and are companies that— (i) would be identiﬁed under subsection (13) or (14) as being controlled by the taxpayer if the taxpayer were treated as being the New Zealand parent; or (ii) would result in the taxpayer being identiﬁed under subsection (13) or (14) as being controlled by the other company being included in the group under this subparagraph if the other company were treated as being the New Zealand parent; or (iii) would be identiﬁed under subsection (13) or (14) as being controlled by a company included in the taxpayer’s New Zealand group under subpara- graph (ii) if that other company were treated as being the New Zealand parent; and are not members of the New Zealand banking group of a registered bank.
(14D) Notwithstanding subsections (12) to (14C), the taxpayer’s New Zealand group also includes 1 or more other companies resident in New Zealand or carrying on business in New Zealand through a ﬁxed establishment in New Zealand if— (aa) none of the taxpayer and the other companies is a mem- ber of a New Zealand banking group; and (c) 1365 Part F s FG 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) (c) (d) the New Zealand parent so elects; and the same person who is not resident in New Zealand holds an ownership interest of 50% or more in the tax- payer and each of those companies; and any necessary elections are made under this subsection to ensure that the New Zealand group of— each of those other companies; and (i) each company which is a member of the tax- (ii) payer’s New Zealand group other than under this subsection— comprises the same companies as the taxpayer’s New Zealand group; and the other company is not a company in which, under the rules set out in section FG 2, a direct ownership interest is held by a company (referred to in this paragraph as the possible group member) if— (i) (ii) the possible group member is not included in the taxpayer’s New Zealand group; and the possible group member could have been included in the taxpayer’s New Zealand group had the New Zealand parent made an appropriate election under subsection (13) or this subsection.
(14E) Notwithstanding subsections (12) to (14D), a company is a member of the taxpayer’s New Zealand group if it is— (a) a conduit tax relief holding company, on the date on which the measurement is made under subsection (5), in respect of a conduit tax relief company in which it holds a direct ownership interest of more than 50%, and the conduit tax relief company is a member of the tax- payer’s New Zealand group; or a member of the New Zealand group of any company identiﬁed under paragraph (a) (determined under this section before applying this subsection).
(14F) Subsection (14E) does not apply to the income year if, at the end of the income year, the total of all dividends to the extent fully conduit tax relief credited and previously derived by the conduit tax relief holding company does not exceed the total of all dividends to the extent fully conduit tax relief credited and previously paid by the conduit tax relief holding company.
(b) 1366 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 4 (15) (16) (17) If the taxpayer is a trustee, the amount of total debt and the amount of total assets must be calculated, on a consolidated basis for elimination of intra-group balances equivalent to that used for consolidation of a group of companies under gener- ally accepted accounting practice, for the group comprising the taxpayer and all associated persons which are— (a) (b) resident in New Zealand; or carrying on business in New Zealand through a ﬁxed establishment in New Zealand.
If the taxpayer is an individual who is not a trustee— (a) (b) the only person in the group is the taxpayer; and total assets do not include any private or domestic as- sets.
In any case where a group member required to be included in the consolidated calculation under subsection (9), (12), (15), or (16) is not resident in New Zealand, the amount of total debt and amount of total assets only includes the total debt and total assets of that group member to the extent that that group member is carrying on business in New Zealand through a ﬁxed establishment in New Zealand.
Compare: 1994 No 164 s FG 4 Section FG 4(2)(b): substituted (with effect on 25 February 2008), on 6 October 2009, by section 806 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Subsection (12)(b) was amended, as from 1 July 2005, by section 56(1) Taxa- tion (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “New Zealand parent; and” for “New Zealand parent.” with application as from the 2005–06 income year.
Subsection (12)(c) was inserted, as from 1 July 2005, by section 56(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.

Subsection (14)(b)(iii) was amended, as from 1 July 2005, by section 56(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “New Zealand parent; and” for “New Zealand parent.” with application as from the 2005–06 income year.
Subsection (14)(c) was inserted, as from 1 July 2005, by section 56(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.

Subsection (14D)(aa) was inserted, as from 1 July 2005, by section 56(3) Taxa- tion (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
1367 Part F s FG 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) (3) (4) FG 5 Rules for calculating worldwide group debt percentage (1) The worldwide group debt percentage is the percentage which the amount of total debt represents of the amount of total assets for the taxpayer’s worldwide group for the accounting year of the group ending most immediately prior to the start of the income year, and must be calculated under the rules in this section.
Subject to the following subsections, either or both the amount of total debt and the amount of total assets can be taken from the ﬁnancial accounts of the taxpayer’s worldwide group.

The amount of total debt and amount of total assets for the income year are measured at the end of the relevant accounting year.
The amount of total debt and amount of total assets must be calculated— (a) under a standard for ﬁnancial reporting in a consistent and non-distorting manner which is equivalent to gen- erally accepted accounting practice; and in accordance with the ﬁnancial reporting standards of the country which are applied in the preparation of that group’s consolidated ﬁnancial accounts.
(5) Notwithstanding subsections (3) and (4), the taxpayer may (b) elect either or both— (a) to measure total debt applying the deﬁnition of total debt in section FG 4(2) (applying that provision as if paragraph (b) referred also to a deduction which could be claimed if the taxpayer or another group member were resident in New Zealand): to measure total debt and total assets on 1 of the bases listed in section FG 4(5)(a) or (b) (applying that pro- vision as if the accounting year were the income year referred to).
(b) The amount of total debt and total assets calculated must be in New Zealand currency and, subject to section FG 7, any necessary currency conversions must be made at the close of trading spot exchange rate on the date as at which the amount is being calculated.
(6) 1368 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 5 (8) (7) Any temporary increase in the amount of total debt and any temporary decrease in the amount of total assets must be ex- cluded from the calculations if the increase or decrease has a purpose or effect of defeating the intent and application of this subpart.
If the taxpayer is a company, the amount of total debt and total assets must be calculated for the group (referred to in this sec- tion as the taxpayer’s worldwide group) which comprises— (a) (b) the taxpayer; and all persons included in the taxpayer’s New Zealand group for the income year under section FG 4; and all persons not resident in New Zealand required to be included in consolidated group accounts with the tax- payer under, at the election of the taxpayer,— (i) (ii) (c) the generally accepted accounting practice; or an equivalent standard for ﬁnancial reporting in a consistent and non-distorting manner of the country in which is resident the company (re- ferred to in this section as the ultimate non-resi- dent parent)— (A) which has, under section FG 2, a 50% or greater ownership interest in the taxpayer; and is not excluded from the taxpayer’s world- wide group under subsection (9); and in which no other company, which has under the section FG 2 rules a 50% or greater ownership interest in the taxpayer, has under those rules an ownership inter- est; or (B) (C) (iii) an equivalent standard for ﬁnancial reporting in a consistent and non-distorting manner which is in fact applied when preparing the consolidated group accounts of the international group of which the taxpayer is part; and (d) the ultimate non-resident parent and all persons not resi- dent in New Zealand required to be included in con- solidated group accounts with the ultimate non-resident parent under,— 1369 Part F s FG 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) if an accounting standard of the ultimate non- resident parent’s country applies under subsec- tion (8)(c)(ii), that standard; and in any other case, under generally accepted ac- counting practice; and any person not resident in New Zealand who— (i) (ii) is not a company; and has a 50% or greater ownership interest in the company; and any person associated with any person included in the taxpayer’s worldwide group under paragraph (e).
(e) (f) (9) Notwithstanding subsection (8), if in a joint venture ownership situation of a taxpayer which is a company— (a) (b) (c) a person, under the rules set out in section FG 2, has an ownership interest in the taxpayer equal to 50%; and the taxpayer elects to exclude the person (referred to in this subsection as the excluded joint venturer) from the taxpayer’s worldwide group; and there is still group— (i) included in the taxpayer’s worldwide 1 other person (referred to in this subsection as the included joint venturer) who has an owner- ship interest equal to 50% in the taxpayer; and all other persons who have an ownership interest equal to 50% in the taxpayer and— (A) who have an ownership interest in the in- (ii) (B) cluded joint venturer; or in whom the included joint venturer has an ownership interest,— the excluded joint venturer is excluded from the taxpayer’s worldwide group for the income year in respect of which the election is made.
If the taxpayer is a company, the amount of total debt and total assets must be calculated, for the group identiﬁed under subsections (8) and (9), on a consolidated basis for elimination of intra-group balances, under,— (a) if an accounting standard of the ultimate non-resident parent’s country applies under subsection (8)(c)(ii), that standard; and (10) 1370 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 6 (b) in any other case, under generally accepted accounting practice.
(11) (12) If the taxpayer is a trustee, the amount of total debt and total assets must be calculated, on a consolidated basis for elimin- ation of intra-group balances equivalent to that used for con- solidation of companies under generally accepted accounting practice, for the group comprising the taxpayer and all associ- ated persons.
If it is impractical for the taxpayer to calculate the taxpayer’s worldwide group debt percentage for an income year due to an inability to comply with all or any of these rules,— (a) the taxpayer may elect that the Commissioner must esti- mate the percentage in accordance with the intent of this subpart and, if the Commissioner then makes an esti- mate, the estimate is treated as being the percentage for the purposes of this subpart; and if the Commissioner is not asked to or cannot reasonably make an estimate, this subpart applies as if the percent- age were 68.1818.
(b) (13) If there is no person in the taxpayer’s worldwide group who is not resident in New Zealand (other than the taxpayer), the taxpayer’s worldwide group debt percentage is 68.1818 not- withstanding the calculation rules in this section.
Compare: 1994 No 164 s FG 5 FG 6 Concession for on-lending (1) When a taxpayer calculates their New Zealand group debt per- centage, the amount of total debt and total assets is reduced by the outstanding balance of a ﬁnancial arrangement if— (a) the taxpayer (or another group member) enters into the ﬁnancial arrangement with a person who is— (i) (ii) (iii) neither resident in New Zealand nor carrying on a business in New Zealand through a ﬁxed estab- lishment; or not associated with the taxpayer; or associated with the taxpayer if section FG 8 can apply to that person because section FG 2 applies, and the person is not a member of the taxpayer’s New Zealand group; and 1371 Part F s FG 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) the ﬁnancial arrangement provides funds to the other party; and the consideration given for the ﬁnancial arrangement is an arm’s length amount.
(2) When a taxpayer calculates their worldwide group debt per- centage, the amount of total debt and total assets is reduced by the outstanding balance of a ﬁnancial arrangement if— (a) the taxpayer (or another group member) enters into the ﬁnancial arrangement with a person not associated with the taxpayer; and the ﬁnancial arrangement provides funds to the other party.
(b) Compare: 1994 No 164 s FG 6 FG 7 Concession for exchange rate ﬂuctuations The taxpayer may elect, when calculating the taxpayer’s New Zealand or worldwide group debt percentage for the income year, to calculate the outstanding balance of any 1 or more ﬁnancial arrangements, or the value of any 1 or more assets, denominated in a currency other than New Zealand currency using the forward exchange rate, for the relevant measurement date speciﬁed in section FG 4 or FG 5, applicable on the ﬁrst day of the income year.
Compare: 1994 No 164 s FG 7 FG 8 Apportionment of interest deductions—taxpayer not in New Zealand banking group (1) Notwithstanding anything in section DB 6 or DB 7 or DB 8, if a taxpayer is not in a New Zealand banking group and the taxpayer’s New Zealand group debt percentage for an income year fails the test in section FG 3, the amount for which the taxpayer would, in the absence of this section, be allowed a deduction for the income year under section DB 6 or DB 7 or DB 8 is reduced by an amount calculated in accordance with the following formula: 1372 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 8 where— I is the sum of all deductions for which the taxpayer would be allowed a deduction under section DB 6 or DB 7 or DB 8 but for this subpart GI IFD is the sum of all deductions which the taxpayer would be allowed under section DB 6 or DB 7 or DB 8 in respect of amounts payable (excluding any amount in- cluded in item “IFD”) to a company included in the tax- payer’s New Zealand group under section FG 4(12) or (15) is the sum of all deductions which the taxpayer would be allowed under section DB 6 or DB 7 or DB 8 in respect of ﬁnancial arrangements excluded from total debt for the taxpayer’s New Zealand group by virtue of section FG 4(2) TNZD is the total debt of the taxpayer’s New Zealand group for the income year, calculated under section FG 4 be- fore allowing for any adjustment under section FG 6 NZDA is the amount, if any, deducted under section FG 6 in calculating the total debt of the taxpayer’s New Zealand group for the income year (which amount must be aver- aged in circumstances where section FG 4(5)(a) or (b) applies) NZDP is the taxpayer’s New Zealand group debt percentage for the income year TDP is,— (a) (b) if the taxpayer is a company or a trustee, the greater of— (i) (ii) 75%; and the taxpayer’s worldwide group debt per- centage multiplied by 1.1; and if the taxpayer is an individual who is not a trustee, 75%.
(2) Notwithstanding subsection (1), if and to the extent that an- other member of the same wholly-owned group of compan- ies— (a) (b) would, in the absence of an election under paragraph (a) and after allowing for any other reductions under this elects that this subsection apply; and 1373 Part F s FG 8B Income Tax Act 2004 Reprinted as at 29 August 2011 subsection, be allowed a deduction under section DB 6 or DB 7 or DB 8, and if the sum of all deductions under section DB 6 or DB 7 or DB 8 is at least as large as the amount to which the election applies,— the reduction is made to the amount for which the other group member would otherwise be allowed a deduction under section DB 6 or DB 7 or DB 8 for the income year instead of to the amount for which the taxpayer was allowed a deduction.
Compare: 1994 No 164 s FG 8 The heading to section FG 8 was amended, as from 1 July 2005, by section 57(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by inserting the words “—taxpayer not in New Zealand banking group” after the word “deductions” with application as from the 2005–06 income year.
Subsection (1) was amended, as from 1 July 2005, by section 57(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by inserting the words “taxpayer is not in a New Zealand banking group and the” after the words “if a” with application as from the 2005–06 income year.
FG 8B Adjustment of annual total deduction—reporting bank For a taxpayer that is a reporting bank and under section FG (1) 3(2) has an annual total deduction for a tax year given by this section, the taxpayer’s annual total deduction for the tax year is,— (a) if the New Zealand banking group of the reporting bank has a group funding debt for the tax year that is not zero, the amount calculated using the formula— (b) unadjusted annual total deduction – adjustments: if the New Zealand banking group of the reporting bank has a group funding debt for the tax year of zero, the annual total deduction for the tax year that the taxpayer would have had in the absence of this section and sec- tion FG 3(2).
In the formula in subsection (1)(a),— (a) unadjusted annual total deduction is the annual total deduction for the tax year that the taxpayer would have had in the absence of this section and section FG 3(2): adjustments is the sum of the income adjustment amounts that are given by subsection (4) for the meas- urement periods for the corresponding income year of the reporting bank.
(b) (2) 1374 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 8B (3) The group funding debt for a tax year for the New Zealand banking group of a reporting bank means the amount calcu- lated using the formula— where— SFI is the sum of the amounts for the tax year, each of which is the ﬁnancial value for the New Zealand bank- ing group of interest-bearing debt calculated under gen- erally accepted accounting practice for a group quarter day FID is the sum of the amounts for the tax year, each of which is the ﬁnancial value for the New Zealand bank- ing group, on a group quarter day, of ﬁnancial arrange- ments— (a) for which the consolidated ﬁnancial statements of the New Zealand banking group would show, in the corresponding income year of the reporting bank, a deduction— (i) (ii) under 1 or more of sections DB 6 to DB 8; and other than as a consequence of a ﬂuctua- tion in the value of a currency of a country relative to the value of a currency of an- other country; and that do not contribute to item SFI FTE is the sum of the amounts for the tax year, each of which is the ﬁnancial value for the New Zealand bank- ing group, on a group quarter day, of shares that con- tribute to item SFI (b) NQ is the number of group quarter days in the correspond- ing income year of the registered bank.
(4) For a measurement day in an income year of a reporting bank, the adjustment amount for a reporting bank is the amount cal- culated using the formula— where— 1375 Part F s FG 8C Income Tax Act 2004 Reprinted as at 29 August 2011 NET is the net equity threshold for the New Zealand banking group for the measurement day NZE is the lesser of— I (a) (b) the net equity threshold for the New Zealand banking group for the measurement day: the New Zealand net equity for the New Zealand banking group for the measurement day is the ﬁnancial value for the New Zealand banking group, on the last day of the income year, of expend- iture that— (a) (b) is incurred by a member of the New Zealand banking group in the income year; and is an interest expense under generally accepted accounting practice, incurred other than in rela- tion to a share that contributes to item SFI, or is a deduction referred to in paragraph (a) of the def- inition of item FID in subclause (3) GFD is the group funding debt for the tax year for the New (5) (6) Zealand banking group PD is the number of days in the measurement period that corresponds to the measurement day YD is the number of days in the income year.
If this Act requires that the annual total deduction for a report- ing bank for an income year be apportioned between 2 or more parts of the income year, the adjustment amount under subsec- tion (4) for a measurement day in the income year is attributed to the part containing the measurement day.
In this section, group quarter day for a registered bank and a tax year means a day— (a) that is the last day of a quarter in the corresponding income year of the registered bank; and on which the registered bank is a reporting bank.

(b) Sections FG 8B to FG 8J were inserted, as from 1 October 2005, by section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FG 8C New Zealand banking group of registered bank (1) The New Zealand banking group of a registered bank for a measurement period consists of every person or ﬁxed estab- 1376 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 8C lishment that on the measurement day for the measurement period is— (a) a member under subsection (2) or a potential member under subsection (3) or (4); and not excluded by an election under subsection (8).
(2) (b) If the registered bank— (a) (b) is resident in New Zealand, the registered bank is a member: is not resident in New Zealand, a ﬁxed establishment in New Zealand of the registered bank is treated as being a person who is— (i) (ii) separate from the registered bank; and a member.
(3) A person who is a New Zealand resident is a potential member if— (a) (b) (c) the person satisﬁes subsection (5) and— (i) the registered bank is resident in New Zealand; and there is no non-resident who is an ultimate parent of the registered bank under subsection (9): (ii) the person satisﬁes subsection (6) and— (i) (ii) the registered bank is a non-resident; and there is no non-resident who is an ultimate parent of the registered bank under subsection (9): the person satisﬁes subsection (7) and there is a non- resident who is an ultimate parent of the registered bank under subsection (9).
(4) A ﬁxed establishment in New Zealand of a non-resident is treated as being a person who is separate from the non-resi- dent and a potential member if— (a) the ﬁxed establishment satisﬁes subsection (6) and— the registered bank is a non-resident; and (i) there is no non-resident who is an ultimate parent (ii) of the registered bank under subsection (9): the ﬁxed establishment satisﬁes subsection (7) and there is a non-resident who is an ultimate parent of the regis- tered bank under subsection (9).
(5) A person satisﬁes this subsection if,— (b) 1377 Part F s FG 8C Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) under generally accepted accounting practice, consoli- dated group accounts— (i) are required to include the person and the regis- tered bank: (ii) would be required to include the person and the registered bank but for relevant materiality thresholds: the person is in the same group of companies as the registered bank under section IG 1(2).
(a) (6) A person or ﬁxed establishment satisﬁes this subsection if,— under generally accepted accounting practice, the per- son or ﬁxed establishment would be required to be in- cluded in consolidated group accounts with the regis- tered bank if— (i) the registered bank were resident Zealand; and (ii) the relevant materiality thresholds were satisﬁed: the person is in the same group of companies as the registered bank under section IG 1(2).
in New (b) (a) (7) A person or ﬁxed establishment satisﬁes this subsection if,— under generally accepted accounting practice, the per- son or ﬁxed establishment would be required to be in- cluded in consolidated group accounts with the ultimate parent of the registered bank if— (i) the ultimate parent were resident Zealand; and the relevant materiality thresholds were satisﬁed: (ii) the person is in the same group of companies as the ultimate parent under section IG 1(2).
in New (b) (b) (8) A reporting bank may elect under this subsection to exclude from the New Zealand banking group of the reporting bank— a person or a ﬁxed establishment, whose main activity (a) is the providing of life insurance: a person who— (i) (ii) is resident in New Zealand; and has a voting interest of 100% in a person who is excluded by an election under paragraph (a); and does not have a main activity that is banking, ﬁnancing or leasing; and (iii) 1378 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 8C (iv) does not have a main activity that involves the ownership or control of entities having a main activity of banking, ﬁnancing or leasing: a ﬁxed establishment of a non-resident, if— (i) (c) (d) the non-resident has a voting interest of 100% in a person who is excluded by an election under paragraph (a); and the ﬁxed establishment has a main activity of ﬁ- nancing the person who is excluded by the elec- tion under paragraph (a); and the ﬁxed establishment does not have a main ac- tivity that is banking, ﬁnancing or leasing, other than the activity referred to in subparagraph (ii); and the ﬁxed establishment does not have a main ac- tivity that involves the ownership or control of entities having a main activity of banking, ﬁnan- cing or leasing: is resident in New Zealand; and under generally accepted accounting practice is required for the making of ﬁnancial reports to be included in consolidated group accounts with a person or ﬁxed establishment who is excluded by an election under paragraph (a) or (b); and does not have a main activity that is banking, ﬁnancing or leasing; and does not have a main activity that involves the ownership or control of entities having a main activity of banking, ﬁnancing or leasing.
(ii) (iii) (iv) (iii) (iv) a person who— (i) (ii) (9) For the purposes of this section, the ultimate parent of a regis- tered bank is a company— (a) that has an ownership interest in the registered bank, calculated under section FG 2, of 50% or more; and in which no ownership interest, as calculated under sec- tion FG 2, is held by a company that holds an ownership interest in the registered bank, calculated under section FG 2, of 50% or more.
(b) 1379 Part F s FG 8D Income Tax Act 2004 Reprinted as at 29 August 2011 (10) For the purposes of this section, the ultimate parent of a ﬁxed establishment in New Zealand of a registered bank is the regis- tered bank.

Sections FG 8B to FG 8J were inserted, as from 1 October 2005, by section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
(2) (3) FG 8D Reporting bank for New Zealand banking group (1) For a New Zealand banking group that on a day includes a sin- gle registered bank, or includes no registered bank but includes a ﬁxed establishment of a single registered bank, the reporting bank for the day is the registered bank.
For a New Zealand banking group that on a day includes more than 1 registered bank, the reporting bank for the day is— (a) the registered bank that ﬁrst gives notice to the Com- missioner of an election to be the reporting bank, if the Commissioner receives such a notice by the day that is 6 months after the end of the tax year in which the day occurs: the registered bank chosen by the Commissioner, if paragraph (a) does not apply.
(b) For a New Zealand banking group that on a day includes no registered bank but includes ﬁxed establishments of more than 1 registered bank, the reporting bank for the day is— (a) the registered bank that ﬁrst gives notice to the Com- missioner of an election to be the reporting bank, if the Commissioner receives such a notice by the day that is 6 months after the end of the tax year in which the day occurs: the registered bank chosen by the Commissioner, if paragraph (a) does not apply.
(b) Sections FG 8B to FG 8J were inserted, as from 1 October 2005, by section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FG 8E Measurement periods and measurement days (1) For the New Zealand banking group and income year of a re- porting bank, the measurement periods are— (a) the quarters in the income year, if the reporting bank does not make an election under paragraph (b) or (c): 1380 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 8F (2) (3) (b) (c) each calendar month of the income year, if the reporting bank elects that the New Zealand banking group have such measurement periods: each day of the income year, if the reporting bank elects that the New Zealand banking group have such meas- urement periods.
For the New Zealand banking group and income year of a re- porting bank, the measurement days are each last day of each measurement period if the measurement periods are given by subsection (1)(a) or (b).

If there is a change in the identity of the reporting bank for a New Zealand banking group, the measurement period cor- responding to the ﬁrst measurement day for the new reporting bank begins on the day after the last measurement day for the former reporting bank.
Sections FG 8B to FG 8J were inserted, as from 1 October 2005, by section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FG 8F Financial value and regulatory value (1) In sections FG 8B to FG 8J, the ﬁnancial value of an item for a New Zealand banking group at a time is the amount that would be recorded for the item in ﬁnancial statements for the New Zealand banking group that— (a) related to the time; and (b) were prepared for external reporting purposes; and (c) were produced consistently with generally accepted ac- counting practice at the time by— (i) consolidating the ﬁnancial statements for the members of the New Zealand banking group that are in the same group of companies; and if more than 1 consolidation is required under subparagraph (i), combining the consolidated ﬁ- nancial statements so as to eliminate inter-group transactions.
(ii) (2) In sections FG 8B to FG 8J, the regulatory value of an item for a New Zealand banking group at a time is the total risk- weighted value for the item that would be obtained for the New Zealand banking group if the New Zealand banking group 1381 Part F s FG 8G Income Tax Act 2004 Reprinted as at 29 August 2011 were a banking group for the purposes of the Capital Adequacy Framework that is issued by the Reserve Bank of New Zealand acting in the prudential supervision of registered banks under the Reserve Bank of New Zealand Act 1989.
Sections FG 8B to FG 8J were inserted, as from 1 October 2005, by section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FG 8G New Zealand net equity of New Zealand banking group The New Zealand net equity of the New Zealand banking (1) group of a registered bank for a measurement day is given by the following formula: EQV – FRS – SDS – EID – UPB – INTG – CGA – REV – TXB – CEFA – NAFA – EOI – NOIA – AEQ – AEQI where— EQV is the sum of the following amounts for the New Zealand banking group: (a) the ﬁnancial value for the measurement day of— the New (i) the shareholders’ equity for Zealand banking group; and the branch equity relating to ﬁxed estab- lishments of the New Zealand banking group: (ii) (b) (c) the ﬁnancial value for the measurement day of shares, each of which— (i) is issued by a member of the taxpayer’s New Zealand banking group; and does not contribute to the amount referred to in paragraph (a): (ii) the ﬁnancial value for the measurement day of ﬁnancial arrangements, each of which is a loan, or the provision of funds by a non-resident to its ﬁxed establishment that— (i) is not taken into account in the calcula- tion of the group funding debt of the New Zealand banking group; and is made by a non-resident who is not a member of the New Zealand banking group and is associated with a member (ii) 1382 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 8G of the New Zealand banking group under section OD 7 or OD 8(3); and is made to a member of the New Zealand banking group; and does not contribute to the amount referred to in paragraph (a); and 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 does not relate to a supply of goods or services (iii) (iv) (v) (vi) FRS is the ﬁnancial value for the measurement day of ﬁxed rate shares, each of which is— (a) (b) (c) (d) issued by a member of the New Zealand banking group; and owned by a person who is resident in New Zealand; and included in the value of item EQV; and issued by the member— (i) (ii) on or after 1 January 2005: before 1
 January 2005, if the measurement period begins on or after 1 January 2010 SDS is the ﬁnancial value for the measurement day of stapled debt securities, each of which is— (a) (b) (c) owned by a person resident in New Zealand; and included in the value of item EQV; and stapled to shares other than shares of a company that is a proportional-stapling company EID is the ﬁnancial value for the measurement day of ﬁnan- cial arrangements, each of which— (a) is taken into account under paragraph (a) or (b) of the deﬁnition of item EQV in calculating the value of that item; and gives rise to a deduction for the tax year under 1 or more of sections DB 6 to DB 8 for a member of the New Zealand banking group (b) 1383 Part F s FG 8G Income Tax Act 2004 Reprinted as at 29 August 2011 UPB is the ﬁnancial value for the measurement day of un- vested policyholder beneﬁt liabilities and policy-holder retained proﬁts that contribute to the value of item EQV INTG is the ﬁnancial value for the measurement day of intan- gible assets, other than— (a) goodwill relating to a business that is not bank- ing, ﬁnancing, leasing, or life insurance and that— (i) is acquired from a person who, at the time of acquisition, is not associated under sec- tion OD 7 or OD 8(3) with a member of the New Zealand banking group: relates to an entity that is acquired from a person who is not associated under section OD 7 or OD 8(3) with a member of the New Zealand banking group: (ii) (b) (c) a ﬁlm or ﬁlm right: property that is depreciable property or is ex- pected to become depreciable property CGA is the sum for the measurement day of capital gain amounts, each of which arises for the 2004-05 or a later tax year from a transfer of an intangible asset between a member of the New Zealand banking group and a person who— (a) is not a member of the New Zealand banking group; and is associated with a member of the New Zealand banking group under section OD 7 or OD 8(3) (b) REV is the ﬁnancial value for the
 measurement day of revalu- ation reserves that contribute to the value of item EQV TXB is the ﬁnancial value for the measurement day of net future tax beneﬁts that are taken into account in deter- mining the value of item EQV and arise from— (a) (b) (c) net losses for the tax year: losses carried forward from an earlier tax year: timing or temporary differences to the extent that the items giving rise to the timing or temporary differences would contribute to a net loss for the 1384 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 8G tax year if the items were deductible in the tax year CEFA is the ﬁnancial value for the measurement day of the credit enhancements provided by members of the New Zealand banking group, each of which is, for the pur- pose of the Capital Adequacy Framework that is issued by the Reserve Bank of New Zealand,— (a) a credit enhancement that is provided to an as- sociated funds management and securitisation scheme of a non-member: a credit enhancement that is provided to an afﬁl- iated insurance group that is a non-member and has not been expensed (b) EOI NAFA is the ﬁnancial value for the measurement day of ad- vances by members of the New Zealand banking group, each of which is, for the purpose of the Capital Ade- quacy Framework that is issued by the Reserve Bank of New Zealand, an advance of a capital nature to a con- nected person who is not a member of the New Zealand banking group is the amount that would, if the New Zealand bank- ing group included the potential members of the New Zealand banking group and before any set-off allowed under generally accepted accounting practice, be the ﬁnancial value for the measurement day of shares in non-residents that— are held by— (a) (i) (ii) a member or potential member of the New Zealand banking group: a company resident in New Zealand in which a member or potential member of the New Zealand banking group holds a direct voting interest of 10% or more and that, in the income
 year, pays to the member or potential member a dividend to which a conduit tax relief credit is at- tached; and (b) are not interests in foreign investment funds for which the FIF income or loss is calculated using 1385 Part F s FG 8G Income Tax Act 2004 Reprinted as at 29 August 2011 (c) the comparative value method, the deemed rate of return 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 exchange; and (ii) are revenue account property; and (iii) would not be a sufﬁcient interest in the offshore company if the class of the shares were the only class of share issued by the offshore company NOIA is the notional offshore investment amount for the New Zealand banking group for the income year of the re- porting bank, as deﬁned in subsection (4) AEQ is the ﬁnancial value for the measurement day of inter- ests, each of which is taken into account in calculating item EQV and is held by a person who— (a) is not a member of the New Zealand banking group; and is not a member of the New Zealand banking group because of an election under section FG 8C(8); and is resident in New Zealand or holds the interest through a ﬁxed establishment in New Zealand AEQI is the ﬁnancial value for the measurement day of— (b) (c) (a) (b) shares in persons who are not members of the New Zealand banking group because of an elec- tion under section FG 8C(8): loans, other than on arm’s-length terms, to per- sons who are not members of the New Zealand banking group because of an election under sec- tion FG 8C(8).
Subsection (3) applies if a component of an item, other than the item NOIA, that is subtracted from the item EQV under subsection (1) is a component of 1 or more other such items.

The value of the component is included in a single item for which the value of the component is not less than the value of the component for each of the other items.
(2) (3) 1386 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 8G (4) The notional offshore investment amount for a New Zealand banking group for an income year of the reporting bank for the New Zealand banking group is the greater of zero and the amount given by the following formula: where— FTC is the total for the tax year of foreign tax credits each of which— (a) is claimed as a credit against the income tax li- ability for the tax year of— (i) a member of the New Zealand banking group: a person who is excluded from the New Zealand banking group by an election under section FG 8C(7); and (ii) (b) (c) does not arise from attributed CFC income or from FIF income; and does not arise from income derived before 1 July 2005 DMT is the amount— (a) (b) (c) set by the Governor-General by Order in Council as the threshold amount for the application of this subsection; or equal to $5,000,000, if no threshold amount is set under paragraph (a) and paragraph (c) does not apply; or equal to $416,667 multiplied by the number of months beginning on or after 1 July 2005 in the corresponding income year for the reporting bank, if the corresponding income year includes that date and no threshold amount is set under paragraph (a) CRT is the rate of tax for companies referred to in schedule 1, part A, item 5 for the tax year IRR is the amount— (a) set by the Governor-General by Order in Council as the interest rate of return for the purposes of this subsection; or 1387 Part F s FG 8G Income Tax Act 2004 Reprinted as at 29 August 2011 (b) of 7% per year, if no interest rate of return is set under paragraph (a) NM is the number of months beginning on or after 1 July 2005 in the income year of the reporting bank for the New Zealand banking group.
(c) (b) (5) The Governor-General may, from time to time by Order in Council,— (a) specify a type of instrument that is included in item EQV for the purposes of subsection (1): specify a type of instrument that is not included in item EQV for the purposes of subsection (1): 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 paragraph (a) to (c): set, replace, or repeal a ﬁgure for the threshold amount for the purposes of paragraph (a) of the deﬁnition of item DMT in subsection (4): set, replace, or repeal a ﬁgure for the interest rate of return for the purposes of paragraph (a) of the deﬁnition of item IRR in subsection (4).
(6) An Order in Council under subsection (5) may— (d) (e) (f) (a) (b) come into effect on or after 1 July 2005: apply for measurement periods and quarters that— (i) are in the 2005-06 or a subsequent income year; and commence on or after 1 July 2005.

Sections FG 8B to FG 8J were inserted, as from 1 October 2005, by section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
(ii) Section FG 8G(1) formula: amended (with effect on 25 February 2008), on 6 October 2009, by section 807(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FG 8G(1) formula item SDS: inserted (with effect on 25 February 2008), on 6 October 2009, by section 807(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Subsection (1) the deﬁnition of item EOI paragraph (b) was amended, as from 1 April 2007, by section 89(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “comparative value method, 1388 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FG 8I the deemed rate of return method, the fair dividend rate method, or the cost method” for “comparative value method or the deemed rate of return method”.
See section 89(2) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
FG 8H Net equity threshold (1) The net equity threshold for a measurement day for the New Zealand banking group of a registered bank is given by the following formula: 0.04 x (RWE – DEQ) where— RWE is the sum of the following values for the measurement day: (a) (b) (c) for an asset that is included in a balance sheet, the regulatory value of the asset: for an exposure that is not included in a balance sheet, the regulatory value of the exposure: for goodwill that is not taken into account in calculating item INTG in determining the New Zealand net equity of the New Zealand banking group, the ﬁnancial value of the goodwill (2) DEQ is the total of the regulatory values for the measurement day of items, other than item NOIA, that are deducted from item EQV in determining the New Zealand net equity of the New Zealand banking group.
For the purposes of subsection (1), the assets of a ﬁxed estab- lishment include the assets that are treated as being the assets of the ﬁxed establishment under generally accepted account- ing practice.

Sections FG 8B to FG 8J were inserted, as from 1 October 2005, by section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FG 8I Valuation of debt and risk-weighted exposures For the purposes of sections FG 8B to FG 8H, the value on a day of a ﬁnancial arrangement or risk-weighted exposure that is denominated in a foreign currency must be determined— (a) (b) in New Zealand currency; and using the close of trading spot exchange rate for the foreign currency on the day.
1389 Part F s FG 8J Income Tax Act 2004 Reprinted as at 29 August 2011 Sections FG 8B to FG 8J were inserted, as from 1 October 2005, by section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FG 8J Treatment of temporary change in New Zealand net equity or net equity threshold A change in a quantity that, but for this subsection, would produce a temporary change in the New Zealand net equity or net equity threshold of the New Zealand banking group of a registered bank does not affect the value of the New Zealand net equity or net equity threshold if the change is produced by an arrangement that has an effect of defeating the intent and application of sections FG 8B to FG 8I.
Sections FG 8B to FG 8J were inserted, as from 1 October 2005, by section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FG 9 Treatment of speciﬁed leases and interest expense In this subpart,— (a) (b) (c) a deemed loan under section FC 6(3) must be treated as a ﬁnancial arrangement which provides funds to the issuer; and expenditure incurred by the lessee in respect of speciﬁed leases for which a deduction is allowed must be treated as an amount of interest under section DB 6 or DB 7 or DB 8; and interest that is allowed as a deduction under section DP 1(1)(b) or DV 10(1)(a) or (b) must be treated as an amount of interest under section DB 6 or DB 7 or DB 8, if not already allowed as a deduction under section DB 6 or DB 7 or DB 8.
Compare: 1994 No 164 s FG 9 FG 10 Mode of elections (1) Any election available to a person under this subpart must be exercised by the person ﬁling the person’s return of income for the income year completed in a manner which reﬂects the election.
(2) Notwithstanding subsection (1), any election under section FG 4(5) or FG 5(5)(b) can be revoked and exercised differently on 1390 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FH 1 receipt of a notice of assessment from the Commissioner for the relevant income year.
(3) Notwithstanding subsection (1), an election made under sec- tion FG 4(11), (13), (14), or (14D) by a person other than the taxpayer must be exercised by the person giving a notice to the Commissioner with the taxpayer’s income tax return for the income year.
Compare: 1994 No 164 s FG 10 Subpart FH—Foreign attributed income excess interest allocation Contents FH 1 Circumstances in which group excess interest allocation required FH 2 Rules for determining company’s foreign attributed income group FH 3 Rules for determining New Zealand foreign attributed income group debt percentage FH 4 Rules for determining consolidated foreign attributed income group debt percentage FH 5 Rule for calculating group excess interest allocation amount Page 1391 1393 1393 1394 1396 FH 6 Rule for calculating company’s excess interest allocation 1397 percentage FH 7 Rule for calculating individual excess interest allocation 1398 amount FH 8 Rules for applying surplus group excess interest allocation amount to increase income tax and dividend withholding payment 1399 FH 1 Circumstances in which group excess interest allocation (1) required Subject to subsection (2), the group excess interest allocation rules in sections FH 5 to FH 8 apply for a tax year to a company that— (a) for the imputation year that corresponds with the tax year— 1391 Part F s FH 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (i) (ii) is a dividend withholding payment account com- pany or a conduit tax relief company; and is not a member of a New Zealand banking group for a registered bank; and in the corresponding income year— (i) (ii) derives foreign attributed income: is paid a dividend from which the company must deduct an amount of dividend withholding pay- ment or would have to deduct such an amount but for section NH 7.
The group excess interest allocation rules do not apply for a tax year to— (a) a company, if the total of the rebates in the following subparagraphs is less than $50,000, calculated as if item “EIA” of the formula in section KH 1(2) were in all cases nil: income tax rebates under section KH 1 and dividend withholding payment reductions under section NH 7 al- lowed to the company for the tax year if it is a conduit tax relief company, or that would be allowed to the com- pany if it had been a conduit tax relief company; and income tax rebates under section KH 1 and dividend withholding payment reductions under section NH 7 al- lowed to all other conduit tax relief companies that are associated with the company; and income tax rebates under section KH 1 and dividend withholding payment reductions under section NH 7 that would be allowed to all other companies that are not conduit tax relief companies and are associated with the company, had those other companies been conduit tax relief companies; or a company whose New Zealand foreign attributed in- come group debt percentage for the tax year is 66% or less.
(i) (ii) (iii) (b) Compare: 1994 No 164 s FH 1 Subsection (1) was substituted, as from 1 July 2005, by section 59 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79).
(2) 1392 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FH 3 FH 2 Rules for determining company’s foreign attributed (1) (2) income group If the thin capitalisation interest apportionment rule in section FG 8 can apply to a company by virtue of section FG 2, the company’s foreign attributed income group is the same New Zealand group of companies that would be identiﬁed for thin capitalisation purposes under section FG 4(10) to (14D).
If subsection (1) does not apply, the company’s foreign at- tributed income group consists of— (a) (b) the company; and every other company that is— (i) in the same group of companies as the company; and resident in New Zealand or carrying on business in New Zealand through a ﬁxed establishment in New Zealand.
(ii) Compare: 1994 No 164 s FH 2 FH 3 Rules for determining New Zealand foreign attributed (1) (2) income group debt percentage Subject to subsections (2) and (3), the New Zealand foreign at- tributed income group debt percentage of a company for a tax year is calculated under section FG 4 (excluding subsections (14E) and (14F) and modiﬁed, as relevant, under sections FG 6, FG 7, and FG 9) as if the company were the taxpayer calcu- lating its New Zealand group debt percentage.
If a company and each company in the same New Zealand tax group are the company’s foreign attributed income group under section FH 2(2),— (a) (b) section FG 4(10) to (14F) does not apply; and the group of companies referred to in section FG 4(9) is the group identiﬁed under section FH 2(2); and section FG 4(6) applies as if the company were the New Zealand parent.
(c) (3) The total assets of the group are reduced by the total of the amounts calculated for each member of the group as follows: NRS x (CFC + FIF) 1393 Part F s FH 4 Income Tax Act 2004 Reprinted as at 29 August 2011 where— NRS is either— (a) (b) if the group member receives conduit tax relief by way of an income tax rebate under section KH 1, the percentage of the relevant group member’s shareholders not resident in New Zealand used to calculate the rebate under section KH 1(2); or if the group member receives conduit tax relief by reducing its dividend withholding payment under section NH 7, the average of the percent- ages of the relevant group member’s sharehold- ers not resident in New Zealand used to calculate the reduction under section NH 7(1) CFC is the total value, at the relevant measurement time and determined under section FG 4(3), of the assets of the relevant group member which are rights in respect of a controlled foreign company which result in the rele- vant group member having attributed CFC income or at- tributed CFC loss in the controlled foreign company for an accounting period which includes the relevant meas- urement time FIF is the total value, at the relevant time and measured under section FG 4(3), of any interests in foreign invest- ment funds of the relevant group member for which the relevant group member is determining its FIF income or FIF loss under the accounting proﬁts method or the branch equivalent method.
Compare: 1994 No 164 s FH 3 FH 4 Rules for determining consolidated foreign attributed income group debt percentage (1) A company may choose to calculate its consolidated foreign attributed income group debt percentage for the tax year under this section if its New Zealand foreign attributed income group debt percentage for the tax year is more than 66%.
Subject to subsections (3) to (8), the consolidated foreign at- tributed income group debt percentage is calculated under the rules set out in section FH 3 for calculating the New Zealand foreign attributed income group debt percentage.
(2) 1394 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FH 4 (3) A controlled foreign company or foreign investment fund of the type referred to in item “CFC” or “FIF” in section FH 3(3) is consolidated with a foreign attributed income group if the foreign attributed income group— (a) has a total income interest of 40% or more in the con- trolled foreign company for the accounting period in which the relevant measurement date under section FG 4(5) falls; or (b) would be treated, under section EX 8 if the foreign in- vestment fund were a controlled foreign company, as having a total income interest of 40% or more in the for- eign investment fund for the accounting period in which the relevant measurement date under section FG 4(5) falls.
(4) A controlled foreign company or foreign investment fund of the type referred to in item “CFC” or “FIF” in section FH 3(3) is consolidated with a foreign attributed income group if the foreign attributed income group— has a total income interest of 5% or more but less than (a) 40% in the controlled foreign company for the accounting period in which the relevant measurement date under section FG 4(5) falls; or (b) would be treated, under section EX 8 if the foreign in- vestment fund were a controlled foreign company, as having in total an income interest of 5% or more but less than 40% in the foreign investment fund for the ac- counting period in which the relevant measurement date under section FG 4(5) falls.
(5) A controlled foreign company’s or foreign investment fund’s consolidation with a foreign attributed income group under subsection (4) applies only to the extent that the percentage of the controlled foreign company’s or foreign investment fund’s debts and assets equal the total percentage income interest of the foreign attributed income group in the controlled foreign company or foreign investment fund.
The consolidation required under subsections (3) and (4) is made— (6) 1395 Part F s FH 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) (c) as if the controlled foreign company or foreign invest- ment fund were a member of the company’s foreign at- tributed income group; and on a basis for eliminating intra-group balances used under generally accepted accounting practice for con- solidation of a group of companies; and by calculating the amount of debts and assets of the con- trolled foreign company or foreign investment fund us- ing the values shown in the ﬁnancial accounts for the accounting period and to a ﬁnancial reporting standard that is equivalent to generally accepted accounting prac- tice.
(7) No reduction from the amount of total assets is to be made under section FH 3(3).

(8) A reduction is to be made equal to the total value of assets (determined under section FG 4(3)) of group members which are— (a) referred to in items “CFC” or “FIF” of section FH 3(3) for the accounting period in which the relevant meas- urement date falls; and not consolidated under subsection (3) or (4).
(b) Compare: 1994 No 164 s FH 4 FH 5 Rule for calculating group excess interest allocation amount The group excess interest allocation amount for a company for a tax year is calculated under the following formula (but cannot be less than nil): where— GI is the total of deductions that companies are allowed for the tax year if they are members of the company’s foreign attributed income group at the end of the tax year under— (a) section DB 6 or DB 7 or DB 8 (as modiﬁed by section FG 8); or 1396 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FH 6 IGI (b) sections FC 6 to FC 8 as lessee expenditure in respect of a speciﬁed lease is the total of amounts included in item “GI” for amounts payable to another company in the foreign attributed income group (excluding an amount included in item “GIFD”) GIFD is the total of amounts included in item “GI” for ﬁ- nancial arrangements that are excluded, when applying sections FH 3 and FH 4, as a result of section FG 4(2) NCGDP is the New Zealand foreign attributed income group debt percentage of the company for the tax year calcu- lated under section FH 3 CGDP is the greatest of— (a) (b) (c) 66%; or the New Zealand foreign attributed income group debt percentage that would be calculated for the company if section FH 3(3) did not apply; or the consolidated foreign attributed income group debt percentage of the company for the tax year, calculated under section FH 4, if the company chooses to calculate that percentage.
Compare: 1994 No 164 s FH 5 FH 6 Rule for calculating company’s excess interest allocation percentage If a company has a group excess interest allocation amount for a tax year, the company’s excess interest allocation percentage is the lesser of 1 and the amount calculated as follows: where— GEIA is the group excess interest allocation amount for the tax year GFAI is the total of the foreign attributed income for the tax year of all companies (including the company) which are in the company’s foreign attributed income group at the end of the tax year GFALO is the total of the foreign attributed loss offsets for the tax year of all companies (including the company) 1397 Part F s FH 7 Income Tax Act 2004 Reprinted as at 29 August 2011 that are in the company’s foreign attributed income group at the end of the tax year GBC is the total of the amounts able to be credited against the income tax liability for the tax year under section MF 5(4) of all companies (including the company) that are in the company’s foreign attributed income group at the end of the tax year, determined as if the amount of rebate calculated under section KH 1 were for all companies nil TR is the rate of income tax stated in schedule 1, part A, clause 5 for the tax year.
Compare: 1994 No 164 s FH 6 FH 7 Rule for calculating individual excess interest allocation amount The individual excess interest allocation for the company for the tax year to be included in the formula in section KH 1(2) is calculated as follows: where— BC is the total of— (a) (b) the amount able to be credited by the company against its income tax liability for the tax year under section MF 5(4) (the amount is determined as if the amount of rebate calculated under sec- tion KH 1 were nil); and the amount credited by another company in the same group of companies against the company’s income tax liability for the tax year under sec- tion MF 5(4) (the amount is determined as if the amount of rebate calculated under section KH 1 were nil) TR is the rate of income tax stated in schedule 1, part A, clause 5 for the tax year FAI is the company’s foreign attributed income for the tax year 1398 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FH 8 FALO is the company’s foreign attributed loss offsets for the tax year EIAP is the company’s excess interest allocation percentage calculated under section FH 6 for the tax year.
Compare: 1994 No 164 s FH 7 (1) FH 8 Rules for applying surplus group excess interest allocation amount to increase income tax and dividend withholding payment If the total of individual excess interest allocations calculated under section FH 7 for the tax year for all companies included in a company’s foreign attributed income group at the end of the tax year is less than the group excess interest alloca- tion amount calculated under section FH 5, for all companies included in the company’s foreign attributed income group, the difference is the surplus group excess interest allocation amount.
The company’s surplus group excess interest allocation per- centage for the tax year is the lesser of 1 and the percentage calculated as follows: (2) where— SGEIA is the surplus group excess interest allocation amount for the tax year TR is the rate of income tax stated in schedule 1, part A, clause 5 for the tax year GDWP is the total of dividend withholding payments (calcu- lated after loss offsets are claimed under section NH 3 but before any reduction is allowed under section NH 7) that must be deducted from dividends paid during the tax year to companies that are members of the com- pany’s foreign attributed income group at the end of the tax year.
(3) The company is deemed to derive, on the last day of the tax year, an amount of income equal to the foreign dividend ad- justment amount.
1399 Part F s FH 8 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) The company’s foreign dividend adjustment amount is calcu- lated as follows: where— DWP is the total of dividend withholding payments (calcu- lated after loss offsets are claimed under section NH 3 but before any reduction is allowed under section NH 7) that must be deducted by the company from dividends paid to the company during the tax year SGEIP is the surplus group excess interest allocation per- centage calculated under subsection (2) for the company and the tax year TR is the rate of income tax stated in schedule 1, part A, clause 5 for the tax year.
(5) A conduit tax relief company has a conduit tax relief account adjustment of an amount calculated as follows: FDAA x TR where— FDAA is the company’s foreign dividend adjustment amount for the tax year TR is the rate of income tax stated in schedule 1, part A, clause 5 for the tax year.
(6) A membership change that has only a temporary effect on the company’s foreign attributed income group is disregarded when making calculations under this section, if a purpose or effect of the change is to defeat the intent and application of this section.
Compare: 1994 No 164 s FH 8 Subpart I—Effect of certain disposals and resulting acquisitions Subpart I (comprising sections FI 1 to FI 11) was inserted, as from 1 October 2005, by section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
1400 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FI 1 Contents FI 1 FI 2 FI 3 FI 4 Disposals and resulting acquisitions to which subpart FI applies Disposal and resulting acquisition of property treated as occurring at market value Date on which disposal and resulting acquisition treated as occurring Disposal and resulting acquisition of property by spouse, civil union partner, or de facto partner on death of person Distributions of property to close relatives and others Disposal and resulting acquisition of timber Relationship of section FI 2(2) to subpart CB Relationship of subpart FI to unexpired prepayments Death occurring before 1 October 2005 FI 5 FI 6 FI 7 FI 8 FI 9 FI 10 Value of property acquired by beneﬁciary of trust before 1 October 2005 FI 11 Disposal of certain ﬁnancial arrangements on death Page 1401 1402 1402 1403 1404 1405 1405 1406 1407 1408 1409 FI 1 Disposals and resulting acquisitions to which subpart FI (1) (2) (3) applies The purpose of this subpart is to provide a disposal value in re- spect of the disposals and a cost price in respect of the resulting acquisitions of property for transactions to which subsections (2) and (3) refer.
This subpart applies to a transaction that is of a type referred to in subsection (3).
This subpart applies to a transaction that is— (a) a distribution of property made by a trustee of a trust to a beneﬁciary of that trust: a distribution in kind made by a company— (i) (b) to a shareholder of that company, or to a person in a shareholding relationship with that company; and to which section CD 5 applies; and that is a transfer of value to which section CD 3(1)(a) refers: (ii) (iii) (c) a gift made by one person to another person: 1401 Part F s FI 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) (e) (f) a transfer of an estate of a deceased person to an admin- istrator or executor of the estate occurring as a result of the death of a person: a distribution of property made by an administrator, ex- ecutor, or trustee of the estate of a deceased person to a person who is beneﬁcially entitled to receive the prop- erty under a will or an intestacy: a settlement of property by one trust on another trust, if authorised— (i) (ii) under a trust instrument as a power of advance- ment or resettlement: under section 41 of the Trustee Act 1956 as the payment of money or the application of property.
Subpart I (comprising sections FI 1 to FI 11) was inserted, as from 1 October 2005, by section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FI 2 Disposal and resulting acquisition of property treated as occurring at market value (a) (1) A transaction to which this subpart applies is to be treated as— a disposal at market value by the person who disposes of the property; and an acquisition at market value by the recipient of the property.

(b) (2) In this Act, the market value of property that a person receives from a transaction to which this subpart applies is the market value of the property for the person from whom the property was received.
Subpart I (comprising sections FI 1 to FI 11) was inserted, as from 1 October 2005, by section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FI 3 Date on which disposal and resulting acquisition treated as occurring (1) Unless subsection (2) applies, the person who disposes of property in a transaction to which section FI 1 refers and the person who receives the property must treat the disposal as occurring on the date on which the transaction occurs.
(2) On the happening of a transaction to which section FI 1(3)(d) refers, the personal representatives of the deceased person and 1402 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FI 4 the recipient of the property must treat the disposal as occur- ring immediately before the person died.
Subpart I (comprising sections FI 1 to FI 11) was inserted, as from 1 October 2005, by section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FI 4 Disposal and resulting acquisition of property by spouse, civil union partner, or de facto partner on death of person On the death of a person, a disposal under the terms of a will or intestacy in a transaction to which section FI 1(3)(d) or (e) refers of property to which the surviving spouse, civil union partner, or de facto partner of the deceased person is entitled as beneﬁciary is treated as a matrimonial property disposition to which subpart FF applies, unless— (a) (b) a person who is not within the second degree of rela- tionship to the deceased is beneﬁcially entitled under the will or intestacy to other property (the other prop- erty); and the other property is— (i) (ii) (iii) revenue account property: an interest in a FIF: a ﬁnancial arrangement other than a ﬁnancial ar- rangement in respect of which the deceased per- son or a trustee of the deceased person was a cash basis person: an item in respect of which a person has an amount of depreciation loss under section EE 1(2).
(iv) Subpart I (comprising sections FI 1 to FI 11) was inserted, as from 1 October 2005, by section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.

The heading to section FI 4 was amended, as from 1 October 2005, by section 90(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “spouse, civil union partner, or de facto partner” for “spouse or de facto partner”.
Section FI 4 was amended, as from 1 October 2005, by section 90(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “in a transaction to which section FI 1(3)(d) or (e) refers of property to which the surviving spouse, civil union partner, or de facto partner of the deceased person is entitled as beneﬁciary” for “to the surviving spouse or de facto partner of the deceased person of property to which section FI 1(3)(d) or (e) refers”.
1403 Part F s FI 5 Income Tax Act 2004 Reprinted as at 29 August 2011 Paragraph (a) was amended, as from 1 October 2005, by section 90(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “under the will or intestacy to other property (the other property)” for “to property”.
Paragraph (b) was amended, as from 1 October 2005, by section 90(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “the other property” for “the property”.
FI 5 Distributions of property to close relatives and others (1) This section applies to a transaction to which section FI 1(3)(e) refers if persons who are related within the second degree of relationship to the deceased person, or persons who are exempt under section CW 36, are— (a) (b) the sole beneﬁciaries of the property of the deceased person: beneﬁciaries of the deceased person and the sole bene- ﬁciaries of property of the deceased person that is— (i) (ii) (iii) revenue account property: an interest in a FIF: a ﬁnancial arrangement other than a ﬁnancial ar- rangement in respect of which the deceased per- son or a trustee of the deceased person was a cash basis person: an item in respect of which a person has an amount of depreciation loss under section EE 1(2).
(iv) (2) A disposal and acquisition of property to which this section applies is treated as a transaction to which subpart FF applies, if— (a) the terms of the testamentary instrument or intestacy of the deceased person establish no life interest; and other than for the period in which the property is subject to administration or executorship, the terms of the testa- mentary instrument or intestacy of the deceased person require that no property of the deceased person be held in trust; and in a tax year during which the property is subject to ad- ministration or executorship or in which the property is held in trust, the net income of the estate is distributed beneﬁcially to the maximum extent that is allowable (b) (c) 1404 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FI 7 under the terms of the will or intestacy and that is con- sistent with the legal obligations of the trustee.
Subpart I (comprising sections FI 1 to FI 11) was inserted, as from 1 October 2005, by section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FI 6 Disposal and resulting acquisition of timber If a transaction to which section FI 1(3)(d) or (e) refers in- volves the disposal and acquisition of property that is tim- ber, standing timber, or the right to take timber, the disposal is treated as a transaction to which subpart FF, applies if the beneﬁciary of the property is within the second degree of re- lationship to the deceased person Subpart I (comprising sections FI 1 to FI 11) was inserted, as from 1 October 2005, by section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
Section FI 6 was substituted, as from 1 October 2005, by section 91 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
FI 7 Relationship of section FI 2(2) to subpart CB (1) This section applies to a transaction to which section FI 1(3)(d) or (e) refer if— (a) the transaction involves an interest in property that is land; and (ab) persons who are related within the second degree of relationship to the deceased person receive the land as beneﬁciaries— (i) under the transaction (the original transaction), if section FI 1(3)(e) refers to the original transac- tion: under a transaction to which section FI 1(3)(e) refers, if section FI 1(3)(d) refers to the original transaction; and (ii) (b) the sale of the interest in the land, if sold by the deceased person, would result in income to the deceased person under any of sections CB 7, CB 8, CB 9, or CB 12.
(2) When this section applies, sections CB 7, CB 8, CB 9, and CB 12 do not apply to a transaction to which any of section FI 1(3)(d) or (e) refers.
1405 Part F s FI 8 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) If a disposal of an interest in land by an administrator or ex- ecutor or beneﬁciary of the estate of a deceased person within 10 years of its acquisition by the deceased person results in in- come under any of sections CB 7, CB 8, CB 9, or CB 12, the cost of the interest in the land to the administrator or executor or beneﬁciary is the cost of the interest to the deceased person plus all other costs incurred by the deceased person and the ad- ministrator or executor or beneﬁciary not previously deducted under this Act.
Subpart I (comprising sections FI 1 to FI 11) was inserted, as from 1 October 2005, by section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.

Subsection (1)(a) was substituted, as from 1 October 2005, by section 92(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Subsection (1)(ab) was inserted, as from 1 October 2005, by section 92(1) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Subsection (1)(b) was amended, as from 1 October 2005, by section 92(2) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “CB 10, or CB 12” for “or CB 10”.
Subsection (1)(b) was amended, as from 17 May 2006, by section 92(3) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “or CB 12” for “CB 10, or CB 12”.

Subsection (2) was amended, as from 1 October 2005, by section 92(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “CB 10, and CB 12” for “and CB 10”.
Subsection (2) was amended, as from 17 May 2006, by section 92(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “and CB 12” for “CB 10, and CB 12”.

Subsection (3) was amended, as from 1 October 2005, by section 92(6) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “CB 10, or CB 12” for “or CB 10”.
Subsection (3) was amended, as from 17 May 2006, by section 92(7) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “or CB 12” for “CB 10, or CB 12”.
FI 8 Relationship of subpart FI to unexpired prepayments If property subject to section EA 3 is disposed of in a trans- action to which section FI 1(3)(d) or (e) refers and would be valued under section FI 2 in the absence of this section, the property must be valued under section EA 3(4) to (7), as the circumstances require, as if the date of valuation is the end of an income year.
1406 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FI 9 Subpart I (comprising sections FI 1 to FI 11) was inserted, as from 1 October 2005, by section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FI 9 Death occurring before 1 October 2005 (1) This section applies to a transaction to which section FI 1 refers that involves the disposal of property to an administra- tor, or executor, or trustee on the death of a person if— (a) (b) the death occurred before 1 October 2005; and in the year in which the transaction occurred,— (i) (c) (ii) each beneﬁciary of the deceased person is a New Zealand resident; and no amount of the income of the beneﬁciary is exempt income under section CW 36; and the tax returns of the deceased person and of the result- ing estate that are provided to the Commissioner in re- spect of the income year in which the death occurred are calculated on the basis that all the property of the deceased person was disposed of immediately before death— (i) (ii) at market values; or at the values given by subpart FF for property of that type; or at a combination of the values in subparagraphs (i) and (ii); and (iii) (2) (d) the administrator or executor adopted for taxation pur- poses the value referred to in paragraph (c) for the prop- erty.
For the purposes of the Income Tax Act 1994 and this Act, the value used in the tax returns of the deceased person and the estate for the disposal value and the cost price of the property involved in the transaction is treated as correct.
(3) Despite subsection (2), if an enactment contained in the In- come Tax Act 1994 or this Act prescribes the adoption of a market value on a disposal by an administrator or executor or trustee of the estate of the deceased person on the death of the deceased person, that market value must be adopted in a tax return provided to the Commissioner.
1407 Part F s FI 10 Income Tax Act 2004 Reprinted as at 29 August 2011 Subpart I (comprising sections FI 1 to FI 11) was inserted, as from 1 October 2005, by section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FI 10 Value of property acquired by beneﬁciary of trust before (1) 1 October 2005 This section applies to a transaction to which section FI 1 refers that involves the disposal of property to a beneﬁciary by an administrator or executor or trustee if— (a) (b) the transaction occurred before 1 October 2005; and the beneﬁciary was a New Zealand resident when the beneﬁciary acquired the property; and no amount of the income of the beneﬁciary is exempt income under section CW 36; and the tax returns of the estate and of the beneﬁciary pro- vided to the Commissioner in respect of the income year in which the transaction occurred are calculated on the basis that— (i) (ii) the distributed property was disposed of at mar- ket value; or the disposition of the estate was a disposition and acquisition of the property at values given by sub- part FF for property of that type; or the value of the property was a combination of the values given by paragraphs (d)(i) or (ii); and the beneﬁciary adopted for taxation purposes the value referred to in paragraph (d) for the property.
(iii) (c) (d) (e) (2) For the purposes of the Income Tax Act 1994 and this Act, the value used in the tax returns of the estate and the beneﬁciary for the disposal value and the cost price of the property involved in the transaction is treated as correct.
(3) Despite subsection (2), if an enactment contained in the In- come Tax Act 1994 or this Act prescribes the adoption of a market value on a disposal by an administrator or executor or trustee of the estate of a deceased person, that market value must be adopted by the administrator, executor, or trustee, and a beneﬁciary in the tax returns they provide to the Commis- sioner.
1408 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FZ 1 Subpart I (comprising sections FI 1 to FI 11) was inserted, as from 1 October 2005, by section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
FI 11 Disposal of certain ﬁnancial arrangements on death If property is disposed of in a transaction to which section FI 1(3)(d) or (e) refers and the trustee of the deceased person’s estate is a cash basis person under section EW 60(1), the prop- erty must be valued at cost and not under section FI 2.
Subpart I (comprising sections FI 1 to FI 11) was inserted, as from 1 October 2005, by section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
Subpart FZ—Terminating provisions Contents FZ 1 Deduction for dividends paid on certain preference shares FZ 2 Amounts owing under convertible notes deemed to be share capital and holders deemed to be shareholders Page 1409 1410 FZ 1 Deduction for dividends paid on certain preference shares This section does not apply to the extent that any speciﬁed (1) preference shares in any close company are to be issued to or are held by— (a) any holder of any other class or classes of shares in the capital of the company; or any person where that person and any holder of any other class or classes of shares in the capital of the com- pany are associated persons,— (b) unless the Commissioner has approved the terms of issue of the speciﬁed preference shares as being ordinary commercial conditions consistent with those applying between parties at arm’s length, and those terms as approved are continued.
This section does not apply to any company which is under the control of persons who are not deemed to be resident in New Zealand.

(2) 1409 Part F s FZ 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) (4) (5) For the purposes of subsection (2), section OD 1 has effect as if for the term 50% wherever it occurs there were substituted in each case the term 25%.
Subject to this section, a company to which this section ap- plies is allowed a deduction in any income year of an amount equal to the dividends paid by the company in that income year in respect of speciﬁed preference shares of that company in any case where at all times in that income year the aggregate amount of the available subscribed capital per share calculated under the slice rule of all the preference shares, including spe- ciﬁed preference shares, of the company does not exceed 50% of the aggregate amount of the available subscribed capital per share calculated under the slice rule of all the ordinary shares of the company.
In this section, speciﬁed preference shares, in relation to any company, means shares in the company— (a) that have been issued and subscribed for in cash on or after 22 May 1975, in accordance with a binding con- tract entered into before 8.00 pm New Zealand Standard Time on 23 October 1986; and that are preferential as to dividends; and that are fully paid up in cash; and that are entitled to a ﬁxed rate of dividend without a further right to participate in proﬁts; and that are issued at par value only; and that are— (i) (ii) redeemable in cash at that par value; or convertible into, or redeemable by the issue of, shares or stock in the capital of the company or in the capital of any other company not earlier than 5 years after the date of allotment.
(b) (c) (d) (e) (f) Compare: 1994 No 164 s FZ 1 FZ 2 Amounts owing under convertible notes deemed to be share capital and holders deemed to be shareholders (1) Where, under the terms of any issue of convertible notes, any person becomes entitled to have a convertible note issued or given to the person by a company, the company is, for the pur- poses of this section, deemed to have issued or given the con- 1410 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FZ 2 vertible note at the time when that person ﬁrst became entitled to have the convertible note issued or given to the person.
(2) Where a company has issued or given a convertible note in accordance with an offer made by or to the company after 8 September 1960,— (a) (b) the company is denied a deduction in respect of any in- terest payable under the convertible note or of any ex- penditure or loss incurred in connection with the con- vertible note or in borrowing any money in respect of which the convertible note is issued or given; and for the purposes of this Act,— (i) the amount in respect of which the convertible note is issued or given is deemed to be share cap- ital in the capital of the company; and that amount is deemed to be the amount paid up in respect of shares of which the holder of the convertible note is deemed to be the holder; and the holder of the convertible note is deemed to be a shareholder in the company,— (ii) (iii) (3) and this Act applies accordingly.
Subsection (2) does not apply with respect to any convertible note that is issued or given by a New Zealand company on or after 11 June 1971, if the total amount in respect of which the convertible note has been issued or given is required, not later than 5 years after the date on which the company has issued or given the convertible note, to be, under the terms of issue of the convertible note, converted into, or redeemed or paid by the issue of, shares or stock in the capital of the company.
(4) A company is denied a deduction in respect of— (a) any interest payable on the whole or any part of the amount in respect of which the company has issued or given a convertible note to which subsection (3) applies, after— (i) the date on which, under the terms of issue of the convertible note, the amount in respect of which the convertible note has been issued or given is required to be converted into, or to be redeemed or paid by the issue of, shares or stock in the capital of the company; or 1411 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) the expiration of 5 years after the date on which the company has issued or given the convertible note,— whichever is the earlier; or (b) any expenditure or loss incurred at any time in connec- tion with a convertible note to which subsection (3) ap- plies, or in borrowing any money in respect of which any such convertible note is issued or given.
(5) Notwithstanding anything in subsection (1), the period of 5 years referred to in subsections (3) and (4)(a)(ii) is deemed not to include any interval between the time when the person en- titled ﬁrst became entitled to have the convertible note issued or given to the person and the commencement of the period for which interest under the convertible note commences to become payable, if and to the extent that that interval is, in the opinion of the Commissioner, necessary for the completion of formalities preliminary to the issue of the convertible note.
This section does not apply to any convertible note issued after 8.00 pm New Zealand Standard Time on 23 October 1986, other than a convertible note issued in accordance with a bind- ing contract entered into before that time.
Compare: 1994 No 164 s FZ 2 (6) Part G Avoidance and non-market transactions Contents Page Subpart GB—Avoidance: general GB 1 Agreements purporting to alter incidence of tax to be void 1415 Subpart GC—Avoidance: speciﬁc GC 1 Arrangement to defeat application of cross-border arrangement provision GC 2 Arrangements to defeat application of net loss carry 1419 1419 forward provisions GC 3 Effect on continuity provisions of change in beneﬁciaries 1420 of trust GC 4 Arrangement to defeat application of net loss offset 1420 provisions 1412 Reprinted as at 29 August 2011 Income Tax Act 2004 Part F s FZ 2 GC 5 Arrangement to defeat application of qualifying company 1420 provisions GC 6 Arrangement to defeat application of depreciation provisions GC 7 Arrangements in respect of CFCs GC 8 Arrangement to defeat application of CFC attributed repatriation provisions GC 9 Variations in control or income interests in foreign companies 1421 1421 1422 1422 GC 10 Attributed CFC income and FIF income: arrangements in 1427 respect of elections GC 11A Non-market transactions to acquire ﬁlm rights GC 11B Manipulation of arrangements to acquire ﬁlm rights GC 12 Petroleum mining GC 14 Income of beneﬁciaries GC 14A Sale or transfer of commercial bill to New Zealand resident GC 14B Attribution rule for personal services GC 14C Deﬁnitions for use in section GC 14B GC 14D Attribution rule: calculation GC 14E Attribution rule: exception GC 14EB Treatment of dividends as if from qualifying company [Repealed] 1427 1428 1428 1430 1431 1431 1432 1433 1435 1435 GC 14F Arrangement to avoid application of restrictive covenant 1435 rule GC 14G Arrangement to avoid application of rules for returning 1436 share transfers Fringe beneﬁt tax GC 15 Beneﬁt given to associated person of employee GC 16 Value of motor vehicle acquired from associated person GC 17 Fringe beneﬁt tax: general GC 17B Fringe beneﬁt tax: arrangement void Deductions GC 18 Agreements not to make tax deductions to be void GC 19 Resident withholding tax GC 20 Agreements not to make
 resident withholding tax deductions to be void Imputation GC 21 Imputation continuity requirements GC 22 Imputation: arrangement to obtain tax advantage GC 23 Imputation: dividend paid by another company 1436 1437 1438 1439 1440 1440 1441 1441 1441 1445 1413 Income Tax Act 2004 Reprinted as at 29 August 2011 GC 24 Application of speciﬁc imputation provisions to consolidated groups GC 25 Avoidance of dividend withholding payments GC 26 Arrangement to defeat application of branch equivalent 1446 1447 1447 tax account provisions GC 27 Arrangement to defeat application of dividend withholding 1447 payment account provisions GC 27A Arrangement to obtain tax advantage with respect to 1448 Maori authority credit account provisions (subpart MK) GC 28 Tax credits for families Tax credits for families Arrangements involving money not at risk GC 29 Application of sections GC 29 to GC 31 GC 30 Deﬁned terms for sections GC 29 to GC 31 GC 31 Deferral of surplus deductions from arrangement Subpart GD—Non-market transactions Trading stock GD 1 Sale or other disposal of trading stock for inadequate consideration GD 2 Distribution of trading stock to shareholders of company [Repealed] 1450 1451 1454 1455 1460 1462 Remuneration GD 3 Payment of excessive salary or wages, or allocation of 1462 excessive share of proﬁts or losses, to relative employed by or in partnership with taxpayer GD 4 Payments to taxpayer’s spouse, civil union partner or de 1464 facto partner GD 5 Excessive remuneration by close company to shareholder, 1465 director, or relative Superannuation and life insurance GD 6 Value of loans provided by superannuation fund deemed 1465 to be income of fund GD 7 Distribution of property to policyholders GD 8 Superannuation schemes GD 10 Leases for inadequate rent Leases GD 11 Financial arrangements rules Other non-market transactions 1414 1466 1467 1471 1472 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GB 1 GD 12 Non-market transactions for incurring ﬁlm
 production 1472 expenditure GD 12A Film production expenditure if payments postponed or 1473 contingent GD 12B Manipulation of arrangements to incur ﬁlm production 1473 expenditure GD 13 Cross-border arrangements between associated persons GD 14 Attributing interests in FIFs GD 15 Disposal of timber, or right to take timber, or standing timber to associated person GD 16 Disposals of ETS units at below market value Subpart GE—Non-market transactions: speciﬁc GE 1 New Zealand Raspberry Marketing Council Subpart GZ—Terminating provisions Pre-1974 agreements purporting to alter incidence of tax GZ 1 Subpart GB—Avoidance: general Contents GB 1 Agreements purporting to alter incidence of tax to be void 1473 1478 1479 1480 1480 1482 Page 1415 GB 1 Agreements purporting to alter incidence of tax to be void (1) Where an arrangement is void in accordance with section BG 1, the amounts of assessable income, deductions, and available net losses included in calculating the taxable income of any person affected by that arrangement may be adjusted by the Commissioner in the manner the Commissioner thinks appro- priate, so as to counteract any tax advantage obtained by that person from or under that arrangement, and, without limiting the generality of this subsection, the Commissioner may have regard to— (a) such amounts of assessable income, deductions, and available net losses as, in the Commissioner’s opinion, that person would have, or might be expected to have, 1415 Part G s GB 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) or would in all likelihood have, had if that arrangement had not been made or entered into; or such amounts of assessable income and deductions as, in the Commissioner’s opinion, that person would have had if that person had been allowed the beneﬁt of all amounts of assessable income, or of such part of the as- sessable income, as the Commissioner considers proper, derived by any other person or persons as a result of that arrangement.
(2) Where any amount of assessable income or deduction is in- cluded in the calculation of taxable income of any person under subsection (1), then, for the purposes of this Act, that amount is not included in the calculation of the taxable income of any other person.
(2A) Without limiting the generality of the preceding subsections, if an arrangement is void in accordance with section BG 1 because, whether wholly or partially, the arrangement directly or indirectly relieves a person from liability to pay income tax by claiming a credit of tax, the Commissioner may, in addition to any other action taken under this section,— (a) (b) disallow the credit in whole or in part; and allow in whole or in part the beneﬁt of the credit of tax for any other taxpayer.
(2B) For the purposes of subsection (2A), the Commissioner may have regard to the credits of tax which the taxpayer or another taxpayer would have had, or might have been expected to have had, if the arrangement had not been made or entered into.
In this section, credit of tax means the reduction or offsetting of the amount of tax a person must pay because— (a) credit has been allowed for a payment of any kind, whether of tax or otherwise, made by a person; or of a credit, beneﬁt, entitlement, or state of affairs.
(2C) (b) (3) Without limiting the generality of subsections (1) and (2), sec- tion BG 1, or the deﬁnitions of arrangement, liability, tax avoidance, or tax avoidance arrangement in section OB 1, where, in any tax year, any person sells or otherwise disposes of any shares in any company under a tax avoidance arrange- ment under which that person receives, or is credited with, or there is dealt with on that person’s behalf, any consideration 1416 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GB 1 (whether in money or money’s worth) for that sale or other dis- posal, being consideration the whole or a part of which, in the opinion of the Commissioner, represents, or is equivalent to, or is in substitution for, any amount which, if that arrangement had not been made or entered into, that person would have de- rived or would derive, or might be expected to have derived or to derive, or in all likelihood would have derived or would derive, as dividends in that tax year, or in any subsequent tax year or years, whether in 1 sum in any of those years or in any other way, an amount equal to the value of that consideration, or of that part of that consideration, is deemed to be a dividend derived by that person in that ﬁrst-mentioned tax year.
Compare: 1994 No 164 s GB 1 Subpart GC—Avoidance: speciﬁc Contents GC 1 Arrangement to defeat application of cross-border arrangement provision GC 2 Arrangements to defeat application of net loss carry forward provisions Page 1419 1419 GC 3 Effect on continuity provisions of change in beneﬁciaries 1420 of trust GC 4 Arrangement to defeat application of net loss offset 1420 provisions GC 5 Arrangement to defeat application of qualifying company 1420 provisions GC 6 Arrangement to defeat application of depreciation provisions GC 7 Arrangements in respect of CFCs GC 8 Arrangement to defeat application of CFC attributed repatriation provisions GC 9 Variations in control or income interests in foreign companies 1421 1421 1422 1422 GC 10 Attributed CFC income and FIF income: arrangements in 1427 respect of elections GC 11A Non-market transactions to acquire ﬁlm rights GC 11B Manipulation of arrangements to acquire ﬁlm rights GC 12 Petroleum mining GC 14 Income of beneﬁciaries 1427 1428 1428 1430 1417 Income Tax Act 2004 Reprinted as at 29 August 2011 GC 14A Sale or transfer of commercial bill to New Zealand resident GC 14B Attribution rule for personal services GC 14C Deﬁnitions for use in section GC 14B GC 14D Attribution rule: calculation GC 14E Attribution rule: exception GC 14EB Treatment of dividends as if from qualifying company [Repealed] 1431 1431 1432 1433 1435 1435 GC 14F Arrangement to avoid application of restrictive covenant 1435 rule GC 14G Arrangement to avoid application of rules for returning 1436 share transfers Fringe beneﬁt tax GC 15 Beneﬁt given to associated person of employee GC 16 Value of motor vehicle acquired from associated person GC 17 Fringe beneﬁt tax: general GC 17B Fringe beneﬁt tax: arrangement void Deductions GC 18 Agreements not to make tax deductions to be void GC 19 Resident withholding tax GC 20 Agreements not to make resident withholding tax deductions to be void Imputation GC 21 Imputation continuity requirements GC 22 Imputation: arrangement to obtain tax advantage GC 23
 Imputation: dividend paid by another company GC 24 Application of speciﬁc imputation provisions to consolidated groups GC 25 Avoidance of dividend withholding payments GC 26 Arrangement to defeat application of branch equivalent tax account provisions 1436 1437 1438 1439 1440 1440 1441 1441 1441 1445 1446 1447 1447 GC 27 Arrangement to defeat application of dividend withholding 1447 payment account provisions GC 27A Arrangement to obtain tax advantage with respect to 1448 Maori authority credit account provisions (subpart MK) GC 28 Tax credits for families Tax credits for families Arrangements involving money not at risk GC 29 Application of sections GC 29 to GC 31 1450 1451 1418 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 2 GC 30 Deﬁned terms for sections GC 29 to GC 31 GC 31 Deferral of surplus deductions from arrangement 1454 1455 GC 1 Arrangement to defeat application of cross-border arrangement provision Notwithstanding section GD 13(2), section GD 13 also applies to require the substitution of an arm’s length amount of con- sideration in the case of an arrangement which has a purpose or effect in respect of any taxpayer of defeating the intent and application of that section (including, but without limiting the generality of this section, as a result of a collateral arrangement involving an associated person not resident in New Zealand, or another collateral arrangement such as a market sharing ar- rangement, an arrangement not to enter a particular market, a back-to-back supply arrangement, or an income sharing ar- rangement).
Compare: 1994 No 164 s GC 1 GC 2 Arrangements to defeat application of net loss carry (b) forward provisions Where any company (in this section referred to as the loss company) claims to carry forward the whole or any part of any net loss for any income year to any later income year and— (a) any shares in the loss company or in any other company have been subject to any arrangement or series of related or connected arrangements; or any shares in the loss company or in any other company have had any rights attaching to them extinguished or altered, directly or indirectly by any means,— in each case for the purpose, or for purposes including the pur- pose, of enabling the loss company to meet the requirements of section IF 1(1) so as to defeat the intent and application of sections IE 1 and IF 1, the loss company is, in relation to those shares, deemed not to have met those requirements.
Compare: 1994 No 164 s GC 2 1419 Part G s GC 3 Income Tax Act 2004 Reprinted as at 29 August 2011 GC 3 Effect on continuity provisions of change in beneﬁciaries (1) of trust The provisions of this section apply only to modify the pro- visions of sections OD 3 and OD 4 for the purposes of the application of the continuity provisions.
(2) Where at any time— (a) (b) any share in a company or option over a share in a com- pany is held by a trustee; and there is a change in the beneﬁciaries of the trust under an arrangement which has a purpose or effect of defeat- ing the intent and application of any of the continuity provisions,— the trustee is treated as having disposed of the share or option at that time to an unrelated third party and to have reacquired the share or option immediately thereafter.
Compare: 1994 No 164 s GC 3 GC 4 Arrangement to defeat application of net loss offset provisions No offset is allowed under section IG 2(2) in calculating the taxable income of any company for any tax year where the Commissioner is of the opinion that any shares in that com- pany or in any other company— (a) have been subject to any arrangement or series of related or connected arrangements; or have had any rights attaching to them extinguished or altered, directly or indirectly, by any means,— in either case for the purpose, or for purposes including the purpose, of enabling that ﬁrst-mentioned company to meet the requirements of that subsection so as to defeat the intent and application of section IG 2.
Compare: 1994 No 164 s GC 4 (b) GC 5 Arrangement to defeat application of qualifying company provisions Where the Commissioner is of the opinion that at any time any shares in a company have been subject to any arrangement or series of related or connected arrangements for the purpose, or for purposes including the purpose, of making the company or 1420 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 7 any other company (the relevant company being in this section referred to as the speciﬁed company) a qualifying company so as to defeat the intent and application of subpart HG, the speciﬁed company is deemed not to be a qualifying company at that time.
Compare: 1994 No 164 s GC 5 GC 6 Arrangement to defeat application of depreciation provisions If the Commissioner is of the opinion that at any time the assets of a taxpayer have been subject to any arrangement or series of connected arrangements for the purpose, or for purposes including the purpose, of allowing the taxpayer or any other taxpayer (the relevant taxpayer being in this section referred to as the speciﬁed taxpayer) a deduction for an amount of depreciation loss so as to defeat the intent or application of this Act, the speciﬁed taxpayer is denied such a deduction.
Compare: 1994 No 164 s GC 6 Section GC 6 was amended, as from 3 April 2006, by section 109(1)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting the word “If” for the words “For the purposes of sections EZ 16 to EZ 18 and FF 15, where” with application as from the income year corresponding to the 2005–06 tax year.
Section GC 6 was amended, as from 3 April 2006, by section 109(1)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting the words “a deduction for an amount of depreciation loss so” for the words “a deduction so” with application as from the income year corresponding to the 2005–06 tax year.
GC 7 Arrangements in respect of CFCs Where in relation to any foreign company any 2 or more per- sons resident in New Zealand have entered into an arrange- ment by which any control interests in that foreign company are held by any other person or persons, which arrangement has the purpose or a purpose of preventing the foreign com- pany from being a controlled foreign company, those control interests are deemed to be held by those persons resident in New Zealand divided equally among them.
Compare: 1994 No 164 s GC 7 1421 Part G s GC 8 Income Tax Act 2004 Reprinted as at 29 August 2011 GC 8 Arrangement to defeat application of CFC attributed repatriation provisions For the purposes of sections CD 34 to CD 41, where and to the extent that— (a) (b) (c) any controlled foreign company enters into any loan or other arrangement (including a security arrangement) with any other person; and the arrangement does not directly result in any person having any attributed repatriation in respect of the con- trolled foreign company; and where, having regard to any connection between the parties to the loan or arrangement or to any other rele- vant circumstances, the parties were dealing with each other in relation to the loan or arrangement in a manner that has the purpose or effect of— (i) indirectly enabling any person directly or (whether or not the person referred to in para- graph (a), and referred to in this paragraph as the investor) to enter into a loan or other arrange- ment (in this section referred to as the related arrangement), which, if entered into by the con- trolled foreign company, would have resulted in a person having attributed repatriation in respect of the controlled foreign company; and defeating the intent and application of sections CD 34 to CD 41,— (ii) the related arrangement is deemed to have been entered into by the controlled foreign company and not by the investor.
Compare: 1994 No 164 s GC 8 GC 9 Variations in control or income interests in foreign companies (1) Where before the end of a quarter there is, in relation to any person and any foreign company, a variation in control or in- come interests that is attributable to an acquisition of control or income interests or a disposal of control or income interests by the person (in this subsection referred to as the variation), and within a period of 183 days after that variation there is a fur- ther variation in control or income interests that is attributable 1422 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 9 to a disposal of control or income interests or an acquisition of control or income interests by the person (in this subsection referred to as the subsequent variation), then if— (a) the variation reduces the person’s control interest or in- come interest in the foreign company and the subse- quent variation increases that person’s control interest or income interest in the foreign company; or the variation increases the person’s control interest or income interest in the foreign company and the subse- quent variation reduces that person’s control interest or income interest in the foreign company,— (b) and, if it were not for the application of this subsection the effect of the variation would be that a greater amount of at- tributed CFC loss or a lesser amount of attributed CFC income or attributed repatriation would be attributed to the person, or to any person associated with the person, or, where the per- son is a controlled foreign company, to any person holding an income interest in the controlled foreign company, then if the variation and the subsequent variation are part of an arrange- ment the effect, or 1 of the effects, of which is to defeat the intent and application of the international tax rules, the vari- ation, to the extent it was reversed by the subsequent variation, is deemed not to have occurred when calculating that person’s control interest or income interest in the foreign company at the end of the quarter.
(2) Where before the end of a quarter there is, in relation to any person and any foreign company, a variation in control or in- come interests that is attributable to a reduction or increase in any of the foreign company aggregates (in this subsection referred to as the variation) and within a period of 365 days after the variation there is a further variation in control or in- come interests which is attributable to an increase or reduction in any of the foreign company aggregates (in this subsection referred to as the subsequent variation), then if— (a) the variation reduces the person’s control interest or in- come interest in the foreign company and the subse- quent variation increases that person’s control interest or income interest in the foreign company; or 1423 Part G s GC 9 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) the variation increases the person’s control interest or income interest in the foreign company and the subse- quent variation reduces that person’s control interest or income interest in the foreign company,— and if it were not for the application of this subsection the effect of the variation would be that a greater amount of at- tributed CFC loss or a lesser amount of attributed CFC income or attributed repatriation would be attributed to the person, or to any person associated with the person, or, where the per- son is a controlled foreign company, to any person holding an income interest in the controlled foreign company, then if the variation and the subsequent variation are part of an arrange- ment the effect, or 1 of the effects, of which is to defeat the intent and application of the international tax rules, the vari- ation, to the extent it was reversed by the subsequent variation, is deemed not to have occurred when calculating that person’s control interest or income interest in the foreign company at the end of the quarter.
(3) Where before the end of a quarter there is, in relation to any person and any foreign company, a variation in control or in- come interests (in this subsection referred to as the variation) that is attributable to— (a) (b) an acquisition of control or income interests or a dis- posal of control or income interests by the person; or a reduction in any of the foreign company aggregates or an increase in any of the foreign company aggregates,— and within a period of 365 days after the variation there is a further variation in control or income interests (in this sub- section referred to as the subsequent variation) which is at- tributable,— (c) in any case where the variation was of the type speciﬁed in paragraph (a), to an increase in the foreign company aggregates or a reduction in the foreign company aggre- gates; or in any case where the variation was of the type speciﬁed in paragraph (b), to an acquisition of control or income interests or a disposal of control or income interests by the person,— (d) 1424 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 9 and if it were not for the application of this subsection, the effect of the variation would be that a greater amount of at- tributed CFC loss or a lesser amount of attributed CFC income or attributed repatriation would be attributed to the person, or to any person associated with the person, or, where the per- son is a controlled foreign company, to any person holding an income interest in the controlled foreign company, then if the variation and the subsequent variation are part of an arrange- ment the effect, or 1 of the effects, of which is to defeat the intent and application of the international tax rules, the vari- ation, to the extent it was reversed by the subsequent variation, is deemed not to have occurred when calculating that person’s control interest or income interest in the foreign company at the end of the quarter.
Subsections (1) and (3) do not apply where the person ﬁrst mentioned in each of those subsections acquired a control in- terest or an income interest in a controlled foreign company from, or disposes of a control interest or income interest in a controlled foreign company to, a person who— (a) is at the time of the acquisition or disposal resident in New Zealand; and is required to include as assessable income any at- tributed CFC income which that person might derive; and has immediately prior to the acquisition or immediately after the disposition (as the case may be) an income in- terest of 10% or greater in that controlled foreign com- pany under sections EX 14 to EX 17.
(b) (c) (4) (6) (5) Nothing in this section is to be construed as limiting the cir- cumstances in which a person is regarded as being entitled to acquire anything under section EX 6.

For the purposes of the international tax rules, where a com- pany resident in New Zealand becomes a foreign company and subsequently within 183 days becomes a company resident in New Zealand, that company is deemed to have been resident in New Zealand at all times during that period.
In this section,— acquisition of control or income interests means an acqui- sition directly or indirectly, and whether by 1 transaction or a (7) 1425 Part G s GC 9 Income Tax Act 2004 Reprinted as at 29 August 2011 series of transactions, by a person of any percentage of any of the things, or an entitlement to acquire any percentage of any of the things, listed in section EX 5(1) or EX 9(1) disposal of control or income interests means a disposal di- rectly or indirectly, and whether by 1 transaction or a series of transactions, by a person of any percentage of any of the things, or an entitlement to acquire any percentage of any of the things, listed in section EX 5(1) or EX 9(1) foreign company aggregates, in relation to any foreign com- pany, means the total of each of— (a) the available subscribed capital per share calculated under the slice rule of shares in the foreign company; or the rights to vote or participate in any decision-mak- ing concerning the distributions to be made by that for- eign company (not being decision-making undertaken by directors acting only in their capacity as directors), the constitution of that foreign company, any variation in the issued capital of the foreign company, or the ap- pointment or election of directors of the foreign com- pany; or the rights to receive or have dealt with the income of the foreign company, if distributed; or the rights to receive or have dealt with the net assets of the foreign company, if distributed (b) (c) (d) variation in control or income interests, in relation to any person, means any increase or reduction in the control inter- est or income interest of such person in a foreign company, whether by 1 transaction or a series of transactions, that is at- tributable to— (a) (b) (c) an acquisition of control or income interests; or a disposal of control or income interests; or a reduction in any of the foreign company aggregates; or an increase in any of the foreign company aggregates.
(d) Compare: 1994 No 164 s GC 9 Section GC 9(4)(c): amended (with effect from 1 April 2005), on 19 Decem- ber 2007, by section 102(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1426 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 11A GC 10 Attributed CFC income and FIF income: arrangements in respect of elections Notwithstanding sections EX 27(3) and EX 42(5), where— (a) an income interest in a controlled foreign company or an attributing interest in a foreign investment fund is transferred from 1 person to an associated person on or more occasions; and the associated persons enter into an arrangement with respect to making or not making— the election referred to in section EX 27(3); or (i) the election referred to in section EX 42(5); or (ii) any combination of 2 or more such elections; and (iii) the arrangement has an effect of defeating the intent and application of the international tax rules,— (b) (c) the Commissioner may deem any 1 or more of such elections to have been made or not made to the extent appropriate to prevent the arrangement having such effect.
Compare: 1994 No 164 s GC 10 GC 11A Non-market transactions to acquire ﬁlm rights (1) A person must reduce the deduction allowed to them under section DS 1 for expenditure incurred in acquiring a ﬁlm right, in accordance with subsection (2), if— (a) the Commissioner considers that the person (person A) and the person from whom the ﬁlm right was acquired (person B) were not dealing with each other at arm’s length in relation to the acquisition; and the amount of the expenditure incurred by person A in acquiring the ﬁlm right is more than the market value of the ﬁlm right at the time it was acquired by person A.
(b) (2) (3) If subsection (1) applies, the deduction must be reduced to an amount equal to the market value of the ﬁlm right at the time it was acquired by person A.

If person A acquires only a share of a ﬁlm right, this section applies only to the part of the total market value of the ﬁlm right that is attributable to that share.
Compare: 1994 No 164 s GC 11(3) 1427 Part G s GC 11B Income Tax Act 2004 Reprinted as at 29 August 2011 GC 11B Manipulation of arrangements to acquire ﬁlm rights If the Commissioner considers that 2 persons have made ar- rangements so that section DS 1, EJ 4, or EJ 5 applies more favourably in relation to a person in an income year than it would have applied without the arrangements,— (a) the deduction allowed to the person under section DS 1 must be reduced to the amount that the Commissioner considers would have been allowed if the arrangements had not been made: the deduction allocated under section EJ 4 or EJ 5 must be allocated to the income year to which the Commis- sioner considers it would have been allocated if the ar- rangements had not been made.
(b) Compare: 1994 No 164 s GC 11(4) GC 12 Petroleum mining (1) Without limiting the provisions of sections BG 1, GB 1, and GZ 1, where the Commissioner considers that any arrange- ment consisting of— (a) a disposal of any petroleum mining asset on or after 1 July 1992, together with any related arrangements (if any); or the incurring of petroleum exploration expenditure on or after 1 July 1992, together with any related arrange- ments (if any); or a farm-out arrangement entered into on or after 16 De- cember 1991, together with any related arrangements (if any),— (b) (c) has the effect or has been entered into for a purpose of tax avoidance, the Commissioner may, in accordance with section GB 1, adjust the taxable income of any person affected by the arrangement so as to counteract any tax advantage obtained by that person.
(2) Without limiting the generality of subsection (1), and for the purposes of that subsection, an arrangement having the effect of tax avoidance includes— (a) an arrangement involving the disposal, on or after 1 July 1992, of any petroleum mining asset where it is prob- 1428 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 12 (b) (c) able at the time the arrangement is entered into that the person acquiring the petroleum mining asset— (i) will through a related arrangement, whether in relation to an associated person or otherwise, not have to suffer the whole or part of the expenditure of acquiring the petroleum mining asset; or (ii) will be (or has been or is) effectively compen- sated in some way for the whole or part of that expenditure: an arrangement involving the incurring, on or after 1 July 1992, of petroleum exploration expenditure where it is probable at the time the arrangement is entered into that the person who is to incur the petroleum exploration expenditure— (i) will through a related arrangement, whether in relation to an associated person or otherwise, not have to suffer the whole or part of the petroleum exploration expenditure; or (ii) will be (or has been or is) effectively compen- sated in some way for whole or part of the pet- roleum exploration expenditure: an arrangement, involving a farm-out arrangement en- tered into on or after 16 December 1991, where it is probable at the time the arrangement is entered into that— (i) the farm-in party will through a related arrange- ment, whether in relation to an associated person or otherwise, not have to suffer the whole or part of the farm-in expenditure attributable to the pro- portionate interest acquired by the farm-in party under the farm-out arrangement; or the farm-in party or an associated person will be (or has been or is) effectively compensated in some way for the whole or part of that farm-in expenditure: (ii) (d) an arrangement by which a petroleum miner disposes of a petroleum mining asset to an associated person on or
 after 1 July 1992 for the purpose, or for purposes including the purpose, of ensuring that the associated 1429 Part G s GC 14 Income Tax Act 2004 Reprinted as at 29 August 2011 (e) person secures the beneﬁt of a greater deduction than that which would have been allowed if the asset had been disposed of for its market value: an arrangement by which a petroleum miner enters into a farm-out arrangement with an associated person on or after 16 December 1991 for the purpose, or for purposes including the purpose, of ensuring that the associated person receives the beneﬁt of a greater deduction than would have been allowed if the farm-out arrangement had been entered into on substantially the same terms as those on which it would have been entered into with a person not associated with the petroleum miner.
This section applies with any necessary modiﬁcations to a pet- roleum miner who undertakes petroleum mining operations that are— (a) outside New Zealand and undertaken through a branch or a controlled foreign company; and substantially the same as the petroleum mining activ- ities governed by this Act.

(b) 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.
For the purposes of this section, references to the disposal of an asset apply equally to the disposal of part of an asset.
Compare: 1994 No 164 ss DM 7, DM 9, DM 10, GC 12 (3) (4) (5) GC 14 Income of beneﬁciaries (1) Where, in relation to any trust and any beneﬁciary, any ar- rangement has been entered into under which property is trans- ferred, or services or other beneﬁts are provided by the trustee to a person other than that beneﬁciary, which arrangement has the effect in relation to that beneﬁciary of defeating the intent and application of section HH 3, that property and those ser- vices or beneﬁts are deemed for the purposes of that section to be received or enjoyed by that beneﬁciary.
This section does not apply to a Maori authority.
Compare: 1994 No 164 s GC 14 (2) 1430 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 14B GC 14A Sale or transfer of commercial bill to New Zealand resident (1) A person who redeems a commercial bill derives income from the redemption payment if— (a) a non-resident, not being a person who has become a party to a commercial bill for the purpose of carrying on business through a ﬁxed establishment in New Zealand, sells or transfers the commercial bill to the person; and the person is a resident or a non-resident who has be- come a party to the commercial bill for the purpose of carrying on business through a ﬁxed establishment in New Zealand; and the sale or transfer has the purpose of avoiding non- resident withholding tax or the approved issuer levy.
(b) (c) (3) (2) A person who does not redeem the commercial bill but other- wise satisﬁes subsection (1) is treated as having redeemed the bill.
Subsection (1) does not apply to a commercial bill issued by— a person who is resident in New Zealand, if the money (a) lent for the bill is used by the person in a business carried on through a ﬁxed establishment outside New Zealand; or a person who is not resident in New Zealand, unless the money lent for the bill is used by the person in a busi- ness carried on through a ﬁxed establishment in New Zealand.
(b) Compare: 1994 No 164 s GC 14A GC 14B Attribution rule for personal services (1) If, during a tax year, a person (person A) purchases services from another person (person B) and the services are person- ally performed by a third person (person C), who is associated with person B, an amount must be attributed by person B to person C in accordance with section GC 14D in the same tax year.
Subsection (1) applies if— (a) 80% or more of person B’s total assessable income from personal services during the tax year is derived from the (2) 1431 Part G s GC 14C Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) (d) sale of services to person A or a person associated with person A; and 80% or more of person B’s total assessable income from personal services during the tax year is derived through services personally performed by person C or a relative of person C; and person C’s net income for the tax year in which an at- tribution would be made is more than $60,000; and substantial business assets are not a necessary part of the business structure that is used to derive the total as- sessable income referred to in paragraph (a).
(3) Subsection (1) does not apply— (a) (ab) (b) if person B and person C are both non-residents during all of person B’s tax year: if person B is a natural person and is not a partner of a partnership: to the extent that the services personally performed by person C are essential support for a product supplied by person B.

Compare: 1994 No 164 s GC 14B GC 14C Deﬁnitions for use in section GC 14B This section applies for the purposes of section GC 14B.
(1) (2) A person is treated as being associated with another person if the person would be treated as being associated under section OD 7 or OD 8(3) at the time the services are personally per- formed by person C. (3) A person is not treated as being associated with another person under subsection (2) if— (a) (b) both persons are public authorities: person C cannot be reasonably expected to know that a particular person A is associated with another person A, other than by making a speciﬁc enquiry.
For the purposes of section GC 14B(2)(b), a relative of person C must be a relative at the beginning of person C’s tax year.
For the purposes of section GC 14B(2)(c), person C’s total assessable income includes the taxable value of a fringe beneﬁt provided or granted by a person associated with person C. (4) (5) 1432 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 14D (6) (7) (8) (9) Substantial business assets means depreciable property that— (a) on person B’s balance date, costs more than $75,000, or 25% or more of person B’s total assessable income from services for the tax year; and is not for private use or enjoyment.
(b) For the purposes of subsection (6)(a), the cost of depreciable property includes the cost price of property subject to a speci- ﬁed lease or the lessee’s acquisition cost of property subject to a ﬁnance lease or a hire purchase agreement.

Subsection (6)(b) does not apply to depreciable property if 20% or less of the property’s use is for private use or enjoy- ment.
For the purposes of subsection (8), 20% of a property’s use is calculated according to— (a) the proportion that the number of days for which fringe beneﬁt tax is payable in respect of the property bears to the total number of days in the tax year in which the property is owned or is subject to a speciﬁed lease, ﬁ- nance lease, or a hire purchase agreement, if the prop- erty is subject to the FBT rules: the proportion that the expenditure incurred in respect of the property, for which a deduction is denied, bears to all expenditure incurred in respect of the property in the tax year if the property is not subject to the FBT rules.
(b) Compare: 1994 No 164 s GC 14C GC 14D Attribution rule: calculation (1) Person B must attribute to person C in a tax year the lesser of the following amounts: (a) person B’s net income for the tax year, calculated as if their only income were derived from personal services; and person B’s net income for the tax year; and if person B is a company or a trust that has a net loss available for carry forward under section IE 1 that arises only from a business or a trading activity of selling per- sonal services, person B’s net income for the tax year, (b) (c) 1433 Part G s GC 14D Income Tax Act 2004 Reprinted as at 29 August 2011 offset by any net loss carried forward from a previous tax year, as allowed by section IE 1.
(b) For the purpose of calculating person B’s net income for the tax year under subsection (1),— (a) if person B is a trustee of a trust, the trustees are treated as not having made a distribution to a beneﬁciary during the tax year or before the end of 6 months after the end of the tax year: if person B is a partnership, person B is treated as a taxpayer and section HD 1(1)(b) does not apply.
For the purpose of calculating person B’s net income for the tax year under subsection (1)(a),— (a) person B is allowed a deduction for employment income paid to person C during the tax year: person B is allowed a deduction for the taxable value of a fringe beneﬁt provided or granted by person B to person C during the tax year and the fringe beneﬁt tax payable on the fringe beneﬁt.
(b) (b) (c) Person B’s net income for the tax year, as calculated after ap- plying subsections (2) and (3), is reduced by,— (a) in the case of a trustee of a trust, the amount of beneﬁ- ciary income derived by person C from the trust in the tax year: in the case of a partnership, the share of proﬁts allocated by the partnership to person C: in the case of a company, any dividends paid— (i) by person B to person C during the tax year or before the end of 6 months after the end of the tax year; and from income derived in the tax year.
If person B is a partnership that receives administrative ser- vices from another person related to their income from per- sonal services and has not paid for the administrative services, the amount to be attributed to person C must be reduced by the market value of the administrative services provided by the other person.

If a reduction required under subsection (4) results in a nega- tive amount, an amount is not attributable.
(ii) (2) (3) (4) (5) (6) 1434 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 14F (7) If person B is a trust and the amount attributable would cause the trust to have a net loss for the tax year, the trust’s beneﬁ- ciary income for the tax year must be reduced so that the trust’s taxable income for the tax year is zero, and the amount of bene- ﬁciary income distributed to beneﬁciaries other than person C must be reduced— (a) according to proportions determined by the trust’s trustees: if paragraph (a) does not apply, by the amount of the reduction, according to the proportion the beneﬁciary income distributed bears to total beneﬁciary income.
(b) (8) If the amount attributable is to be attributed to more than 1 person C, the amount attributed to each person C must reﬂect the value of the services personally performed by each person C respectively.

Compare: 1994 No 164 s GC 14D GC 14E Attribution rule: exception (1) Sections GC 14B and GC 14D do not apply if the amount to be attributed by person B to person C is less than $5,000.
If there is more than 1 person selling the services that are per- sonally performed by the same person C, subsection (1) may be applied in respect of person C once only.

Compare: 1994 No 164 s GC 14E (2) GC 14EB Treatment of dividends as if from qualifying company [Repealed] Section GC 14EB: repealed (with effect on 1 October 2007), on 6 October 2009, by section 808 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section GC 14EB: inserted (with effect from 1 October 2007), on 19 December 2007, by section 103 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
GC 14F Arrangement to avoid application of restrictive (1) covenant rule If a person enters into an arrangement that has an effect of avoiding section CE 9, the Commissioner may, despite the ar- rangement, treat— 1435 Part G s GC 14G Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) an amount, or part of an amount, under the arrangement as an amount to which section CE 9 applies; and a person affected by the arrangement as the person who gave the undertaking referred to in section CE 9(1).
(2) In this section, a collateral arrangement to dispose of property may be part of an arrangement.
Compare: 1994 No 164 s GC 14F GC 14G Arrangement to avoid application of rules for returning share transfers If a person enters into an arrangement that has an effect of avoiding a requirement of the deﬁnition of returning share transfer in section OB 1 so as to defeat the intention and ap- plication of this Act, the Commissioner may, despite the ar- rangement, 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.
Section GC 14G was inserted, as from 1 July 2006, by section 110 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Fringe beneﬁt tax GC 15 Beneﬁt given to associated person of employee (1) For the purposes of the FBT rules, where any beneﬁt which, if it were provided for or granted to an employee would be a fringe beneﬁt, is provided or granted by the employer of the employee, or is provided or granted by another person with whom the employer of the employee has entered into an ar- rangement for the providing or granting of that beneﬁt, for or to a person other than the employee of the employer, the em- ployee of the employer and the other person being associated persons, that beneﬁt is deemed to be a beneﬁt provided for or granted to the employee by the employer of the employee.
Subsection (1) does not apply to deem a beneﬁt provided or granted by an employer (being a company) to an associated person of any employee to be a beneﬁt provided or granted to the employee where and to the extent that— (a) the employee is also a shareholder in the company; and (2) 1436 Reprinted as at 29 August 2011 (b) (c) Income Tax Act 2004 Part G s GC 16 the associated person is a company; and the Commissioner is satisﬁed that the beneﬁt is not pro- vided or granted under an arrangement which has a purpose of providing or granting a beneﬁt to the em- ployee— (i) (ii) in lieu of employment income; or free from the application of fringe beneﬁt tax.
(3) For the purposes of the FBT rules and notwithstanding section CX 4, an associated person is deemed to be an employee of an employer and a beneﬁt is deemed to be a fringe beneﬁt subject to fringe beneﬁt tax where— (a) (b) the employer is a company; and the employer provides or grants a beneﬁt, or has entered into an arrangement with another person for the provid- ing or granting of that beneﬁt, for or to an associated person of an employee; and the person associated with the employee is also an as- sociated person of a shareholder in the company; and the associated person is not a company; and the associated person is not an employee or shareholder in the company except to the extent this section deems otherwise; and the beneﬁt is of a kind that would be a fringe beneﬁt under the FBT rules were it provided or granted for or to the employee; and the beneﬁt is of a kind that would be a dividend were it provided or granted for or to the shareholder.
(c) (d) (e) (f) (g) (4) Subsection (3) does not apply for the purposes of sections ND 5 and ND 6, which require calculations of fringe beneﬁt tax on attributed and non-attributed fringe beneﬁts respectively.
Compare: 1994 No 164 s GC 15 GC 16 Value of motor vehicle acquired from associated person For the purposes of schedule 2, part A,— (a) in any case where, in any quarter, or (where fringe bene- ﬁt tax is payable on an income year basis under section ND 14) income year, any motor vehicle, being a motor vehicle acquired by a person on or after 23 September 1985 (that acquisition being referred to in this subsec- 1437 Part G s GC 17 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) tion as the speciﬁed acquisition), is owned by the per- son and has, within the period of 24 consecutive months immediately preceding the day on which the speciﬁed acquisition occurred, been owned by the person, or by any other person where the person and the other person are associated persons, the cost price of the motor ve- hicle to the person is deemed to be an amount equal to the higher, or the highest, of the cost prices for which the motor vehicle has, subsequent to its manufacture, been acquired by the person or the other person: subject to paragraph (a), where, in relation to any motor vehicle and to any acquisition of the vehicle by any per- son,— (i) the motor vehicle was acquired by that person at no cost; or the cost price of the motor vehicle to that per- son was, in the opinion of the Commissioner, less than the amount of the market value of the motor vehicle on the date of the acquisition of it by that person, and the Commissioner is satisﬁed that the cost price would not have been so less but for an arrangement entered into, for the purpose of defeating the intent and application of the FBT rules, between that person and any other person (that person and that other person being associ- ated persons); or the cost price in relation to that acquisition is for any reason unable to be established by that person to the satisfaction of the Commissioner,— (ii) (iii) the cost price, in relation to that acquisition, is deemed to be an amount equal to the amount which the Commissioner is satisﬁed was the market value of the
 motor vehicle on the date of that acquisition.
Compare: 1994 No 164 s GC 16 GC 17 Fringe beneﬁt tax: general Where the Commissioner is satisﬁed that an arrangement has been entered into between persons and a purpose or effect of the arrangement (not being a merely incidental purpose or ef- 1438 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 17B fect) is to defeat the intent and application of the FBT rules, or of any provision of the FBT rules, the Commissioner may, notwithstanding the arrangement, deem— (a) a person who is a party to that arrangement (that person being referred to in this section as the participant) to be the employer in relation to such other person or such other persons as the Commissioner speciﬁes by notice to the participant; and any person so speciﬁed to be, in relation to the partici- pant, an employee (that person being referred to in this section as the deemed employee); and any beneﬁt that— (i) is obtained by the deemed employee and is pro- vided or granted by the participant; or the deemed employee would have, or might be expected to have, or would in all likelihood have, obtained if that arrangement had not been made or entered into,— (ii) (b) (c) to be a beneﬁt provided or granted by the participant to the deemed employee by virtue of the employment of the deemed employee,— for the purposes of the FBT rules; and the FBT rules apply accordingly throughout such period or periods (each being a period during which that arrangement is in force) as the Com- missioner determines.
Compare: 1994 No 164 s GC 17 GC 17B Fringe beneﬁt tax: arrangement void (1) If an arrangement is void under section BG 1, the amount of excluded income under section CX 3 of a person affected by the arrangement may be adjusted by the Commissioner in the manner the Commissioner thinks appropriate, so as to counter- act any tax advantage obtained by that person from or under the arrangement, and without limiting the generality of this subsection, the Commissioner may have regard to— (a) the amount of excluded income as, in the Commis- sioner’s opinion, the person would have, or might be expected to have, or would in all likelihood have, had if the arrangement had not been made or entered into; or 1439 Part G s GC 18 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) (b) the amount of excluded income as, in the Commis- sioner’s opinion, the person would have had if they had been allowed the beneﬁt of some or all of the excluded income, as the Commissioner considers proper, derived by any other person or persons as a result of the arrange- ment.
If an amount of excluded income is included in the income of a person under subsection (1), then, for the purposes of this Act, that amount is not included in the income of any other person.

Section GC 17B was inserted, as from 1 April 2006, by section 111(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
See section 111(2) of that Act as to the application of this amendment for a person and a period beginning on or after 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe beneﬁt tax).
GC 18 Agreements not to make tax deductions to be void Deductions Where a tax deduction or combined tax and earner premium deduction or combined tax and earner levy deduction is re- quired to be made under the PAYE rules and, where applic- able, section 115 of the Accident Rehabilitation and Com- pensation Insurance Act 1992 or section 285 of the Accident Insurance Act 1998 or section 221 of the Injury Prevention, Rehabilitation, and Compensation Act 2001, any agreement not to make the deduction in accordance with those rules or that section 115 or that section 285 or that section 221 is void.
Compare: 1994 No 164 s GC 18 GC 19 Resident withholding tax Without limiting the generality of section NF 13, section GB 1(1) applies as if— (a) the words “amounts of assessable income, deductions, and available net losses included in calculating the tax- able income” in subsection (1) were replaced by the words “liability to resident withholding tax”; and the words “assessable income, deductions, and avail- able net losses” in subsection (1)(a) were replaced by the words “resident withholding income”; and (b) 1440 Reprinted as at 29 August 2011 (c) Income Tax Act 2004 Part G s GC 22 the words “assessable income and deductions as, in the Commissioner’s opinion, that person would have had if that person had been allowed the beneﬁt of all amounts of assessable income, or of such part of the assess- able income” in subsection (1)(b) were replaced by the words “resident withholding income as, in the Commis- sioner’s opinion, that person would have had, if that per- son had been allowed the beneﬁt of all amounts of resi- dent withholding income, or such part of the resident withholding income”.
Compare: 1994 No 164 s GC 19 GC 20 Agreements not to make resident withholding tax deductions to be void Where a resident withholding tax deduction is required to be made under the RWT rules, any agreement not to make the tax deduction in accordance with those rules is void.
Compare: 1994 No 164 s GC 20 GC 21 Imputation continuity requirements Imputation For the purposes of section ME 5(1)(i), where— (a) any shares in the company or in any other company have been subject to any arrangement or series of related or connected arrangements; or any shares in the company or in any other company have had any rights attaching to them extinguished or altered, directly or indirectly, by any means,— (b) in each case for the purpose, or for purposes including the purpose, of enabling the company to meet the requirements of section ME 5(1)(i) so as to defeat its intent and application, the company, in relation to those shares, is deemed not to have met those requirements.
Compare: 1994 No 164 s GC 21 GC 22 Imputation: arrangement to obtain tax advantage (1) For the purposes of this section, there is an arrangement to obtain a tax advantage where— 1441 Part G s GC 22 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) (ii) (iii) there is an arrangement for the sale or other disposition of shares or issue of shares where— (i) any person who is a party to the arrangement might reasonably have anticipated that a dividend would be paid in respect of the shares in any in- come year; and any person who is a party to the arrangement might reasonably have anticipated that an imput- ation credit or a dividend withholding payment credit would be attached to the dividend; and any person who is a party to the arrangement might reasonably expect— (A) that a party to the arrangement will be able to obtain a tax advantage in relation to any such imputation credit or dividend with- holding payment credit; or that a party to the arrangement will not be able to obtain a tax advantage in relation to any such imputation credit or dividend withholding payment credit; and (B) (iv) the purpose, not being an incidental purpose, of the arrangement is that a party to the arrangement would obtain any such tax advantage; or in respect of any 1 or more distributions (including bonus issues) by a company, whether occurring in the same imputation year or over more than 1 imputation year, the company streams the payment of dividends, or the attachment of imputation credits or dividend withholding payment credits or both to any dividends, in such a way as will give higher credit values to per- sons who will obtain a tax advantage from them than to persons who will not so obtain a tax advantage or who may reasonably be expected to derive a lesser beneﬁt from any tax advantage.
For the purposes of subsection (1)(b), a dividend paid by a company is deemed to have a higher credit value than another dividend where any of the following applies: (a) the dividend has an imputation credit attached to it, and the other dividend does not: (2) 1442 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 22 (b) (c) (d) (e) (f) the imputation ratio of the dividend is higher than that of the other dividend: the dividend has a dividend withholding payment credit attached to it, and the other dividend does not: the dividend withholding payment ratio of the dividend is higher than that of the other dividend: the dividend has both an imputation credit and a divi- dend withholding payment credit attached to it, and the other dividend has no such credit or only 1 such type of credit attached: the combined imputation and dividend withholding payment ratio of the dividend is greater than that of the other dividend.
(3) Where the Commissioner determines that there is an arrange- ment to obtain a tax advantage, the Commissioner may— (a) (b) (c) (d) determine whether the arrangement gives rise to an ac- count advantage, a tax credit advantage, or both: determine, in the case of any arrangement within the meaning of subsection (1)(b) to which any person (other than the company referred to in that paragraph) is a party, which of subsections (4) and (5) should apply: determine the amount of the imputation credit or divi- dend withholding payment credit the subject of the ar- rangement: determine the imputation year in which the arrangement occurred or commenced (being the year in which the Commissioner considers that the ﬁrst reasonably iden- tiﬁable step towards implementation of the arrangement occurred).
(4) Where the Commissioner determines that there is an arrange- ment within the meaning of subsection (1)(a), or determines that there is an arrangement within the meaning of subsection (1)(b) and that this subsection should apply to that arrange- ment, the following provisions apply: (a) any person who, but for this paragraph, would obtain a tax credit advantage from the arrangement is not entitled in respect of the arrangement to a credit of tax under section LB 2 or LD 8 or to a refund under section LD 9 (as the case may be); and 1443 Part G s GC 22 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) (d) there arises a debit to the imputation credit account or the dividend withholding payment credit account (as the case may be) of any company that, but for this para- graph, would obtain an account advantage from the ar- rangement; and the amount of the credit of tax or refund to which the person referred to in paragraph (a) is not entitled and the amount which arises as the debit referred to in para- graph (b) is in each case an amount equal to the amount of the imputation credit or the dividend withholding payment credit determined under subsection (3)(c) to be the subject of the arrangement; and any debit arising under paragraph (b) is a debit that arises in the imputation year determined under subsec- tion (3)(d) to be that in which the arrangement occurred or commenced.
(5) Where there is an arrangement within the meaning of subsec- tion (1)(b) to which no person other than the company referred to in that paragraph is a party, or where the Commissioner de- termines that there is an arrangement within the meaning of that paragraph and that this subsection should apply in respect of that arrangement, the following provisions apply: (a) there arises a further debit to the imputation credit ac- count or the dividend withholding payment account of the company referred to in subsection (1)(b); and the amount of that further debit is an amount equal to the amount of the imputation credit or the dividend withholding payment credit determined under subsec- tion (3)(c) to be the subject of the arrangement; and the further debit is a debit that arises in the imputation year determined under subsection (3)(d) to be that in which the arrangement occurred or commenced; and to the extent to which this subsection applies to the ar- rangement, subsection (4) does not apply to the arrange- ment.
(b) (c) (d) (6) As soon as is convenient after a determination is made in rela- tion to a company under subsection (3) (in this section referred to as a determination of tax advantage arrangement debit), the Commissioner must give notice of the determination to the 1444 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 23 company in respect of whose imputation credit account or divi- dend withholding payment account the determination is made.
(7) A notice may be included in a notice of assessment made under section 111(1) of the Tax Administration Act 1994, or a deter- mination under either section ME 40 or MG 12.

(9) (8) An omission to give the notice referred to in subsection (6) does not invalidate the determination of tax advantage arrange- ment debit.
In this section,— account advantage means— (a) the arising of a credit to an imputation credit account in accordance with section ME 4; or the arising of a credit to a dividend withholding payment account in accordance with section MG 4 (b) tax credit advantage means— (a) (b) the allowance, in whole or in part, of a credit of tax in accordance with section LB 2: the allowance, in whole or in part, of a credit of tax in accordance with section LD 8, or the obtaining of a refund of dividend withholding payment under section LD 9.
Compare: 1994 No 164 s GC 22 Subsection (4)(b) was amended, as from 1 October 2005, by section 61(1) Taxa- tion (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by omitting the words “both a tax credit advantage and” with application for arrangements entered on or after 16 November 2004.
GC 23 Imputation: dividend paid by another company (1) Where, in relation to a company and a shareholder of the com- pany, there is an arrangement entered into for the purpose, or for purposes including the purpose, that— (a) the shareholder or, where the shareholder is a trustee in relation to the share or shares held, any beneﬁciary of that trust, or any person associated with either the share- holder or any such beneﬁciary, may be paid a dividend by another company, whether directly or indirectly by any means whatever; or the shareholder or, where the shareholder is a trustee in relation to the share or shares held, any beneﬁciary (b) 1445 Part G s GC 24 Income Tax Act 2004 Reprinted as at 29 August 2011 of that trust, or any person associated with either the shareholder or any such beneﬁciary, may acquire any shares in another company so that the other company may pay a dividend to the shareholder or the beneﬁciary or the associated person, whether directly or indirectly by any means whatever,— (2) any dividend paid to the shareholder or, as the case may be, the beneﬁciary or associated person by that other company under the arrangement is, for the purposes of the imputation rules, deemed to be a dividend paid by the company.
For the purposes of the imputation rules, the amount of any imputation credit attached to a dividend to which subsection (1) applies— (a) does not constitute income of the shareholder or, as the case may be, the beneﬁciary or associated person: is not treated as an imputation credit for the purposes of section LB 2: notwithstanding anything in subsection (1), is a debit in accordance with section ME 5(1)(a) to the imputation credit account of the company that is deemed by sub- section (1) to have paid the dividend.
(b) (c) Compare: 1994 No 164 s GC 23 GC 24 Application of speciﬁc imputation provisions to consolidated groups Section GC 23(2) applies in any case where the company deemed by section GC 23(1) to have paid a dividend is at the time of payment a member of a consolidated group as if the reference to section ME 5(1)(a) were a reference to section ME 12(1)(a).
Section GC 22 applies, with any necessary modiﬁcations, in any case which 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 such equivalent accounts.
Compare: 1994 No 164 s GC 24 (1) (2) 1446 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 27 GC 25 Avoidance of dividend withholding payments Where the Commissioner is satisﬁed that an arrangement has been entered into between persons for the purpose of, or for purposes including the purpose of, avoiding the application of the dividend withholding payment rules or of any provision of those rules, the Commissioner may, notwithstanding the ar- rangement, deem a payment or part of a payment that is the subject of the arrangement to be a foreign withholding pay- ment dividend for the purposes of those rules.
Compare: 1994 No 164 s GC 25 GC 26 Arrangement to defeat application of branch equivalent (b) tax account provisions For the purposes of section MF 4(1)(e) and (3)(d), where— (a) any shares in the company or in any other company have been subject to any arrangement or series of related or connected arrangements; or any shares in the company or in any other company have had any rights attached to them extinguished or altered, directly or indirectly, by any means whatever,— in each case for the purpose, or for purposes including the purpose, of enabling the company to meet the requirements of either section MF 4(1)(e) and (3)(d) so as to defeat its intent and application, the company, in relation to those shares, is deemed not to have met those requirements.
Compare: 1994 No 164 s GC 26 GC 27 Arrangement to defeat application of dividend withholding payment account provisions For the purposes of section MG 5(1)(i), where— (a) (b) any shares in the company or in any other company have been subject to any arrangement or series of related or connected arrangements; or any shares in the company or in any other company have had any rights attaching to them extinguished or altered, directly or indirectly, by any means whatsoever,— in each case for the purpose, or for purposes including the purpose, of enabling the company to meet the requirements of section MG 5(1)(i) so as to defeat its intent and application, 1447 Part G s GC 27A Income Tax Act 2004 Reprinted as at 29 August 2011 the company, in relation to those shares, is deemed not to have met those requirements.
Compare: 1994 No 164 s GC 27 (1) GC 27A Arrangement to obtain tax advantage with respect to Maori authority credit account provisions (subpart MK) For the purposes of this section, there is an arrangement to obtain a tax advantage if the arrangement is for the sale or other disposition of shares or the issue of shares in a Maori authority that is a company and— (a) a party to the arrangement might reasonably have antici- pated that a taxable Maori authority distribution would be made in respect of the shares in an income year; and a party to the arrangement might reasonably have antici- pated that a Maori authority credit would be attached to the distribution; and a party to the arrangement might reasonably expect that the party will, or will not, be able to obtain a tax advan- tage in relation to the Maori authority credit; and the purpose, not being an incidental purpose, of the ar- rangement is that a party to the arrangement would ob- tain a tax advantage.
(b) (c) (d) For the purposes of this section, there is an arrangement to ob- tain a tax advantage if in respect of any 1 or more taxable Maori authority distributions by a Maori authority, whether occur- ring in the same imputation year or over more than imputation year, the Maori authority streams the distributions, or the at- tachment of Maori authority credits to distributions, in such a way as will give higher credit values to members who will ob- tain a tax advantage from them than to members who will not so obtain a tax advantage or who may reasonably be expected to derive a lesser beneﬁt from any tax advantage.
For the purposes of subsection (2), a taxable Maori authority distribution by a Maori authority is treated as having a higher credit value than another distribution if— (a) the taxable Maori authority distribution has a Maori au- thority credit attached to it, and the other distribution does not; or (2) (3) 1448 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 27A (b) the base ratio of the taxable Maori authority distribution is higher than that of the other distribution.
(4) (5) If the Commissioner determines that there is an arrangement to obtain a tax advantage, the Commissioner may— (a) determine whether the arrangement gives rise to an ac- count advantage, a tax credit advantage, or both; or in the case of an arrangement described in subsection (2) to which a person, other than the Maori authority, is a party, determine whether subsection (5) or (6) should apply; or determine the amount of the Maori authority credit that is the subject of the arrangement; or determine the imputation year in which the arrangement occurred or commenced, being the year in which the Commissioner considers that the ﬁrst reasonably iden- tiﬁable step towards implementation of the arrangement occurred.
If the Commissioner determines that there is an arrangement to obtain a tax advantage and that this subsection should apply, the following provisions apply: (a) a member who, but for this paragraph, would obtain a tax credit advantage from the arrangement is not entitled to a credit of tax under section LD 3A; and a debit arises to the Maori authority credit account of a Maori authority that, but for this paragraph, would ob- tain both a tax credit advantage and an account advan- tage from the arrangement; and the amount of the credit of tax or refund to which the member is not entitled and the debit that arises must both be the same amount as the Maori authority credit determined under subsection (4)(c) to be the subject of the arrangement; and the debit arises in the imputation year determined under subsection (4)(d) to be that in which the arrangement occurred or commenced.
(b) (c) (d) (b) (c) (d) (6) If the Commissioner determines that there is an arrangement to obtain a tax advantage to which subsection (2) applies and to which only the Maori authority referred to in that subsection is a party, or if the Commissioner determines that there is an 1449 Part G s GC 28 Income Tax Act 2004 Reprinted as at 29 August 2011 arrangement within the meaning of that subsection and that this subsection should apply in respect of the arrangement, the following provisions apply: (a) a further debit arises to the Maori authority’s Maori au- thority credit account; and the further debit is equal to the amount of the Maori authority credit determined under subsection (4)(c) to be the subject of the arrangement; and the further debit arises in the imputation year deter- mined under subsection (4)(d) to be that in which the arrangement occurred or commenced; and to the extent to which this subsection applies to the ar- rangement, subsection (5) does not apply to the arrange- ment.
(b) (c) (d) (7) As soon as is convenient after a determination is made, the Commissioner must give notice of the determination to the Maori authority in respect of whose Maori authority credit ac- count the determination is made.

(9) (8) A notice may be included in a notice of assessment under sec- tion 111(1) of the Tax Administration Act 1994, or a determin- ation under section MK 9.

Failure to give notice does not invalidate the Commissioner’s determination.
In this section,— account advantage means the arising of a credit to a Maori authority credit account in accordance with section MK 4 tax credit advantage means the allowance, in whole or in part, of a credit of tax in accordance with section LD 3A.

Compare: 1994 No 164 s GC 27B (10) Tax credits for families Heading: substituted (with effect from 1 April 2007), on 19 December 2007, by section 104(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
GC 28 Tax credits for families If the Commissioner is satisﬁed that arrangements have been made between a person and another person with a view to the affairs of those persons being arranged or conducted so 1450 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 29 that subpart KD would, but for this section, have effect more favourably for that person than would otherwise have been the case, the amount of a credit of tax to which that person is en- titled under subpart KD may not be more than the amount of the credit of tax to which the person would, in the Commis- sioner’s opinion, have been entitled if those arrangements had not been made.
Compare: 1994 No 164 s GC 28 Section GC 28 heading: substituted (with effect from 1 April 2007), on 19 De- cember 2007, by section 104(2) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).
Arrangements involving money not at risk GC 29 Application of sections GC 29 to GC 31 (1) This section and sections GC 30 and GC 31 apply to an ar- rangement and a person (participant), who is a taxpayer and is a party to the arrangement or affected by the arrangement, if at any time after the arrangement commences— (a) there is a person who sells or issues, or promotes the selling or issuing of, the arrangement, whether or not for remuneration; and the participant and any affected associates of the partici- pant, considered together, have for a period— (i) deductions resulting from the arrangement, other than— (A) (b) (B) deductions arising under this section and sections GC 30 and GC 31: net losses of a loss attributing qualify- ing company, to the extent that sharehold- ers with effective interests in the company are deemed under section HG 16 to incur amounts of loss that correspond to the net losses; and (ii) assessable income resulting from the arrange- ment, other than assessable income arising under this section and sections GC 30 and GC 31, that in total is less than the total amount of deductions referred to in subparagraph (i); and 1451 Part G s GC 29 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) (d) (e) the period referred to in paragraph (b) for a participant, or a group consisting of a participant and the affected associates of the participant, is— (i) the earliest income year in which an interest in the arrangement was acquired by the participant or an affected associate of the participant; or the income year referred to in subparagraph (i) together with the next following income year; or the income year referred to in subparagraph (i) together with the next following income year and the second following income year; and (ii) (iii) as part of or for the purposes of the arrangement, the participant or an affected associate of the participant borrows a limited-recourse amount under a limited re- course loan; and on the balance date, or the latest balance date, of the participant and affected
 associates of the participant that ends a period referred to in paragraph (c)(i) to (iii) for which paragraph (b) is satisﬁed, the participant and the affected associates of the participant hold, as part of the arrangement, property with a total cost that is— (i) less than twice the total of the limited-recourse amounts referred to in paragraph (d) that the par- ticipant and the affected associates of the partici- pant borrowed on or before the balance date; and (ii) more than 142.85% of the total cost of the part of that property that is— land: (A) buildings: (B) (C) plant: (D) machinery: (E) shares in a listed company that in total represent a direct voting interest of 10% or less in the listed company: shares and options that are acquired or cre- ated with an intention that the shares or options will produce income that is mon- etary remuneration of a participant under sections CE 2 to CE 4: (F) 1452 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 29 (2) (3) (G) shares in a foreign company, if the pro- ceeds of a disposal of the shares would not be assessable income of the holder other than under the FIF rules.
The assessable income and deductions resulting from an ar- rangement for each person in a group of persons, for the pur- poses of subsection (1)(b) and section GC 31, and the cost of property that is held by each person in the group as part of the arrangement, for the purposes of subsection (1)(e), are consoli- dated for the elimination of intra-group balances in accordance with generally accepted accounting practice.
If a group of persons consists of persons who are a partner- ship and the partners in a partnership, a joint venture and the partners in the joint venture, or a loss attributing qualifying company and the shareholders in the loss attributing qualify- ing company, the assessable income and deductions resulting from an arrangement for each person in the group for the pur- poses of subsection (1)(b) and section GC 31, and the cost of property that is held by each person in the group as part of the arrangement for the purpose of subsection (1)(e), are calcu- lated using the proportionate method in accordance with gen- erally accepted accounting practice for partnerships.
Compare: 1994 No 164 s ES 1 Subsection (1)(b) (that part before subpara (i)(A)) was amended, as from 1 Oc- tober 2005, by section 204(1)(a) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting the words “or losses”.

Subsection (1)(b)(i)(B) was substituted, as from 1 October 2005, by section 204(1)(b) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Subsection (1)(b)(ii) was amended, as from 1 October 2005, by section 204(1)(c) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting the words “or losses”.

Subsection (1)(b)(ii) was amended, as from 1 October 2005, by section 204(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting the word “assessable” before the word “income” in both places that it occurs.
Subsection (1)(e)(i) was amended, as from 1 October 2005, by section 204(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the words “date; and” for the word “date:”.

Subsection (1)(e)(ii)(F) was amended, as from 1 October 2005, by section 204(4) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “CE 4:” for the expression “CE 4.”.
1453 Part G s GC 30 Income Tax Act 2004 Reprinted as at 29 August 2011 Subsection (1)(e)(ii)(G) was inserted, as from 1 October 2005, by section 204(4) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Subsection (2) was amended, as from 1 October 2005, by section 204(5) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the words “assessable income and deductions” for the words “income, deductions, and losses”.
Subsection (3) was amended, as from 1 October 2005, by section 204(6) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the words “assessable income and deductions” for the words “income, deductions, and losses”.
GC 30 Deﬁned terms for sections GC 29 to GC 31 (1) For the purposes of this section and sections GC 29 and GC 31, a person is an affected associate, for the arrangement, of another person if each person is a party to the arrangement or is affected by the arrangement and— (a) 1 person is a loss attributing qualifying company and the other person is a shareholder in the loss attributing qualifying company: the persons are associated under a provision of section OD 7 or OD 8(3).
(b) (2) (3) For the purposes of this section and sections GC 29 and GC 31, the 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, as deﬁned in subsection (3)(b), are affected in a way that is described in subsection (3)(c).
For the purposes of this section and sections GC 29 and GC 31, limited-recourse loan means a ﬁnancial arrangement that— is not an excepted ﬁnancial arrangement; and (a) involves the provision of money by a person (lender) to (b) another person (borrower); and has an effect, or has an economic effect that is substan- tially similar to the effect, of— (i) (c) relieving the borrower under the ﬁnancial ar- rangement from the obligation to repay all or some of the money, whether the relief is contin- gent or not: requiring the borrower under the ﬁnancial ar- rangement to make no repayment for a period of (ii) 1454 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 31 10 or more years from the date on which the loan is made, other than repayments for the purpose of defeating the intent and application of this sub- part: providing that the repayment of the money is in substance secured solely against assets that are employed in the arrangement; and (iii) (d) involves money that is provided by— (i) a lender who is not an associated person of the borrower under a provision of section OD 7 or OD 8(3) and who does not provide the money on arm’s-length terms and who— (A) is not a person who regularly provides money to persons on arm’s-length terms under arrangements that do not satisfy paragraphs (a) to (c): is not resident in New Zealand under sec- tion OE 1 or OE 2 and does not carry on business in New Zealand through a ﬁxed establishment in New Zealand; or a lender who is an associated person of the bor- rower under a provision of section OD 7 or OD 8(3) and who obtains the money under an ar- rangement that satisﬁes paragraphs (a) to (c).
(B) (ii) Compare: 1994 No 164 s ES 2 Subsection (3)(c) was amended, as from 1 October 2005, by section 205(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting the words “a purpose or effect of achieving”.

Subsection (3)(d) was substituted, as from 1 October 2005, by section 205(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
GC 31 Deferral of surplus deductions from arrangement (1) This section applies for an income year to a participant in an arrangement to which this section and sections GC 29 and GC 30 apply if— (a) the participant is not a loss attributing qualifying com- pany and has from the arrangement for the income year— 1455 Part G s GC 31 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) deductions, including any deduction under sub- section (3) or section HG 16; and a total amount of assessable income, other than under this section, that is less than the total amount of the deductions referred to in subpara- graph (i); and (b) the participant and the affected associates of the partici- pant who are not a loss attributing qualifying company that has incurred a net loss from the arrangement for the income year, considered together, have from the ar- rangement for the income year— (i) deductions, including any deduction under sub- section (3) or section HG 16; and a total amount of assessable income, other than under this section, that is less than the total amount of the deductions referred to in subpara- graph (i); and (ii) (c) on the balance date, or the latest balance date, of the participant and affected associates of the participant for the income year, the arrangement involves a limited re- course loan for which the participant or an affected as- sociate of the participant is a borrower.
(2) If this section applies to a participant for an income year and an arrangement, the participant is treated as deriving in the income year an amount of assessable income that is given by the following formula: where— a is the amount for the income year by which the deduc- tions, including any deduction under subsection (3) or section HG 16, of the participant from the arrangement exceed the assessable income, other than under this sec- tion, of the participant from the arrangement b is the total amount for the income year by which the deductions, including any deduction under subsection (3) or section HG 16, from the arrangement exceed the 1456 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 31 assessable income, other than under this section, from the arrangement for the group that consists of— (a) (b) the participant; and the affected associates of the participant who are not a loss attributing qualifying company and who each have for the income year allowable deductions, including any allowable deduction under subsection (3) or section HG 16, from the arrangement that in total exceed the assessable income, other than under this section, from the arrangement is the lesser of— c (a) (b) the total amount for the income year by which the deductions, including any deduction under sub- section (3) or section HG 16, from the arrange- ment exceed the assessable income, other than under this section, from the arrangement for the group that consists of— (i) (ii) the participant; and the affected associates of the participant who are not a loss attributing qualifying company that has incurred a net loss from the arrangement for the income year; and the total of limited-recourse amounts that, on the balance date or the latest balance date of the par- ticipant and the affected associates of the partici- pant, the participant and the affected associates of the participant have undischarged obligations to repay as part of or for the purposes of the ar- rangement.
(4) (3) 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 next following income year.
For the purposes of subsection (1) and of paragraph (b) of the deﬁnition of item “c” in subsection (2), an obligation to repay a limited-recourse amount is not discharged by a transaction to the extent that the transaction— (a) involves the use, as part of the arrangement, of— 1457 Part G s GC 31 Income Tax Act 2004 Reprinted as at 29 August 2011 (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) Compare: 1994 No 164 s ES 3 Subsection (1)(a)(i) was substituted, as from 1 October 2005, by section 206(1)(a) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Subsection (1)(a)(ii) was amended, as from 1 October 2005, by section 206(1)(b)(i) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting the word “assessable” before the word “income”.
Subsection (1)(a)(ii) was amended, as from 1 October 2005, by section 206(1)(b)(ii) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting the words “and losses”.

Subsection (1)(b)(i) was substituted, as from 1 October 2005, by section 206(1)(c) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Subsection (1)(b)(ii) was amended, as from 1 October 2005, by section 206(1)(d)(i) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting the word “assessable” before the word “income”.

Subsection (1)(b)(ii) was amended, as from 1 October 2005, by section 206(1)(d)(ii) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting the words “and losses”.
Subsection (2) was amended, as from 1 October 2005, by section 206(2)(a) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting the word “assessable” before the word “income”.

Subsection (2), items a and b of the formula, were substituted, as from 1 Oc- tober 2005, by section 206(2)(b) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Subsection (2), paragraph (a) of item c of the formula, was substituted, as from 1 October 2005, by section 206(2)(b) Taxation (Venture Capital and Miscellan- eous Provisions) Act 2004 (2004 No 111).

Subsection (3) was amended, as from 1 October 2005, by section 206(3) Taxa- tion (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the words “amount of assessable income” for the words “amount of income”.
Subsection (4)(b) was amended, as from 1 October 2005, by section 206(4) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting the word “assessable” before the word “income”.
1458 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GC 31 Subpart GD—Non-market transactions Contents Trading stock GD 1 Sale or other disposal of trading stock for inadequate consideration GD 2 Distribution of trading stock to shareholders of company [Repealed] Page 1460 1462 Remuneration GD 3 Payment of excessive salary or wages, or allocation of 1462 excessive share of proﬁts or losses, to relative employed by or in partnership with taxpayer GD 4 Payments to taxpayer’s spouse, civil union partner or de 1464 facto partner GD 5 Excessive remuneration by close company to shareholder, 1465 director, or relative Superannuation and life insurance GD 6 Value of loans provided by superannuation fund deemed 1465 to be income of fund GD 7 Distribution of property to policyholders GD 8 Superannuation schemes GD 10 Leases for inadequate rent Leases Other non-market transactions GD 11 Financial arrangements rules GD 12 Non-market transactions for incurring ﬁlm production expenditure 1466 1467 1471 1472 1472 GD 12A Film production expenditure if payments postponed or 1473 contingent GD 12B Manipulation of arrangements to incur ﬁlm production 1473 expenditure GD 13 Cross-border arrangements between associated persons GD 14 Attributing interests in FIFs GD 15 Disposal of timber, or right to take timber, or standing timber to associated person GD 16 Disposals of ETS units at below market value 1473 1478 1479 1480 1459 Part G s GD 1 Income Tax Act 2004 Reprinted as at 29 August 2011 GD 1 Sale or other disposal of trading stock for inadequate Trading stock (1) consideration Subject to subsections (1B) and (2), where any trading stock is sold or otherwise disposed of without consideration in money or money’s worth or for a consideration that is less than the market price of the trading stock at the date of the sale or other disposition,— (a) the trading stock is, for the purposes of this Act, treated as having been sold at and realised at its market price on the date of the sale or other disposition: the price which
 under this section the trading stock is deemed to have realised is treated as income of the per- son selling or otherwise disposing of the trading stock: the person acquiring the trading stock is deemed to have purchased the trading stock at the price which under this section the trading stock is deemed to have realised.
(b) (c) Exclusion (1B) Subsection (1) does not apply to a share disposed of by a share user to a share supplier, or by a share supplier to a share user, under a share-lending arrangement.
For the purposes of this section,— (a) (2) the creation or grant (other than in favour of a propri- etor or grantor) of a right to take timber must be treated as a sale or other disposition of trading stock of a kind referred to in paragraph (b)(iv) of the deﬁnition of trad- ing stock: a sale or other disposition of land with standing timber on the land, unless the land is subject to a right in favour of the seller to take timber, is deemed to include a sale or other disposition of trading stock of a kind referred to in paragraph (b)(iv) of the deﬁnition of trading stock, except to the extent the timber is— (i) timber comprised in ornamental or incidental trees, as evidenced by a certiﬁcate given under section 44C of the Tax Administration Act 1994; or (b) 1460 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GD 1 (ii) (iii) subject to a forestry right (as deﬁned in section 2 of the Forestry Rights Registration Act 1983) registered under the Land Transfer Act 1952; or subject to a proﬁt à prendre granted before 1 January 1984.
(3) This section, with any necessary modiﬁcations, applies in any case where a share or interest in any trading stock is sold or otherwise disposed of without consideration in money or money’s worth or for a consideration that is less than the mar- ket value of the share or interest at the date of the sale or other disposition.

(3A) Subsection (3) does not apply to land with standing timber that (4) (b) is subject to a right to take standing timber.
This section does not apply in respect of any trading stock that— (a) is transferred to a person under a relationship agree- ment; or is donated, or supplied for consideration worth less than the market value of the trading stock, to a person— (i) for use in a farming, agricultural, or ﬁshing busi- ness that is affected by a self-assessed adverse event; and by a donor or supplier who is not associated with the person.
Compare: 1994 No 164 s GD 1 (ii) The heading to section GD 1 was amended, as from 1 October 2005, by sec- tion 207(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the words “Sale or other disposal” for the word “Sale” with application as from the 2005–06 income year.
Subsection (1) was amended, as from 1 July 2006, by section 112(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting the words “subsections (1B) and (2)” for the expression “subsection (2)”.

Subsection (1B) was inserted, as from 1 July 2006, by section 112(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Subsection (4) was substituted, as from 1 October 2005, by section 207(2) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from the 2005–06 income year.

Subsection (4) was to be amended, as from 26 April 2005, by section 3(1) In- come Tax Amendment Act 2005 (2005 No 11) by substituting the words “re- lationship agreement” for the words “matrimonial agreement”.
However, that 1461 Part G s GD 2 Income Tax Act 2004 Reprinted as at 29 August 2011 amendment appears to have been made redundant by the substitution of subsec- tion (4), see above, with application as from the 2005–06 income year.
Subsection (4)(b) was substituted, as from 1 July 2006, by section 112(3) Taxa- tion (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3) with application for transfers of trading stock from the income year corresponding to the 2005–06 tax year.
GD 2 Distribution of trading stock to shareholders of company [Repealed] Section GD 2 was repealed, as from 1 October 2005, by section 63 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
Remuneration GD 3 Payment of excessive salary or wages, or allocation of excessive share of proﬁts or losses, to relative employed by or in partnership with taxpayer (1) Where— (a) any taxpayer carries on any business or undertaking and employs or engages any relative, or, being a company other than a close company, employs or engages any relative of a director or shareholder of the company, to perform services in connection with that business or undertaking; or any taxpayer carries on business in partnership with any person, whether or not any other person is a member of the partnership, and— (i) any relative of the taxpayer is employed or en- gaged by the partnership to perform services in connection with the business; or (ii) where 1 of the partners is a company, any rela- tive of a director or shareholder of the company is employed or engaged by the partnership to per- form services in connection with the business; or any taxpayer carries on business in partnership with any relative or with any company a director or shareholder of which is a relative of the taxpayer or, being a com- pany, carries on business in partnership with any relative of a director or shareholder of the company, whether or not any other person is a member of the partnership,— (b) (c) 1462 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GD 3 and the Commissioner is of the opinion that the remuneration, salary or wages, share of proﬁts, or other income payable to or for the beneﬁt of that relative or that company, or the share of losses to be borne by that relative or that company, under the contract of service, employment, or engagement or the terms of the partnership exceeds such an amount as is reasonable having regard to the nature and extent of the services rendered, the value of the contributions made by the respective partners by way of services or capital or otherwise, and any other rele- vant matters, the Commissioner may for the purposes of this Act allocate the total proﬁts, income or losses of the busi- ness or
 undertaking, without taking into account any amount payable to that relative or company, between the parties to the contract or the partners or any of them in such shares and pro- portions as the Commissioner considers reasonable, and the amounts so allocated are deemed to be income or losses of per- sons to whom those amounts are so allocated and of no other person.
(3) (2) Where any sum paid or credited by a company, being or pur- porting to be remuneration for services rendered by any person who is a relative of a director or shareholder of the company, is allocated to that company in accordance with subsection (1), the amount so allocated to the company is deemed to be a divi- dend paid by the company to that person and received by that person as a shareholder of the company.
This section applies whether the contract of service or employ- ment or the partnership was entered into before or after the commencement of the tax year.

This section does not apply to a bona ﬁde contract of employ- ment or to a bona ﬁde contract of partnership.
For the purposes of this section, a contract of employment or a contract of partnership is deemed to be bona ﬁde if it complies with the following conditions: (a) (5) (4) the contract is in writing or by deed signed by all the parties to it: no partner and no person employed or engaged under the contract was under the age of 20 years at the date on which the contract was signed: (b) 1463 Part G s GD 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) (d) (e) the contract is binding on the parties to the contract for a term of not less than 3 years and is not capable of being terminated by any of those parties before the expiry of that term except for the reasons speciﬁed in sections 36 and 38 of the Partnership Act 1908: each party to the contract has— (i) real and effective control of the remuneration, salary or wages, share of proﬁts, or other income to which the party is entitled under the contract: real and effective liability for the share of losses to be borne by the party under the contract: the remuneration, salary or wages, share of proﬁts, or other income payable to a relative, or to a company a director or a shareholder of which is a relative, does not constitute in whole or in part a gift for the purposes of the Estate and Gift Duties Act 1968.
(ii) Compare: 1994 No 164 s GD 3 GD 4 Payments to taxpayer’s spouse, civil union partner or de facto partner No deduction may, except as expressly provided in this Act, be made in respect of any payments of any kind made by a taxpayer to his or her spouse, civil union partner or de facto partner: provided that, with the consent of the Commissioner granted before the deduction is claimed by the taxpayer, and subject to section GD 3, a deduction may be made in respect of any payment made by a taxpayer to his or her spouse, civil union partner or de facto partner where the Commissioner is satisﬁed that the payment is for services rendered (not being domestic services or services performed in connection with the home) or is otherwise a bona ﬁde payment, and that the pay- ment was exclusively incurred in the derivation of assessable income of the taxpayer for the tax year.
Compare: 1994 No 164 s GD 4 The heading to section GD 4 was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner” for “spouse”.

The heading to section GD 4 was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner” for “spouse or civil union partner”.
1464 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GD 6 Section GD 4 was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner” for “spouse” in both places it occurs.

Section GD 4 was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner” for “spouse or civil union partner” in both places it occurs.
GD 5 Excessive remuneration by close company to shareholder, director, or relative Where any sum paid or credited by a close company, being or purporting to be remuneration for services rendered by any person who is a shareholder or director of the company or a relative of any such shareholder or director, exceeds such amount as in the opinion of the Commissioner is reasonable, the amount of the excess is denied as a deduction of the com- pany, and is, for the purposes of this Act, deemed to be a divi- dend paid by the company to that person and received by that person as a shareholder of the company: provided that this section does not apply in any case where the Commissioner is satisﬁed— (a) that the person to whom the sum is paid or credited is an adult employed substantially full time in the business of the company and participating in the administration or management of the company; and that the determination by the company of the amount so paid or credited to that person was not inﬂuenced by the fact that the person is a relative of a shareholder or director of the company; and that the person is resident in New Zealand.
(b) (c) Compare: 1994 No 164 s GD 5 Superannuation and life insurance GD 6 Value of loans provided by superannuation fund deemed to be income of fund (1) Where any superannuation fund in any income year has, di- rectly or indirectly and whether by 1 transaction or by a series of transactions, provided to a member of that superannuation fund in that income year any loan that would be a fringe beneﬁt if it were provided by an employer to an employee in respect of that employee’s employment, the value of the loan so pro- 1465 Part G s GD 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) vided is deemed to be income derived by the superannuation fund in that income year.
For the purposes of subsection (1), but subject to subsection (3), the value of the loan is the amount, if any, by which the amount of interest that would have accrued on that loan in respect of that income year had that interest been calculated on the daily balance of that loan at the prescribed rate of interest exceeds the amount of interest that, whenever it accrues, arises in respect of that loan to the member during that income year.
(3) Where the loan is a loan that was made on or before 31 March 1989, and the rate of interest payable on the loan is not subject to review, the prescribed rate of interest is deemed to be— (a) in the case of a loan made before 1 April 1985, the non-concessionary rate of interest for the tax year in which the agreement to make the loan was signed or, where the agreement was not in writing, the making of the loan was agreed to by all the parties to the loan: in the case of a loan made on or after 1 April 1985, the prescribed rate of interest that applied during the quarter in which the agreement to make the loan was signed or, where the agreement was not in writing, the making of the loan was agreed to by all parties to the loan.
(b) Compare: 1994 No 164 s GD 6 GD 7 Distribution of property to policyholders For the purposes of section GD 1, where any life insurer sells or otherwise disposes of any property (other than any ﬁnancial arrangement) in the course of carrying on a business of provid- ing life insurance,— (a) (b) (c) that property is deemed to be trading stock; and the life insurer is deemed to be a company; and holders of policies of life insurance for which the life insurer is the insurer are deemed to be shareholders of the life insurer.
Compare: 1994 No 164 s GD 7 Section GD 7 was amended, as from 1 October 2005, by section 113 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting the expression “section GD 1” for the words “sections GD 1 and GD 2 (which relate to the sale of trading stock for 1466 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GD 8 inadequate consideration, and the distribution of trading stock to shareholders of companies)”.
GD 8 Superannuation schemes (1) For the purposes of the life insurance rules, where any person is the trustee of a superannuation scheme and provides any life insurance to members or beneﬁciaries of that scheme, the pro- vision by that trustee of any beneﬁt to any member or beneﬁ- ciary of that scheme is, subject to subsections (2) to (6), treated as if it were the provision of life insurance.
(2) Notwithstanding subsection (1) or any other provision of the life insurance rules, where any person is the trustee of a super- annuation fund (other than a superannuation fund to which property is transferred under an arrangement approved by the Government Actuary under Part 6 of the Superannuation Schemes Act 1989), in respect of the 1990-91 tax year that person is deemed in respect of that superannuation fund not to carry on the business of life insurance.
(3) Notwithstanding subsection (1) or any other provision of the life insurance rules, where in any tax year any person is the trustee of a superannuation fund which is in respect of that tax year a qualifying superannuation scheme, that person is deemed in respect of that superannuation fund and that tax year not to carry on the business of life insurance.
For the purposes of this section, a superannuation fund is a qualifying superannuation scheme in respect of any tax year where at all times during that tax year— (a) (4) (b) (c) the superannuation fund is registered by the Govern- ment Actuary under the Superannuation Schemes Act 1989; and no trustee of the superannuation fund is a company carrying on the business of providing life insurance to which the Life Insurance Act 1908 applies; and the superannuation fund was— (i) established by an employer or group of employ- ers who are associated persons to provide bene- ﬁts only to persons who are, in respect of any such employer or in respect of any other associ- ated person who is an employer and subsequent 1467 Part G s GD 8 Income Tax Act 2004 Reprinted as at 29 August 2011 to the establishment of the superannuation fund agrees to make contributions to the fund,— (A) (B) employees; or in the case of deferred beneﬁts relating to a previous period of employment, former employees; or in the case of beneﬁts arising in respect of membership of the superannuation fund by those employees or former employees, relatives or dependants of those employees or former employees; or (C) constituted under the National Provident Fund the National Provi- Restructuring Act 1990, dent Fund Act 1950, or the Government Superannuation Fund Act 1956 and provides beneﬁts only to persons who are— (A) (B) employees; or in the case of deferred beneﬁts relating to a previous period of employment, former employees; or in the case of beneﬁts arising in respect of membership of the superannuation fund by those employees or former employees, relatives or dependants of those employees or former employees,— (C) of any employer who agrees to or is required to make contributions to the fund or is accepted as a contributor to the fund or on whose behalf con- tributions are made to the fund; or not being a superannuation fund of the kind referred to in subparagraph (ii), constituted under— (A) the National Provident Fund Restructuring Act 1990 for the
 purpose of providing beneﬁts to persons (and relatives and de- pendants of persons) who, before 1 April 1991, were members of a superannuation fund which satisﬁed the requirements of subparagraph (ii); or (ii) (iii) 1468 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GD 8 (B) (C) the National Provident Fund Act 1950 and which, but for the fact that a small number of the total employers to which the fund relates do not agree to or are not required to make contributions to the fund, would be a superannuation fund which satisﬁed the requirements of subparagraph (ii); or the National Provident Fund Restructuring Amendment Act 1997 for the purpose of providing beneﬁts to persons (and and nominated relatives, dependants, immedi- beneﬁciaries of persons) who, ately prior to becoming members of that superannuation fund, were members of a superannuation fund which satisﬁed the requirements of either subparagraph (ii) or (iii)(B); and (d) the only beneﬁciaries of the superannuation fund are natural persons to whom— (i) any of paragraph (c)(i)(A) to (C) or (ii)(A) to (C) applies; or paragraph (c)(iii) applies— (ii) except to the extent that an employer of employees who are members of the superannuation fund may have a contingent interest in any surplus in the superannuation fund; and (e) except in the case of a superannuation fund to which paragraph (c)(iii) applies, and subject to subsection (5), each employer— (i) is required by the trust deed of the superannu- ation fund or by any Act under which the super- annuation fund is constituted to make; or in that tax year is making; or in that tax year is having made on the employer’s behalf— (ii) (iii) superannuation contributions to the superannuation fund to provide to a signiﬁcant extent the beneﬁts payable by the superannuation fund, not being merely nominal contributions or contributions only to meet the costs of administration and management of investments of the superannuation fund; and 1469 Part G s GD 8
 Income Tax Act 2004 Reprinted as at 29 August 2011 (f) the superannuation fund has not been established or utilised in a manner which has the effect of defeating the intent and application of the life insurance rules,— and where an application in writing has been made for the purposes of this subsection to the Government Actuary by the trustee of that superannuation fund and the Government Actu- ary is satisﬁed that the superannuation fund is in respect of that tax year a superannuation fund to which the preceding para- graphs of this subsection apply.
(5) Where in respect of any tax year a superannuation fund fails to meet the requirements of subsection (4)(e), that fund is never- theless treated as complying with that paragraph if the Gov- ernment Actuary is satisﬁed that each employer would be re- quired by the trust deed of the superannuation fund, or by any Act under which the superannuation fund is constituted, to make superannuation contributions to the superannuation fund to provide to a signiﬁcant extent the beneﬁts payable by the superannuation fund, not being merely nominal contributions or contributions only to meet the costs of administration and management of investments of the superannuation fund, were it not that the assets of the fund exceed the accrued beneﬁts of all members and other beneﬁciaries of the fund.
(6) Where the Government Actuary ceases to be satisﬁed that any superannuation fund is a superannuation fund to which sub- section (4)(a) to (f) apply, that superannuation fund ceases to be a qualifying superannuation scheme from such date as the Government Actuary may specify.
The Government Actuary must, as soon as practicable after determining under subsection (4) or (6)— (a) (7) whether or not a superannuation fund is in respect of any tax year a fund to which subsection (4)(a) to (f) apply; or that a superannuation fund has ceased to be a fund to which those paragraphs apply,— (b) notify the trustee of the superannuation fund accordingly.
(8) Any person who is dissatisﬁed with any such determination of the Government Actuary may object to the determination in accordance with section 23 of the Superannuation Schemes Act 1989, and no right of objection lies under this Act or the 1470 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GD 10 Tax Administration Act 1994 in respect of any such determin- ation.
Compare: 1994 No 164 s GD 8 Leases GD 10 Leases for inadequate rent (1) Where any property owned by any person or by 2 or more persons (whether jointly or in common) or by any partnership is leased to a relative of any of those persons or of any member of the partnership or to a related company or by a company to any person and the rent is less than an adequate rent for that property or the lease makes no provision for the payment of rent,— (a) there is deemed to be payable under the lease a rent that is equal to an adequate rent for the property, and that rent is deemed to be payable by the lessee to the lessor on the days provided in the lease for payment of the rent, or, if no rent is payable under the lease, on each day of the term of the lease on a pro rata basis, and is deemed to be income derived by the lessor on the days on which the rent is deemed to be payable under this paragraph; and the rent deemed to be payable under paragraph (a) is deemed to accrue from day to day during the period in respect of which it is payable, and is apportionable accordingly.
(b) (2) (3) (4) This section applies with respect to any leased property only if and to the extent that it is used by the lessee in the derivation of assessable income or exempt income.

This section applies whether the lease was granted before or after the commencement of the tax year.
In this section,— adequate rent, in relation to any property, means the amount of rent that the Commissioner determines to be adequate for that property during the period in respect of which the deter- mination is made 1471 Part G s GD 11 Income Tax Act 2004 Reprinted as at 29 August 2011 lease means a tenancy of any duration, whether in writing or otherwise; and includes a sublease; and also includes a bail- ment; and lessor and lessee have corresponding meanings related company means a company that is under the control of the lessor or any relative or relatives of the lessor or any 1 or more of them, or, where there are several lessors or the lessor is a partnership, under the control of any of the lessors or partners or any relative or relatives of any of the lessors or partners rent includes any premium or other consideration for the lease.
Compare: 1994 No 164 s GD 10 Other non-market transactions GD 11 Financial arrangements rules If the Commissioner is satisﬁed that the parties to a ﬁnancial arrangement were, at the time the ﬁnancial arrangement is en- tered into, acquired, varied, sold, or transferred, dealing with each other in a way that defeats the intention of the ﬁnancial arrangements rules, the Commissioner may deem the consid- eration to be that which independent parties dealing at arm’s length would give.
Compare: 1994 No 164 s GD 11 GD 12 Non-market transactions for incurring ﬁlm production expenditure (1) A person must reduce the deduction allowed to them under section DS 2 in accordance with subsection (2), if— (a) (b) the Commissioner considers that the person (person A) and a person who supplied goods or provided services to person A in relation to the ﬁlm (person B) were not dealing with each other at arm’s length in relation to the goods or services; and person A incurred more ﬁlm production expenditure than person A would have incurred if person A and per- son B had been dealing with each other at arm’s length.
If subsection (1) applies, the deduction must be reduced to an amount equal to the ﬁlm production expenditure that the Commissioner thinks person A would have incurred if person (2) 1472 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GD 13 A and person B had been dealing with each other at arm’s length.
Compare: 1994 No 164 s GD 12(1), (1A) GD 12A Film production expenditure if payments postponed or contingent For the purposes of sections DS 2, EJ 7, and EJ 8, a person is treated as incurring ﬁlm production expenditure in relation to goods or services only at the time of payment for those goods or services if— (a) payment for the goods or services has been deferred by agreement between the supplier of the goods or services and any other person, and the Commissioner thinks that the period between the time that the goods or services are supplied and the time of payment for them is exces- sive; or liability for the payment is contingent.
(b) Compare: 1994 No 164 s EO 4(12) GD 12B Manipulation of arrangements to incur ﬁlm production expenditure If the Commissioner considers that 2 persons have made ar- rangements so that section DS 2, EJ 7, or EJ 8 applies more favourably in relation to a person in an income year than it would have applied without those arrangements,— (a) the deduction that a person is allowed under section DS 2 must be reduced to the amount that the Commissioner considers would have been allowed if the arrangements had not been made: the deduction allocated under section EJ 7 or EJ 8 must be allocated to the income year to which the Commis- sioner considers it would have been allocated if the ar- rangements had not been made.
(b) Compare: 1994 No 164 s GD 12(2) GD 13 Cross-border arrangements between associated persons Subject always to its express provisions, the purpose of this (1) section is to require a taxpayer, who enters into a cross-bor- der arrangement with an associated person for the acquisition 1473 Part G s GD 13 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) or supply of goods, services, or anything else at a consider- ation which reduces the taxpayer’s net income, to substitute an arm’s length consideration when calculating the taxpayer’s net income.
This section only applies to require the substitution of an arm’s length amount of consideration in the case of an ar- rangement— (a) that involves the supply and acquisition of goods, ser- vices, money, other intangible property, or anything else; and (b) where the supplier and acquirer are associated persons; (c) and where the supplier and acquirer are— (i) 2 persons each not resident in New Zealand (un- less each enters into the arrangement for the pur- poses of a business carried on by the person in New Zealand through a ﬁxed establishment in New Zealand); or a person resident in New Zealand and a person not resident in New Zealand unless— (A) the non-resident is entering into the ar- rangement for the purposes of a business carried on by the non-resident in New Zealand through a ﬁxed establishment in New Zealand; and the New Zealand resident has not entered into the arrangement for the purposes of a business carried on by the New Zealand resident outside New Zealand; or 2 persons each resident in New Zealand if either or both enter into the arrangement for the pur- poses of a business carried on by the person out- side New Zealand.
(B) (ii) (iii) If the amount of consideration payable by a taxpayer under such an arrangement exceeds the arm’s length amount, then for all purposes of the application of this Act in relation to the income tax liability for any tax year of the taxpayer, an amount equal to the arm’s length amount is deemed to be the amount payable by the taxpayer in substitution for the actual amount.
(3) 1474 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GD 13 (4) (5) (6) (7) (8) If the amount of consideration receivable by a taxpayer under such an arrangement is less than the arm’s length amount, an amount equal to the arm’s length amount is deemed to be the amount receivable by the taxpayer in substitution for the ac- tual amount for all purposes of the application of this Act in relation to— (a) the income tax liability for any tax year of the taxpayer; or the obligation of the taxpayer under subpart NH to make a withholding or deduction from the amount; or the obligation of any person other than the taxpayer to make a withholding or deduction under Part N from the amount.
(b) (c) Subsection (4) does not apply if the taxpayer is neither resi- dent in New Zealand nor entering into the arrangement for the purposes of a business carried on in New Zealand through a ﬁxed establishment in New Zealand, and— (a) the amount is a deduction of the other party (or, in the case of an interest-free loan, would be a deduction but for the application of subpart FG if an arm’s length amount of interest were substituted) and is interest, roy- alties, or an insurance premium; or the amount is a dividend receivable on a ﬁxed rate share.
(b) For the purposes of this section, the arm’s length amount of consideration must be determined by applying whichever 1 (or combination) of the methods listed in subsection (7) pro- duces the most reliable measure of the amount completely in- dependent parties would have agreed upon after real and fully adequate bargaining.
The arm’s length amount of consideration must be calculated under any 1 (or a combination) of— (a) (b) (c) (d) (e) The choice of method or methods for calculation and the re- sultant application of the method (or methods) must be made having regard to— the comparable uncontrolled price method; or the resale price method; or the cost plus method; or the proﬁt split method; or comparable proﬁts methods.
1475 Part G s GD 13 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) (c) (d) the degree of comparability between the uncontrolled transactions used for comparison and the controlled transactions of the taxpayer; and the completeness and accuracy of the data relied on; and the reliability of all assumptions; and the sensitivity of any results to possible deﬁciencies in the data and assumptions.
The arm’s length amount of consideration is determined by the taxpayer under subsections (6) to (8), and the amount so determined is the arm’s length amount for the purposes of sub- sections (3), (4), and (10), unless— (a) the Commissioner can demonstrate another amount to be a more reliable measure of the arm’s length amount; or the taxpayer has not co-operated with the Commis- sioner in the Commissioner’s administration of this section in relation to that taxpayer and the non-cooper- ation has materially affected the Commissioner in that administration,— (b) in either of which events the Commissioner determines the amount under subsections (6) to (8) for the purposes of sub- sections (3), (4), and (10).
If— (a) the amount of consideration payable by a taxpayer for an acquisition is less than an arm’s length amount or the amount of consideration receivable by the taxpayer for a supply exceeds an arm’s length amount (that acquisi- tion or supply being referred to in this subsection as the compensating adjustment arrangement); and in the same tax year or in the immediately preceding or succeeding tax year, either— (i) an amount of consideration payable by the tax- payer is adjusted down under subsection (3); or an amount of consideration receivable by the tax- payer is adjusted up under subsection (4); and (ii) the adjustment down (or up) is in respect of an arrange- ment for acquisition (or supply) with the same other party and— (b) (c) (9) (10) 1476 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GD 13 (i) involving goods, services, money, other intan- gible property, or anything else of the same type as that supplied and acquired in the compensat- ing adjustment arrangement; or (ii) where the amount of consideration actually payable (or receivable) is set having regard to the amount of consideration actually payable (or receivable) under the compensating adjustment arrangement,— (11) then for all purposes of the application of this Act in relation to the income tax liability for any tax year of the taxpayer (or, if the amount is receivable by the taxpayer, to the obligation of the taxpayer or any other person to make a withholding or deduction from the amount under Part N), an amount equal to the arm’s length amount is deemed to be the amount payable (or receivable) by the taxpayer under the compensation adjust- ment arrangement in substitution for the actual amount.
If— (a) an arm’s length amount of consideration is substituted under subsection (3) or (4) in respect of an arrangement entered into by a taxpayer; and the other party to the arrangement (or, if the other party is a controlled foreign company, any person with an in- come interest in the controlled foreign company) ap- plies to the Commissioner in writing within 6 months after an assessment is made in respect of the taxpayer which reﬂects the substitution; and the Commissioner considers it is fair and reasonable to do so, having regard to any adjustment made under a double tax agreement or any other matter, and has notiﬁed the other party,— (b) (c) then the substitution so applies for all purposes of the applica- tion of this Act in relation to the other party— (d) excluding the determination of whether and the extent to which the other party has derived or been paid a divi- dend; and including, in any case where the other party is a con- the calculation of branch trolled foreign company, equivalent income or branch equivalent loss in respect (e) 1477 Part G s GD 14 Income Tax Act 2004 Reprinted as at 29 August 2011 of the other party and the resultant calculation of the attributed CFC income or attributed CFC loss or at- tributed CFC net loss of any person.
(12) Except to the extent that subsection (11) applies, an adjustment under any of subsections (3), (4), and (10) has no effect on any obligation of the taxpayer to make a withholding or deduction in respect of the amount under Part N, other than under subpart NH.
In this section,— acquisition — (a) (13) subject to paragraph (b), includes obtaining the avail- ability of any thing; and does not include the mere receipt, or retention, by a company of consideration for issue of a share (unless the share is a ﬁxed rate share) (b) amount includes a nil amount insurance premium means a premium treated as being de- rived from New Zealand under section FC 13 supply — (a) subject to paragraph (b), includes making any thing available; and does not include the mere payment, and subsequent con- tinuing making available, by a person to a company of consideration for issue of a share (unless the share is a ﬁxed rate share).
(b) Compare: 1994 No 164 s GD 13 GD 14 Attributing interests in FIFs Subsection (2) applies if— (1) (a) (b) a person disposes of an attributing interest in a FIF; and they calculate the FIF income or loss from the inter- est for the period ending with the disposal using the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method; and they received no consideration for the disposal or con- sideration that was below the market value of the inter- est at the time.
(c) 1478 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GD 15 (2) (3) The person is treated as having disposed of the interest for an amount equal to its market value at the time.
Subsection (4) applies if— (a) (b) a person acquires an attributing interest in a FIF; and they calculate the FIF income or loss from the interest for the period after the acquisition using the compara- tive value method, the deemed rate of return method, the fair dividend rate method, or the cost method; and the consideration (if any) is not equal to the market value of the interest at the time.

(c) (4) The person is treated as having acquired the interest for its market value at the time.
Compare: 1994 No 164 s CG 23(5), (6) Subsection (1)(b) was substituted, as from 1 April 2007, by section 93(1) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

See section 93(3) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.

Subsection (3)(b) was substituted, as from 1 April 2007, by section 93(2) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
See section 93(3) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.

Subsection (3)(c) was substituted, as from 1 October 2005, by section 62 Taxa- tion (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
GD 15 Disposal of timber, or right to take timber, or standing (1) (2) (3) timber to associated person This section applies when— (a) a person (person A) disposes of timber, or a right to take timber, or standing timber, to an associated person; and as a result, person A has an amount of income under section CB 22 or CB 23.

(b) The deduction that person A is allowed for the timber, or the right to take timber, or the standing timber must not be more than the amount of the income.
The deduction that the associated person is allowed for the cost of acquiring the timber is calculated on the basis that the associated person acquired the timber for the total of— (a) the cost to the associated person of acquiring the timber; and 1479 Part G s GD 16 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) the amount (if any) that person A is denied a deduction for by subsection (2).
Compare: 1994 No 164 s DL 1(1) GD 16 Disposals of ETS units at below market value (1) (2) When this section applies This section applies when— (a) (b) (c) a person (the transferor) disposes of an ETS unit to another person (the transferee): the disposal is not a surrender or conversion under the Climate Change Response Act 2002: the disposal is for— (i) (ii) no consideration; or an amount of consideration that is less than the market value of the ETS unit at the time of dis- posal.
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 equal to the market value at the time.

Deﬁned in this Act: amount, , convert, ETS unit, surrender Section GD 16: added, on 26 September 2008, by section 65 of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).
Subpart GE—Non-market transactions: speciﬁc Contents GE 1 New Zealand Raspberry Marketing Council Page 1480 GE 1 New Zealand Raspberry Marketing Council (1) This section applies upon the making of regulations to dissolve the New Zealand Raspberry Marketing Council, the Raspberry Marketing Export Authority, and the District Raspberry Mar- keting Committees, established under the Raspberry Market- ing Regulations 1979.
1480 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GE 1 (2) In this section, council, current grower, District Commit- tee, and grower have the meanings set out in the Raspberry Marketing Authorities (Dissolution) Regulations 1999.

(3) When the Raspberry Marketing Authorities (Dissolution) Regulations 1999 are made, the making and coming into force does not give rise to— (a) assessable income for growers, current growers, or the District Committees under section BD 1; or a dividend.
(b) (4) When the Cold Storage Nelson Limited shares owned by the Nelson Raspberry Marketing Committee vest in Rubus Invest- ments Nelson Limited, the vesting— (a) is treated as the consideration received by Rubus In- vestments Nelson Limited for the issue of its shares to the current growers of the Nelson Raspberry Mar- keting Committee in accordance with the formula in the Raspberry Marketing Authorities (Dissolution) Regulations 1999; and does not give rise to— (i) assessable income for Rubus Investments Nelson Limited under section BD 1; or a dividend.
(ii) (b) (5) The issue of shares to the current growers of the Nelson Rasp- berry Marketing Committee by Rubus Investments Nelson Limited in accordance with the formula in the Raspberry Marketing Authorities (Dissolution) Regulations 1999 is treated as a distribution having been made by the Nelson Raspberry Marketing Committee itself on dissolution.
(6) A distribution made by the council to the District Committees on dissolution is treated as a distribution made by a company to its shareholders on dissolution.

(7) A distribution made by any 1 of the committees to a grower or a current grower on dissolution is treated as a distribution made by a company to its shareholders on dissolution.
Compare: 1994 No 164 s GE 1 1481 Income Tax Act 2004 Reprinted as at 29 August 2011 Subpart GZ—Terminating provisions Contents GZ 1 Pre-1974 agreements purporting to alter incidence of tax Page 1482 GZ 1 Pre-1974 agreements purporting to alter incidence of tax Where any arrangement has been made or entered into before 1 October 1974 and the Commissioner is satisﬁed, in respect of that arrangement, or in respect of a part of that arrangement, that the terms or conditions of that arrangement or of that part (being legally binding terms or conditions which were agreed upon in writing before that date) prevent the discontinuance of that arrangement or of that part,— (a) (b) sections BG 1 and GB 1 do not apply with respect to that arrangement, or with respect to that part, so long as that arrangement or that part is so prevented from be- ing discontinued and is continued strictly in accordance with the requirements of the terms or conditions of the arrangement or part of the arrangement; and so long as sections BG 1 and GB 1 are not applied with respect to that arrangement, or with respect to that part, in accordance with paragraph (a), the section for which section 108 of the Land and Income Tax Act 1954 was substituted by section 9 of the Land and Income Tax Amendment Act (No 2) 1974 is, notwithstanding that substitution, deemed to remain in full force and effect in relation to that arrangement or in relation to that part of the arrangement.
Compare: 1994 No 164 s GZ 1 Part H Treatment of net income of certain entities Contents Page Subpart HB—Consolidated groups of companies HB 1 Returns, assessments, and liability of consolidated group 1488 1482 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GZ 1 HB 2 Taxable income to be calculated generally as if group 1490 were single company Subpart HC—Special partnerships HC 1 Special partnerships [Repealed] 1493 HD 1 Assessment of partners, co-trustees, and joint venturers 1494 Subpart HD—Partnerships Subpart HE—Unit trusts HE 1 Unit trusts HE 2 Group investment funds Subpart HF—Mutual associations HF 1 Proﬁts of mutual associations in respect of transactions with members Subpart HG—Qualifying companies HG 1 Qualifying company regime HG 2 Determination of effective interest in company HG 3 Director elections, and revocation of director elections HG 4 Shareholder elections HG 5 Revocation of shareholder elections HG 6 Period of grace for new elections following death, revocation of shareholder election, or issue of new shares HG 7 Date on which non-complying company ceases to be qualifying company, and Commissioner’s power to defer HG 8 Liability of electing shareholder for income tax of company HG 9 Taxation of shareholders in qualifying companies HG 10 Taxation of qualifying company HG 11 Taxation on election to become qualifying company HG 12 Payment of qualifying company election tax HG 13 Dividends from qualifying company HG 14 Loss attributing qualifying companies HG 14A Minority shareholders in loss attributing qualifying companies HG 15 Revocation of loss attribution elections HG 16 Net losses of loss attributing qualifying company to be attributed to shareholders HG 17 Attributed CFC losses and FIF losses HG 18 Company that ceases to be loss attributing qualifying company also ceases to be qualifying company 1494 1495 1498 1502 1503 1504 1505 1508 1509 1511 1513 1514 1515 1515 1519 1519 1525 1527 1527 1527 1529 1531 1483 Income Tax Act 2004 Reprinted as at 29 August 2011 Subpart HH—Trusts
 Interpretation HH 1 HH 1A Treatment of settlements on trust HH 2 Trusts settled by persons before becoming resident Income of beneﬁciaries HH 3 HH 3A Beneﬁciary income of minors HH 3B Exemption for beneﬁciary income $1,000 or less HH 3C Source of beneﬁciary income HH 3D Treatment of various settlements HH 3E Exceptions HH 3F Deﬁnitions of guardian, minor, and relative HH 4 Trustee income HH 5 Existing trusts becoming subject to tax HH 6 Distributions from trusts HH 7 Commissioner may determine amount of trustee income HH 8 Income received by trustee after death of deceased person HI 1 HI 2 HI 3 HI 4 HI 5 HI 6 HI 7 HI 8 Subpart HI—Maori authorities Application of Act to Maori authority Eligibility to be Maori authority Election to become Maori authority Distributions by Maori authority Amount distributed to member by Maori authority Proportional allocation required if distribution includes amount other than taxable Maori authority distribution Distribution includes Maori authority credit attached and RWT deducted Treatment of companies and trusts that elect to apply this subpart HI 9 Market value calculations HJ 1 Government Superannuation Fund Subpart HJ—Superannuation Subpart HK—Agency Agents generally HK 1 Agent to make returns and be assessed as principal HK 2 Rate and amount of tax payable by agent HK 3 Liability of principal not affected HK 4 Agent may recover tax from principal HK 5 Agent may retain from money of principal amount required for tax HK 6 Assessment deemed authority for payment of tax by agent 1565 1484 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GZ 1 HK 7 Agents to be personally liable for payment of tax HK 8 Relation of principal and agent arising in effect Special cases of agency HK 9 Guardian of person under disability to be agent HK 10 Liability of mortgagee in possession HK 11
 Liability for tax payable by company left with insufﬁcient assets HK 12 Company deemed agent of debenture holders HK 13 Modiﬁcation of agency provisions in respect of income from company debentures Agents of absentees and non-residents HK 16 Liability of agent of absentee principal for returns and tax HK 17 Partner of absentee deemed agent HK 18 Master of ship deemed agent of absentee owner HK 19 Tenant, mortgagor, or other debtor to be agent of absentee landlord, mortgagee, or other creditor HK 20 Person having disposal of income deemed agent HK 21 Company to be agent of absentee shareholders HK 22 Trustee of group investment fund to be agent of absentee investors HK 23 Banking company to be agent of absentee depositors HK 24 Liability as agent of employer of non-resident taxpayer and employer’s agent HK 25 Non-resident trader to be agent of employees in New Zealand HK 26 Agents in New Zealand of principals resident abroad Subpart HL—Portfolio investment entities Introductory provisions Intended effect on portfolio tax rate entities and investors Scheme of subpart HL 1 HL 2 Eligibility requirements: portfolio investment entities and foreign investment vehicles HL 3 Eligibility requirements for entities HL 4 Effect of failure to meet eligibility requirements for entities Foreign investment vehicles HL 5 HL 5B Meaning of investor and portfolio investor class HL 5C Income interest requirement HL 6 Investor membership requirement 1566 1566 1566 1567 1567 1571 1571 1572 1573 1573 1573 1574 1574 1574 1574 1575 1576 1576 1579 1580 1584 1586 1588 1589 1590 1591 1485 Income Tax Act 2004 Reprinted as at 29 August 2011 HL 7 HL 8 Investor return adjustment requirement: portfolio tax rate entity Imputation credit distribution requirement: portfolio listed company Investor interest size requirement HL 9 HL 10 Further eligibility requirements relating to investments 1594 1596 1596 1600 Becoming and ceasing to be portfolio investment entity HL 11 Election to become portfolio
 investment entity and 1604 cancellation of election HL 11B Unlisted company may choose to become portfolio listed 1605 company HL 12 Becoming portfolio investment entity HL 13 Tax consequences from transition HL 14 Ceasing to be portfolio investment entity 1606 1609 1610 Periods relevant to calculation of portfolio entity tax liability HL 15 Portfolio allocation period and portfolio calculation 1611 period Allocation of income in some cases HL 16 Treatment of income from interest if no investor entitled 1612 or investor has conditional entitlement HL 17 Certain new investors treated as part of existing portfolio 1614 investor class Calculating portfolio entity tax liability HL 18 Portfolio class net income and portfolio class net loss for 1615 portfolio allocation period HL 19 Portfolio class taxable income and portfolio class taxable 1616 loss for portfolio allocation period HL 19B Treatment of certain provisions made by portfolio tax 1617 rate entity HL 20 Portfolio entity tax liability and rebates of portfolio tax 1618 rate entity for period Payment by portfolio tax rate entity of tax for tax year HL 21 Payments of tax by portfolio tax rate entity making no 1622 election HL 22 Payments of tax by portfolio tax rate entity choosing to 1623 pay provisional tax HL 23 Payments of tax by portfolio tax rate entity choosing to 1624 make payments when investor leaves 1486 Reprinted as at 29 August 2011 Income Tax Act 2004 Part G s GZ 1 HL 23B Optional payments of tax by portfolio tax rate entities 1626 Results for investors HL 24 Portfolio investor allocated income and portfolio investor 1627 allocated loss HL 25 Treatment of portfolio investor allocated loss for 1630 zero-rated portfolio investors and investors with portfolio investor exit period Rebate for entity HL 26 Treatment of portfolio investor allocated loss for other 1631 investors Treatment of credits received by entity HL 27 Credits received by portfolio tax rate entity or portfolio 1632 investor proxy Treatment of
 losses for entity HL 28 Portfolio entity formation loss HL 29 Portfolio class taxable income and portfolio class taxable loss for tax year HL 30 Treatment of portfolio class taxable loss and portfolio class land loss for tax year HL 31 Portfolio investor proxies Portfolio investor proxies Subpart HZ—Terminating provisions HZ 1 Trust distributions HZ 2 Trusts that may become qualifying trusts Subpart HB—Consolidated groups of companies Contents HB 1 Returns, assessments, and liability of consolidated group HB 2 Taxable income to be calculated generally as if group were single company 1638 1641 1642 1643 1645 1646 Page 1488 1490 1487 Part H s HB 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) HB 1 Returns, assessments, and liability of consolidated group (1) Where and to the extent that any 1 or more companies are in any income year members of the same consolidated group,— the nominated company must make a single return of in- (a) come of those companies for that income year and those companies must not make separate returns of income for that income year, except to the extent that any such company is not a member of the group for part of the income year: that single return of income must, if the Commissioner so requires, include such form of accounts detailing the separate affairs of each of those companies as the Com- missioner may specify: for the purposes of determining the availability under this Act of credits for set-off against the income tax li- ability of the consolidated group in respect of that in- come year, the group is treated as if it were a single company: a single assessment must be made by the nominated company for those companies for that income year as if the companies were a single taxpayer, and a separate assessment for each company for that income year must not be made except to the extent that the company is not a member of the group for part of the income year,— (d) (c) and each of those companies is, subject to this section, jointly
 and severally liable for the amount of income tax assessed in respect of that consolidated group and that income year, and that joint and several liability is in substitution for any income tax liability of those companies under this Act individually in respect of taxable income for that income year (to the extent that the taxable income relates to a period when the company is a member of the consolidated group).
Subsection (1) does not apply to impose on a company that has ceased to be a member of a consolidated group joint and sev- eral liability for any amount of income tax assessed in respect of the consolidated group and any income year to the extent that— (a) the assessment is made after the later of— (2) 1488 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HB 1 (i) (ii) the date on which the company is treated for the purposes of this Act as having ceased to be a member of the group; and the date on which occurred the event that caused the company to cease to be treated as a member of the group; and the amount of income tax so assessed exceeds the amount (if any) assessed before that date in respect of the consolidated group and the income year; and the Commissioner is satisﬁed that the application of this subsection will not signiﬁcantly prejudice any recovery or likely recovery of any amount of income tax for the income year, and notiﬁes the company and the consoli- dated group accordingly.
(b) (c) (3) (4) The nominated company of a consolidated group may, at any time before making an assessment of income tax in respect of the consolidated group and any income year, apply to the Com- missioner requesting that only 1 or more speciﬁed companies in the consolidated group be treated as jointly and severally li- able for the income tax liability of that group for that income year.
The Commissioner must give written approval of any applica- tion made under subsection (3) where satisﬁed that recovery or likely recovery of income tax assessed for that income year will not be signiﬁcantly prejudiced by limiting the joint and several liability for that tax to the company or companies spe- ciﬁed in the application.
(5) Where the Commissioner approves an application under sub- section (4),— (a) subsection (1) does not apply to impose on any com- pany other than the companies speciﬁed in the Com- missioner’s written approval joint and several liability for income tax assessed in respect of the consolidated group for the income year to which the approval relates, except to the extent that— (i) the speciﬁed companies default in meeting their liability for that income tax assessed; and the Commissioner determines that the income tax liability of the consolidated group that is at- (ii) 1489 Part H s HB 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) tributable to the taxable income of the other com- pany is to be recovered from the other company: sections MB 29 and MB 30 do not apply to impose on any company other than the companies speciﬁed in the Commissioner’s written approval joint and several liability for the amount of provisional tax payable by the consolidated group for the income year to which the approval relates.
Compare: 1994 No 164 s HB 1 Section HB 1(5)(b): amended, on 1 October 2007, by section 114(1) of the Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).
HB 2 Taxable income to be calculated generally as if group were single company (1) Notwithstanding any other section of this Act, for the purposes of ensuring that a consolidated group is generally liable to in- come tax as if it were a single company, when calculating the taxable income for all or part of any income year of a company which is for that income year or part income year a member of the consolidated group (that year or part year being in this subsection referred to as the relevant period and the relevant period for the purposes of this section being treated as if it were an income year) to be included in the group return of income under section HB 1,— (a) an amount derived in the relevant period by the com- pany that— (i) is derived from a transaction or other arrange- ment with any other company that is a member of the same consolidated group; and (ii) would not be income if the company and the other company were 1 company,— is not income except to the extent that— (iii) it arises by virtue of a disposition of trading stock of the company; or the amount arises under section EW 31 from the disposition of a ﬁnancial arrangement to which the ﬁnancial arrangements rules apply; or the amount arises under section EW 31 from the remission of a ﬁnancial arrangement to which the (iv) (v) 1490 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HB 2 (vi) ﬁnancial arrangements rules apply, if the parties to the ﬁnancial arrangement were not members of the consolidated group for the whole term of the arrangement; or the amount is a dividend under section CD 3(1) that arises between members of a consolidated group due to the release of the obligation to re- pay an amount lent before the time the members are treated as being members of the consolidated group under section FD 4; and (b) (c) any expenditure or loss incurred in the relevant period by the company— (i) that is incurred by virtue of a payment or dispos- ition to, or other transaction or arrangement with, any other company that is a member of
 the con- solidated group; and for which the company would be denied a deduc- tion if the company and the other company were 1 company,— is denied as a deduction except— to the extent that it arises by virtue of an acquisi- tion of trading stock by the company; or for the purposes of and in accordance with sec- tion FD 10; and (ii) (iii) (iv) where any expenditure or loss or amount of depreciation loss incurred in the relevant period by the company (not being expenditure or loss that is denied as a deduction by virtue of paragraph (b))— (i) would be denied as a deduction but for this para- graph; and (ii) would be allowed as a deduction if the consoli- dated group were 1 company by virtue of any connection between the incurring of that expend- iture or loss or amount of depreciation loss and the deriving of assessable income or the carrying on of any business by any other member of the consolidated group,— the expenditure or loss or amount of depreciation loss is allowed as a de- duction for the relevant period; and 1491 Part H s HB 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) where any expenditure or loss or amount of depreciation loss incurred in the relevant period by the company (not being expenditure or loss that is denied as a deduction by virtue of paragraph (b))— (i) would be allowed as a deduction but for this para- graph; and (ii) would be denied as a deduction if the consoli- dated group were 1 company,— the expenditure or loss or amount of depreciation loss is denied as a deduction for the relevant period, except to the extent that it is interest in respect of money borrowed from a person that is not a member of the consolidated group; and— is allowed as a deduction under section DB 7 or DB 8; or (iii) (iv) would be allowed as a deduction under section DB 7 or DB 8 if the company were deemed for the purposes of that section to have used the money borrowed (to the extent of the actual acquisition cost) to acquire certain shares in fact acquired by
 another member of the consolidated group using (having regard to interposed intragroup borrow- ings) the money borrowed; and where any amount derived in the relevant period by the company— (i) would not be income but for this paragraph; and (ii) would be income of the consolidated group if it were 1 company, by virtue of any purpose for which any property was acquired or any connec- tion between that amount and the carrying on of a business by any other member of the consoli- dated group or otherwise,— the amount is treated as income for the relevant period; and in applying any provision of this Act (such as section EW 17) whose application is dependent upon whether a speciﬁed limit is or is not exceeded, the consolidated group is treated as if it were a single company.
(e) (f) (2) Where— 1492 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HC 1 (a) (b) (c) any company which is a member of a consolidated group of companies incurs any expenditure or loss; and that expenditure or loss would, if the group of compan- ies were a single company, be taken into account under this Act in determining the cost of any property; and but for the application of this subsection, that expend- iture or loss would not be taken into account in de- termining under this Act the cost of any property of a member of the consolidated group,— that expenditure or loss is taken into account in determining the cost of any property of members of the consolidated group.
Compare: 1994 No 164 s HB 2 Subsection (1)(c)(i) was amended, as from 1 April 2005, by section 94(1) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “; and” for “; or” with application as from the 2005–06 income year.

Subsection (1)(d)(i) was amended, as from 1 April 2005, by section 94(2) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “; and” for “; or” with application as from the 2005–06 income year.
Subsection (1)(e)(i) was amended, as from 1 April 2005, by section 94(3) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “; and” for “; or” with application as from the 2005–06 income year.

Subpart HC—Special partnerships Subpart HC (section HC 1) was repealed, as from 1 October 2005, by section 208 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Contents HC 1 Special partnerships [Repealed] Page 1493 HC 1 Special partnerships [Repealed] Section HC 1 was repealed, as from 1 October 2005, by section 208 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
1493 Income Tax Act 2004 Reprinted as at 29 August 2011 Subpart HD—Partnerships Contents HD 1 Assessment of partners, co-trustees, and joint venturers Page 1494 HD 1 Assessment of partners, co-trustees, and joint venturers (1) Where amounts are derived or incurred by 2 or more persons jointly, whether as partners, co-trustees, or otherwise,— (a) (b) in the case of co-trustees, they include such amounts that would be income or deductions if the co-trustees were a single taxpayer resident in New Zealand in a joint calculation of taxable income and are jointly and severally liable for the resulting income tax liability: in the case of partners there is no joint assessment, but each partner must, in calculating their taxable income, take into account their share of the income that they jointly derive from the ﬁrm: in any case other than that of co-trustees or partners, each person jointly deriving or incurring such amounts must, in calculating their taxable income, take into ac- count their share of the income that they jointly derive.
This section does not apply with respect to the income derived by, and deductions allowed to, an airport operator from activ- ities that, in relation to that airport operator, are activities as an airport operator.
Compare: 1994 No 164 s HD 1 (c) (2) Subpart HE—Unit trusts Contents HE 1 Unit trusts HE 2 Group investment funds HE 1 Unit trusts For the purposes of this Act,— 1494 Page 1494 1495 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HE 2 (e) (f) (g) income derived by the trustees of a unit trust is deemed to be income derived by that unit trust; and the trustees of a unit trust are liable to income tax as agent of the unit trust; and sums periodically appropriated or paid for manager’s and trustee’s remuneration out of income derived by the trustees of a unit trust are treated as expenditure incurred in the production of that income.
Compare: 1994 No 164 s HE 1 HE 2 Group investment funds (1) The trustee of a group investment fund for any income year must make separate returns of— (a) (b) category A income of the group investment fund; and category B income of the group investment fund.
(1A) Any income derived by the trustee of a group investment fund from the investments and funds of the group investment fund is, to the extent that— (a) the income is category A income of the group invest- ment fund, deemed to be income to which the trustee of the group investment fund is beneﬁcially entitled: the income is— (i) income derived from the investments and funds of any designated group investment fund; or category B income of the group investment fund,— (ii) (b) (2) deemed to be income derived by a trustee and the trustee of the group investment fund must make returns and be liable accordingly in accordance with sections CX 34, DV 1 to DV 4, GC 14, HH 1 to HH 6, and HZ 2.
For the purposes of this section, the current value of the invest- ments and funds referred to in paragraphs (a) and (b) of the deﬁnition of protected amount in subsection (3) is the cur- rent value attributable to the investments and funds referred to in that paragraph (a) or, as the case may be, that paragraph (b) at any time in relation to which the protected amount is ascertained, as if the investments and funds referred to in that paragraph (a) or, as the case may be, that paragraph (b) com- 1495 Part H s HE 2 Income Tax Act 2004 Reprinted as at 29 August 2011 prised all of the investments and funds in the group investment fund at that time.
In this section,— designated sources, in relation to a group investment fund, means— (a) any trust, other than the trust under which the group investment fund is established, being a trust— (i) that is created— (A) (B) (C) (D) (E) (F) by will or codicil or by order of court vary- ing or modifying the provisions of any will or codicil; or on any intestacy (including any partial in- testacy), or by order of court varying or modifying, in relation to any estate, the ap- plication of the law relating to the distribu- tion of intestate estates; or by order of court; or by any enactment; or the purpose of administering any for funds, being compensation or other money arising from the death of, or injury to, any person; or in order to vary the terms of a will or codi- cil or, in relation to any estate, to vary the application of the law relating to the dis- tribution of intestate estates, in either case for the sole purpose of effecting a settle- ment out of court of an application made or proposed to be made under the Family Protection Act 1955 or a claim or proposed claim to be made under the Law Reform (Testamentary Promises) Act 1949, where the Commissioner is of the opinion that the terms are substantially the same as those likely to have been ordered by the court; or (ii) that is not carried on for the private pecuniary proﬁt of any individual and the funds of which are, in the opinion of the Commissioner, applied, (3) 1496 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HE 2 wholly or principally, for benevolent, philan- thropic, cultural, or public purposes within New Zealand,— where the trustee of the group investment fund is a trustee of the trust ﬁrst referred to in this paragraph (b) protected amount, in relation to a group investment fund and to any time, means the aggregate of— (a) the current value of the investments and funds from des- ignated sources invested as at that time in the group in- vestment fund; and the current value of the investments and funds that were invested in the group
 investment fund as at 22 June 1983 as if those investments and funds had continued to be so invested up to the time ﬁrst mentioned in this deﬁnition other than the part of those investments and funds that on that date were attributable to amounts from desig- nated sources,— and for the purposes of this deﬁnition the investments and funds that were invested in the group investment fund as at 22 June 1983 are deemed to include— (c) any money deposited between 15 June and 23 June 1983 with the trustee of the group investment fund being money so deposited for investment in the group invest- ment fund; and any money deposited between 22 June and 16 July 1983 with the trustee of the group investment fund, being money so deposited for investment in the group invest- ment fund which was, on or before 22 June 1983, sub- ject to a binding commitment to deposit that money (d) speciﬁed value, in relation to a group investment fund and to any income year, means the amount of the current value of all of the investments and funds of the group investment fund on the last day of the income year reduced by the amount that, on that day, is the protected amount.
Compare: 1994 No 164 s HE 2 1497 Income Tax Act 2004 Reprinted as at 29 August 2011 Subpart HF—Mutual associations Contents HF 1 Proﬁts of mutual associations in respect of transactions with members Page 1498 HF 1 Proﬁts of mutual associations in respect of transactions with members (1) Where in any income year an association enters into transac- tions with its members, or with its members and other persons, any amounts derived in that income year from those transac- tions which would be income of the association if the transac- tions were not of a mutual character is deemed to be income of the association derived in that income year (such an asso- ciation being referred to in this section as an association to which this section applies).
Subject to subsection (3), an association to which this section applies is allowed a deduction in an income year for the lesser of— (a) the aggregate of the amounts of rebates, being rebates that— (i) (2) are paid by the association to its members in re- spect of their transactions with the association in that income year, being transactions that are taken into account in determining the net income or net loss of the association; and are calculated by reference to the amounts of those transactions, whether or not, in any case, any rebate is limited or reduced by reference to the amount of the share or interest of a member in the capital of the association; and (ii) (b) an amount calculated in accordance with the following formula: a – (b + c) where— a is the total of the assessable income attributable to those transactions 1498 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HF 1 b c is the total of the deductions to which the associ- ation is entitled other than under this subsection and which are attributable to that assessable in- come is the total of any amounts distributed to members in that income year by way of a cash distribution in respect of which a determination is made under section ME 35(1)(a).
(3) Where an association to which this section applies is a statu- tory producer board,— (a) (b) (c) any amount allowed as a deduction under subsection (2) in respect of rebates paid by the producer board is the amount speciﬁed in subsection (2)(a), and nothing in subsection (2)(b) or (4) or the proviso to subsection (5) applies in relation to any such deduction; and the statutory producer board may elect whether the amount is allowed as a deduction in the income year in which the rebates were paid or for the income year in which occurred the transactions in respect of which the rebates were paid; and where any member of the statutory producer board to whom such a rebate is paid is itself a mutual association to which this section applies, the amount of the rebate is deemed to be income of that association derived in the income year in which the rebate is allowed as a deduc- tion to the statutory producer board in accordance with its election under paragraph (b).
(4) In subsection (2)(b), any expenditure or loss (being expend- iture or loss that is allowed as a deduction under this Act) in- curred by the association in the income year must be appor- tioned between the transactions referred to in paragraph (a)(i) of that subsection and the transactions (being transactions that are taken into account in determining the net income or net loss of the association) in that income year with persons other than its members.
(5) Where any rebate or part of a rebate paid to any member by an association to which this section applies is paid in respect of any transactions which are of such a nature that any payments in respect of those transactions by that member to the asso- 1499 Part H s HF 1 Income Tax Act 2004 Reprinted as at 29 August 2011 ciation, or by the association to that member, would be taken into account in determining the taxable income of that mem- ber, that rebate, or that part of a rebate, is income (otherwise than as a dividend) of that member: provided that where that rebate, or that part of a rebate, exceeds so much as is attributable to it of the deduction allowed under subsection (2), the amount of the excess is deemed to be a dividend derived by that member.
For the purposes of this section, a rebate is deemed to have been paid to a person when it has been credited in account or otherwise dealt with in the person’s interest or on the person’s behalf.
(6) (7) Where a rebate or part of a rebate is satisﬁed— (a) (b) by the issue of fully paid-up or partly paid-up shares in an association (being a company) to which this section applies; or by giving credit in respect of the whole or part of the amount unpaid on any shares in any such association,— that rebate or part of a rebate is deemed not to be a bonus issue.
Every reference in this section to transactions as being trans- actions of an association with its members or transactions of members of an association with the association and as being, in either case, transactions that are taken into account in de- termining net income or net loss of the association is taken as a reference to transactions of any 1 or more of the following classes: (a) the purchase or other acquisition by the association of trading stock from a member of the association, whether that trading stock is sold or otherwise disposed of by the association to a member of the association or to any other person: the sale or other disposition by the association of trad- ing stock to a member of the association, whether that trading stock was purchased or otherwise acquired from a member of the association or from any other person: the supply of any services by a member of the associ- ation to the association: the supply of any services by the association to a mem- ber of the association: (8) (b) (c) (d) 1500 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HF 1 (9) (e) (f) (g) the borrowing by the association of money from a mem- ber of the association to the extent to which that money is applied in lending money to a member or members of the association: the lending by the association of money to a member of the association: in relation to an association that is a statutory producer board, produce transactions, and the payment of levies to the statutory producer board by its members.
In this section,— association means any body or association of persons, whether incorporated or not member, in relation to an association that is a statutory pro- ducer board and to any income year, means any person who— is liable in respect of that year to pay a levy to the statu- (a) tory producer board; or during that year, supplies produce or goods to the statu- tory producer board, in terms of the body’s primary statutory functions (b) rebate means any payment to its members by an association, being a payment that— (a) is made by way of a distribution of proﬁts of the asso- ciation; and is made not later than 6 months after the end of the trading year of the association in respect of which the payment is made,— (b) but does not include any such payment to the extent that it forms part of a cash distribution in respect of which the asso- ciation has made a determination under section ME 30(1)(a) or ME 35(1)(a) or any distribution described in section CD 18 or CD 24.
Compare: 1994 No 164 s HF 1 Subpart HG—Qualifying companies Contents HG 1 Qualifying company regime HG 2 Determination of effective interest in company Page 1502 1503 1501 Part H s HG 1 Income Tax Act 2004 Reprinted as at 29 August 2011 HG 3 Director elections, and revocation of director elections HG 4 Shareholder elections HG 5 Revocation of shareholder elections HG 6 Period of grace for new elections following death, revocation of shareholder election, or issue of new shares HG 7 Date on which non-complying company ceases to be qualifying company, and Commissioner’s power to defer HG 8 Liability of electing shareholder for income tax of company HG 9 Taxation of shareholders in qualifying companies HG 10 Taxation of qualifying company HG 11 Taxation on election to become qualifying company HG 12 Payment of qualifying company election tax HG 13 Dividends from qualifying company HG 14 Loss attributing qualifying companies HG 14A Minority shareholders in loss attributing qualifying companies HG 15 Revocation of loss attribution elections HG 16 Net losses of loss attributing qualifying company to be attributed to shareholders HG 17 Attributed CFC losses and FIF losses HG 18 Company that ceases to be loss attributing qualifying company also ceases to be qualifying company 1504 1505 1508 1509 1511 1513 1514 1515 1515 1519 1519 1525 1527 1527 1527 1529 1531 HG 1 Qualifying company regime Subject to the express provisions of this subpart, any company that— (a) is owned by 5 or fewer natural persons as counted in accordance with section OB 3; or is a ﬂat-owning company within the meaning of subsec- tion (1)(b)(ii) of that section—and that otherwise meets the requirements of that section may, by making the ap- propriate elections,— (b) (c) make distributions to its shareholders of its gains in such a fashion that the distributed gains are treated for taxa- tion purposes; and (d) where the company has only 1 class of shares, allocate its net losses to its shareholders in such a fashion that the net losses are treated for
 taxation purposes,— 1502 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 2 in like manner to that which would have occurred had the com- pany been a partnership.
Compare: 1994 No 164 s HG 1 HG 2 Determination of effective interest in company For the purpose of determining a person’s effective interest in a company in respect of any income year,— (a) the person’s voting interest and market value interest in the company at any time is determined in accordance with sections OD 2 to OD 5, but the person’s voting in- terest and market value interest is, except where other- wise speciﬁcally provided in this subpart, determined in accordance with those sections as if (in any case where the person is a company) the person were not a company and as if sections OD 3(3)(c) and (d) and OD 4(3)(c) and (d) did not apply: (b) where the person’s voting interest or market value inter- est varies at any time during the income year, the per- son’s voting interest or market value interest for that year is equal to the weighted average of the person’s voting interest or market value interest, as the case may be, for the whole of the income year: in the case of a person who has made a shareholder election under section HG 4(1) or (2) in respect of any income year,— (i) (c) the person (or, in the case of an election made under section HG 4(2) by a person other than the trustee, the trustee (but only for the purposes of that election)) is, if during that income year the person revokes that election under section HG 5(1), treated as having a nil voting interest and a nil market value interest during any period fol- lowing the date on which the revocation takes ef- fect under section HG 5(1)(b), unless the person makes a subsequent shareholder election during and in respect of the same income year and in re- spect of the company: if the shareholder election was made after the commencement of the income year, the person’s (ii) 1503 Part H s HG 3 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) voting interest and market value interest is de- termined in relation to that part of the income year that starts with the earliest day of the income year on which the person was a shareholder in the
 company, whether or not that date precedes the date on which the election was made: in the case of a majority shareholder who has made a shareholder election under section HG 4(3) in respect of a minority shareholder’s shareholding,— (i) the effective interest of the minority shareholder in respect of which the majority shareholder has elected to be liable is determined exclusive of any effective interest for which the minority share- holder is personally liable by virtue of an election made by the minority shareholder under section HG 4(1) or (2); and (ii) where the majority shareholder’s election is re- voked under section HG 5(1) or deemed to be re- voked under section HG 5(2)(d) or (e), the effect- ive interest of the minority shareholder for which the majority shareholder is liable is treated as nil for that part of the income year that follows the day on which the revocation took effect under section HG 5(1)(b) or, as the case may be, the day on which occurred the event speciﬁed in sec- tion HG 5(2)(d) or (e).
Compare: 1994 No 164 s HG 2 HG 3 Director elections, and revocation of director elections (1) A company is only a qualifying company where all persons who are directors of the company at the time of the notice of election have, by notice to the Commissioner in such form as the Commissioner may allow, elected that the company should become a qualifying company.
(2) Any election under this section takes effect,— (a) if no later income year has been speciﬁed in the notice of election, on the ﬁrst day of the income year of the company that succeeds the income year in which the notice is received by the Commissioner; or 1504 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 4 (b) in any case where a later income year has been so spe- ciﬁed, on the ﬁrst day of such later income year,— and remains effective until the date upon which a revocation of that election takes effect in accordance with this section.
(3) Notwithstanding subsection (2), any election under this sec- tion in relation to any company that has not previously been required to furnish an annual return of income under the In- come Tax Act 1976 or the Tax Administration Act 1994 may take effect on the ﬁrst day of the company’s ﬁrst income year if the notice of election so requests and is received by the Com- missioner not later than the time allowed in accordance with section 37 of the Tax Administration Act 1994 for the furnish- ing of a return of income in respect of that ﬁrst income year of the company.
(4) A director election may be revoked only by resolution of the board of directors notiﬁed to the Commissioner in such form as the Commissioner may allow.

(5) Any such revocation takes effect on the later of— (a) the beginning of the income year in which the notice of revocation is received by the Commissioner; or the beginning of such other income year as may be spe- ciﬁed in the notice.
Compare: 1994 No 164 s HG 3 (b) HG 4 Shareholder elections (1) A company may only be a qualifying company where each shareholder in that company who is sui juris has, by notice to the Commissioner in such form as the Commissioner may allow,— (a) (b) elected that the company should become a qualifying company; and elected to be personally liable in respect of each income year during which the election is at any time in effect for such percentage of— (i) the income tax liability for that income year of that company; and any income tax payable in respect of that income year in accordance with an election by the com- (ii) 1505 Part H s HG 4 Income Tax Act 2004 Reprinted as at 29 August 2011 pany under this section as a shareholder in an- other company,— as is equal to the shareholder’s effective interest in the company for the relevant income year.
(2) Where any shareholder in a company is a trustee, that trustee is not treated as having made an election in accordance with subsection (1) or (3) unless both the trustee and any 1 or more natural persons who are sui juris (being in each case a bene- ﬁciary of the trust, or, where no beneﬁciary of the trust is sui juris, being a natural person (who may also be the trustee) as- suming liability on behalf of beneﬁciaries) have, by notice to the Commissioner in such form as the Commissioner may al- low,— (a) (b) elected that the company should become a qualifying company; and elected to be personally (in the case of any such bene- ﬁciary or natural person (who may also be the trustee) assuming liability on behalf of beneﬁciaries), or to the extent of the net assets subject to the trust (in the case of the trustee), jointly and severally liable in respect of each income year during which the election is at any time in effect for such percentage of any income tax li- ability for that income year of the company and of any income tax for which the company may be liable in re- spect of that income year in accordance with an election by the company under this section as a shareholder in another company as is equal to,— (i) in the case of an election made in accordance with subsection (1), the effective interest in the company of the trustee as a shareholder of the company for that income year; or in the case of an election made in accordance with subsection (3), the effective interest of the relevant other shareholder in the company for that income year.
(ii) (3) Where— (a) the effective interest of any shareholder (in this subsec- tion referred to as the minority shareholder) in a com- 1506 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 4 (b) (ii) pany at the time at which the election referred to in para- graph (b) is made is less than 50%; and any 1 or more other shareholders (in this subsection re- ferred to as the majority shareholders) in the company whose effective interests in that company at that time aggregate 50% or more have, in addition to any other election the majority shareholders have made in accord- ance with this section,— (i) elected that the company should become a quali- fying company; and elected to be personally and (in the case of more than 1 majority shareholder) jointly and sever- ally liable for each income year during which the election remains in effect for such percentage of any income tax liability for that income year of the company and of any income tax payable by the company in respect of that income year by virtue of an election by the company under this section as a shareholder in another company as is equal to the minority shareholder’s effective in- terest in the company at the time of election and subsequently from time to time,— the minority shareholder is, for the purposes only of section OB 3(1)(f), treated as having made an election in accordance with subsection (1) in respect of the mi- nority shareholder’s shareholding in the company at the time of election.
(4) Any election made in accordance with this section in relation to any company takes effect,— (a) in the case of an election made at a time when the com- pany is not already a qualifying company,— (i) if no later income year has been speciﬁed in the notice of election, on the ﬁrst day of the income year of the company that succeeds the income year of the company in which the notice is re- ceived by the Commissioner; or in any case where a later income year has been speciﬁed, on the ﬁrst day of that later income year; or (ii) 1507 Part H s HG 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) in the case of an election made at a time when the com- pany is already a qualifying company, on the date on which the Commissioner receives notice of the election.
(5) Notwithstanding subsection (4)(a), any election under this sec- tion in relation to any company that has not previously been required to furnish an annual return of income under the In- come Tax Act 1976 or the Tax Administration Act 1994 may take effect on the ﬁrst day of the company’s ﬁrst income year if the notice of election so requests and is received by the Com- missioner not later than the time allowed in accordance with section 37 of the Tax Administration Act 1994 for the furnish- ing of a return of income in respect of that ﬁrst income year of the company.
Compare: 1994 No 164 s HG 4 HG 5 Revocation of shareholder elections (1) A shareholder election made by any person may be revoked by that person by notice furnished to both the Commissioner and the company in such form as the Commissioner may allow, and any such revocation, subject to sections HG 6 and HG 7, takes effect,— (a) for the purposes only of section OB 3(1)(f),— (i) if no later income year has been speciﬁed in the notice of revocation, on the ﬁrst day of the in- come year in which the notice is received by the Commissioner; or on the ﬁrst day of such later income year as may be speciﬁed in the notice: (ii) (b) for the purpose of determining in any appropriate case the effective interest in the company of the person mak- ing the revocation, on the date on which both the Com- missioner and the company have received notice of the revocation or on such later date as may be speciﬁed in the notice of revocation.
(2) A shareholder election made by any person is deemed to be revoked— (a) (b) upon the death of the person: upon the sale or other disposal of all the shares in the shareholding in relation to which the election was made 1508 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 6 (unless those shares are sold or otherwise disposed of to an existing shareholder in the company for whose shareholding a valid shareholder election is already in effect): in the case of an election made under section HG 4(2) or (3) by both a trustee and a natural person assuming liability on behalf of the beneﬁciaries of a trust none of whom is sui juris, upon any beneﬁciary of the trust becoming sui juris: in any case where the effective interest in the company of a minority shareholder in respect of whom an election has been made under section HG 4(3) increases to 50% or more, upon that effective interest attaining 50% or more: in any case where the effective interest or aggregate ef- fective interests in the company of any majority share- holder or shareholders who have made an election under section HG 4(3) falls below 50%, upon the effective in- terest or aggregate effective interests falling below 50%: in the case of an election jointly made by 2 or more per- sons, upon any revocation or deemed revocation taking effect in respect of any 1 of those persons and that elec- tion,— (c) (d) (e) (f) and any such deemed revocation, subject to sections HG 6 and HG 7, takes effect for the purposes of section OB 3(1)(f) on the ﬁrst day of the income year in which occurred the event giving rise to the deemed revocation.
Compare: 1994 No 164 s HG 5 HG 6 Period of grace for new elections following death, revocation of shareholder election, or issue of new shares (1) A company does not cease to be a qualifying company at any time as a result only of the death of a shareholder or any other person, if— (a) that company would have been a qualifying company at that time but for that death; and that company meets (and, subject to this section, subse- quently continues to meet) all the requirements of sec- tion OB 3(1) at some time falling within— (b) 1509 Part H s HG 6 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) the period of 12 months immediately succeeding that death; or such extended period as the Commissioner may allow on the application of the company, the per- sonal representative of a deceased shareholder, or any other person who may make any relevant shareholder election.
(2) A company does not cease to be a qualifying company by rea- son only of a failure to comply with section OB 3(1)(f) due to the revocation or deemed revocation of any shareholder elec- tion if,— (a) in the case of a revocation made by a person by notice to both the Commissioner and the company under section HG 5(1), any other person makes or is deemed to make a shareholder election in respect of all of the shareholding to which the revocation relates within— (i) the period of 63 days immediately succeeding the date of receipt by the company of the notice of revocation; or such extended period as the Commissioner may allow on the application of the company or of a person who may make an election in respect of the shareholding: (ii) (b) (i) (ii) (c) in the case of a shareholder election deemed to be re- voked under any of section HG 5(2)(b) to (e), a valid shareholder election is made (or is already in effect) in respect of all of the shareholding to which the revoked election relates within— the period of 63 days immediately succeeding the event that gave rise to the deemed revocation; or such extended period as the Commissioner may allow on the application of the company or any person who may make a shareholder election in respect of the share- holding: in the case of a jointly made shareholder election deemed to be revoked under section HG 5(2) by reason of a revocation taking effect in respect of any 1 of the persons making the election, any person or persons who may make a shareholder election in respect of 1510 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 7 the relevant shareholding make that election within the period speciﬁed under whichever of subsection (1) or paragraph (a) or (b) applies to the cause of the revocation.
(3) A company does not cease to be a qualifying company by rea- son only of a failure to comply with section OB 3(1)(f) due to— (a) (b) the acquisition of shares in the company by a person other than an existing shareholder (whether by pur- chase, issue, or otherwise); or an existing shareholder becoming sui juris—if, within the period of 63 days following the date upon which the shares were acquired or the shareholder became sui juris, or within such extended period as the Commis- sioner may allow on the application of the new share- holder or the newly sui juris shareholder, or of any other person who may make a shareholder election in respect of the relevant shareholding, a valid shareholder elec- tion is made in respect of that shareholding.
Compare: 1994 No 164 s HG 6 HG 7 Date on which non-complying company ceases to be qualifying company, and Commissioner’s power to defer (1) Where a company ceases to comply with any of the require- ments of section OB 3(1), the company, subject to subsection (2), ceases to be a qualifying company with effect on and after the ﬁrst day of the income year in which the failure to comply occurred, whether or not it was known or possible to ascertain at that time that the company had so ceased to comply.
(2) Where in respect of any company that would, but for this sub- section, cease on the ﬁrst day of any income year to be a quali- fying company by reason of any event occurring or failing to occur at or by any particular time within that income year, the Commissioner is satisﬁed that— (a) at the particular time the company did not know and could not reasonably be expected to have known or as- certained that it would so cease to be a qualifying com- pany, whether by reason of— 1511 Part H s HG 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) (iii) a reasonable expectation that the company would continue to qualify as a qualifying company by virtue of a substitute election or other appropriate event occurring within any period speciﬁed in or allowed under section HG 6 or HG 15(3); or a reasonable expectation that the company would not fail to comply with section OB 3(1)(d); or a reasonable belief that qualifying company divi- dend income derived by a trustee referred to in section OB 3(1)(c)(ii) would be distributed, and qualify, as beneﬁciary income,— or otherwise; and (b) having regard to— (i) (ii) (iii) the period of time that has elapsed between the beginning of the income year and the date of fail- ure to comply with any of the requirements of section OB 3(1); and the period of time that has elapsed between the date of failure to comply with any of the require- ments and the date on which that failure became known, or could reasonably be expected to have become known, to the company; and any transactions of the company during any such period; and any other relevant circumstances,— (iv) it would be unduly harsh or otherwise inappropriate to treat the company as having ceased for the purposes of this Act to be a qualifying company,— the Commissioner may, on the application of the company sup- ported by such accounts or other information as the Commis- sioner may require, defer until the ﬁrst day of a later income year than that speciﬁed under subsection (1) the date on which the company will be
 treated as ceasing to be a qualifying com- pany; and this Act and the Tax Administration Act 1994 ac- cordingly apply in respect of the company and its shareholders as if the company had ceased to be a qualifying company on that later date.
Compare: 1994 No 164 s HG 7 1512 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 8 HG 8 Liability of electing shareholder for income tax of company (1) Where any person elects in accordance with any of section HG 4(1) or (2) or (3) to be liable for a percentage of any income tax payable by a company, then, while the company must make an assessment in the ﬁrst instance,— (a) the Commissioner may assess that person and, where the Commissioner does so, the person is liable as agent under this Act accordingly, as if the person were an agent for the company, for such percentage of the in- come tax payable by the company (including any in- come tax payable by the company by virtue of a share- holder election made by the company) in respect of any income year during which the company is a qualify- ing company and the election is at any time in effect as is equal to that person’s effective interest (and, where appropriate, the effective interest of a minority share- holder) in the company in respect of the income year; and no assessment of the company in respect of that income tax precludes an assessment of that person for the in- come tax, and no assessment of that person in respect of the income tax precludes an assessment of the com- pany for the income tax.
(2) Where a person who is liable under this section for a percent- age of the tax payable by a qualifying company ﬁrst acquires shares in the company, or sells or otherwise disposes of that person’s whole shareholding in the company, during an in- come year, the Commissioner may reduce the percentage of tax for which the person is liable if— (a) the person satisﬁes the Commissioner, with the support of adequate accounts and such other information as the Commissioner may require, that the proportion of the company’s tax liability that is attributable to the part of the income year in which the person was a shareholder in the company is smaller than the proportion that that part income year bears to the whole income year; and the Commissioner is satisﬁed in all the circumstances that it would be appropriate to reduce the person’s liabil- 1513 (b) (b) Part H s HG 9 Income Tax Act 2004 Reprinted as at 29 August 2011 ity to tax accordingly— and, where the Commissioner so reduces the percentage of tax liability, the person’s liability under this section is determined in relation to that reduced percentage accordingly.
Compare: 1994 No 164 s HG 8 HG 9 Taxation of shareholders in qualifying companies (1) Where any qualifying company pays a dividend to any share- holder resident in New Zealand, the provisions of section HG 13 apply in relation to that dividend.

(2) Where for any income year a loss attributing qualifying com- pany has a net loss, the provisions of sections HG 16 and HG 17 apply to the shareholders in the company in relation to that loss.
(3) Notwithstanding any other provision of this Act, where in any income year any shareholder in a qualifying company incurs any interest expenditure in respect of money borrowed to acquire shares in that company, section DB 6 denies any deduction for that interest expenditure to the extent of the amount of any non-cash dividends (other than taxable bonus issues) which that shareholder, or any person associated with the shareholder, derives from that company in that income year.
(3A) For the purposes of subsection (3), where the associated per- son is associated with more than 1 shareholder in the quali- fying company, the amount of any non-cash dividends (other than taxable bonus issues) derived by that person from that company in the income year is apportioned among the share- holders associated with the person in proportion to the effect- ive interest in the company held by each of those shareholders in the relevant income year.
For the purpose only of determining whether a deduction is allowed under section DB 6 for interest expenditure incurred in respect of money borrowed to acquire shares in a qualifying company,— (a) section HG 13 is treated as not deeming to be exempt income distributions from a qualifying company to a shareholder of that company; and (4) 1514 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 11 (5) (b) those distributions are treated as excluded from the def- inition of dividend.
For the purposes of subsection (3), dividends to which section CD 28 applies are not deemed to be paid and derived on the earlier of the dates speciﬁed in section CD 28(3), but are in- stead deemed to be paid and derived at the end of the quarter in respect of which the amount of the dividend is determined under that paragraph.
Compare: 1994 No 164 s HG 9 HG 10 Taxation of qualifying company Notwithstanding any other provision of this Act,— (a) sections CW 9 to CW 11 do not apply to treat as exempt income any dividend derived by a company which has been at any time before the date of derivation a qualify- ing company, except to the extent that the dividend is a dividend to which section CW 9 applies; and section IG 2(2) does not apply to permit any qualifying company to offset against its net income any amount on account of— (i) (ii) the loss of any other company; or a payment made to any other company,— unless the other company is also a qualifying company.
(b) Compare: 1994 No 164 s HG 10 (1A) HG 11 Taxation on election to become qualifying company (1) Where at any time any company not a qualifying company becomes a qualifying company, that company is liable to pay a special tax by way of an income tax known as qualifying company election tax.
If a company is not a qualifying company and ceases to exist when it amalgamates with a qualifying company, the amalga- mated company is liable to pay a special tax by way of income tax known as qualifying company election tax.
If subsection (1A) applies, subsection (2) applies to the amal- gamated company as if— (a) the reference to the “relevant time” were read as refer- ring to the time at which the amalgamating company ceases to exist; and (1B) 1515 Part H s HG 11 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) all references to the time or income year in which the company became a qualifying company, however ex- pressed, were read as referring to the time at which the amalgamating company ceases to exist.
(2) The amount of qualifying company election tax payable by any company is an amount (not being less than nil) calculated in accordance with the following formula: where— a is the aggregate of any amounts which would be divi- dends for the purposes of this Act if, at the time (re- ferred to in this section and section HG 12 as the rele- vant time) immediately preceding the time at which the company became a qualifying company,— (a) the company had disposed of all its tangible and intangible property (other than cash) to an unre- lated person at the relevant time for amounts of cash equal to the market value of such property at the relevant time; and the company had repaid or otherwise met all of its liabilities at the relevant time (not being income tax payable as a result of the disposition of prop- erty or meeting of liabilities) for amounts of cash equal to the market value of such liabilities to a purchaser of such liabilities at the relevant time; and the company had then been liquidated and any amounts of cash remaining (whether arising from the disposition or otherwise) had been distributed to its shareholders (without imputation credits or dividend withholding payment credits attached); and paragraph (i) of item “j” of the formula in the deﬁnition of transitional capital amount were repealed (b) (c) (d) b is the aggregate of the assessable income which would be derived by the company at the relevant time from 1516 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 11 taking the actions described in paragraphs (a) and (b) of item “a”, reduced by all amounts of expenditure or loss incurred in taking such actions for which this Act would allow a deduction c is, subject to subsection (4), the aggregate of the fol- lowing amounts: (a) (b) (c) (d) the amount of the balance in the company’s im- putation credit account immediately before the time at which the company became a qualifying company: the amount of the balance in the company’s divi- dend withholding payment account immediately before the
 time at which the company became a qualifying company: any amount of income tax that— (i) is payable by the company in relation to an income year earlier than that in which the company became a qualifying company; and has not been paid by the company before the time it became a qualifying company; and is tax that, when paid, gives rise to a credit to the company’s imputation credit ac- count under section ME 4,— (ii) (iii) less the amount of any income tax refund due in respect of any such earlier income year that is paid to the company, or credited or available to be credited in payment of any income tax liability of the company, after the time it became a quali- fying company, and that gives rise, when paid or credited, to a debit to the company’s imputation credit account under section ME 5: any amount of dividend withholding payment that— (i) is payable by the company in relation to dividends received before the time the company became a qualifying company; and 1517 Part H s HG 11 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) has not been paid by the company before that time,— less the amount of any refund of dividend with- holding payment made or due after that time to the company in relation to dividend withholding payment paid in respect of dividends received be- fore that time d is the basic rate of income tax for companies, ex- pressed as a decimal, stated in schedule 1, part A, clause 5, and applying in the income year of the company in which the relevant time falls.
(3A) (3) Where in any income year (in this section referred to as the relevant year) any company not a qualifying company becomes a qualifying company, that company is not entitled by virtue of any of sections IE 1, IE 3, IE 4, IF 1, and IF 3 to carry forward any net losses of that company for income years before the relevant year to the relevant year or any later income year or years.
If a company that is not a qualifying company amalgamates with a qualifying company and ceases to exist on amalgam- ation during an income year (referred to as the relevant year), the amalgamated company is not entitled by virtue of any of sections IE 1, IE 3, IE 4, IF 1, and IF 3 to carry forward to the relevant year or a later income year any net losses of the amalgamating company that ceases to exist for income years before the relevant year.
For the purposes of this section, there is deducted, when calcu- lating the amount of item “c” of the formula speciﬁed in sub- section (2), any amount of credit to the company’s imputation credit account or dividend withholding payment credit account which results from any payment of income tax or dividend withholding payment made by the company with a purpose or intention (other than a merely incidental purpose) of reducing the amount of qualifying company election tax payable by the company.
Compare: 1994 No 164 s HG 11 (4) 1518 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 13 HG 12 Payment of qualifying company election tax (1) Every company liable to pay qualifying company election tax in accordance with section HG 11 must— (a) make payment to the Commissioner of the qualifying company election tax no later than the company’s ter- minal tax date for the tax year in which the relevant time, as deﬁned in section HG 11(2), falls; and at the same time as making that payment, furnish to the Commissioner a return in a form prescribed by the Commissioner, setting out such details as are required in that form.
(b) (2) Subject to this section, and to sections 94 and 139B of the Tax Administration Act 1994, the provisions of this Act and of the Tax Administration Act 1994, so far as they are applic- able and with any necessary modiﬁcations, apply with respect to qualifying company election tax, and to any late payment penalty payable under section 139B of the Tax Administration Act 1994 in respect of that qualifying company election tax as if it were income tax imposed under section BB 1, but nothing in this section is to be so construed as to include qualifying company election tax or any such late payment penalty in the expressions “income tax” or “tax” for the purposes of— the provisions listed in section OB 6(3); or (a) the provisional tax rules; or (b) sections 120KB to 120KE of the Tax Administration (c) Act 1994.
Compare: 1994 No 164 s HG 12 Section HG 12(2)(c): amended, on 1 October 2007, by section 115 of the Taxa- tion (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3).
HG 13 Dividends from qualifying company (1) Where any qualifying company pays a dividend to any person (in this section referred to as the shareholder) resident in New Zealand,— (a) that dividend is exempt income of the shareholder to the extent to which the dividend exceeds the aggregate of— the amount calculated in accordance with the fol- (i) lowing formula: 1519 Part H s HG 13 Income Tax Act 2004 Reprinted as at 29 August 2011 where— a is the amount of the imputation credit deemed to have been attached to the divi- dend in accordance with subsection (3) (which amount is zero where no imput- ation credit is attached) b c is the amount of the dividend withhold- ing payment credit deemed to have been attached to the dividend in accordance with subsection (4) (which amount is zero where no dividend withholding payment credit is attached) is the basic rate of income tax for com- panies, expressed as a decimal, stated in schedule 1, part A, clause 5 and applying in respect of the income year of the share- holder in which the dividend is derived; and (ii) the amount of the dividend which would not be a dividend if paragraph (i) of item “j” of the formula in the deﬁnition of transitional capital amount were repealed— and the amount of any such imputation credit or divi- dend withholding payment credit is, for the purposes of this Act, deemed to be attached to that part of the divi- dend which is not exempt income; and sections CW 9 to CW 11 do not apply to treat that divi- dend as exempt income; and the whole of that dividend does not constitute resident withholding income for the purposes of the RWT rules; and where for any income year— (i) (ii) the shareholder has a late balance date; and the dividend is derived in the period between the preceding 31 March and that balance date,— the dividend is, notwithstanding section 38 of the Tax Administration Act 1994, treated for the purposes of (aa) (b) (c) 1520 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 13 this Act as if derived by the shareholder
 immediately following that balance date.
(1A) For the avoidance of doubt, a dividend that is paid by a quali- fying company to any trustee shareholder and that is, or that becomes, beneﬁciary income of a beneﬁciary resident in New Zealand is exempt income of the beneﬁciary to the same ex- tent as if the beneﬁciary were the shareholder referred to in section HG 13(1)(a) and the company had paid the dividend to the beneﬁciary.
(2) Notwithstanding the imputation rules or the dividend with- holding payment rules, no qualifying company may attach— an imputation credit to any dividend paid by that com- (a) pany except in accordance with subsection (3); or a dividend withholding payment credit to any dividend paid by that company except in accordance with sub- section (4).
(b) (3) A qualifying company that is an imputation credit account company is, with respect to any dividend (not being a non-cash dividend other than a taxable bonus issue) paid during any imputation year while that company is a qualifying company, deemed to have attached an imputation credit to that dividend equal to the lesser of— (a) the maximum imputation credit which may be attached to that dividend by virtue of section ME 8(1); and an amount calculated in accordance with the following formula: (b) where— a is the balance in the company’s imputation credit account on the last day of the imputation year in which the dividend is paid, being the bal- ance before any debit is made for the attachment in accordance with this subsection of imputation credits to dividends paid by the company during the imputation year b is the amount of the dividend before attachment of any imputation credits 1521 Part H s HG 13 Income Tax Act 2004 Reprinted as at 29 August 2011 c is the aggregate amount of all dividends (not be- ing non-cash dividends other than taxable bonus issues) paid by the company during the imput- ation year before attachment of any imputation credits.
(4) A qualifying company that is a dividend withholding payment account company is, with respect to any dividend (not being a non-cash dividend other than a taxable bonus issue) paid during any imputation year while that company is a qualify- ing company, deemed to have attached a dividend withholding payment credit to that dividend equal to the lesser of— (a) the maximum dividend withholding payment credit which may be attached to that dividend by virtue of sec- tions MG 8(1) and MG 10(1) (after taking into account for the purposes of section MG 10(1) any imputation credit attached to that dividend under subsection (3)); and an amount calculated in accordance with the following formula: where— d is the balance in the company’s dividend with- holding payment account on the last day of the imputation year in which the dividend is paid, being the balance before any debit is made for the attachment in accordance with this subsection of dividend withholding payment credits to divi- dends paid by the company during the imputation year e f is the amount of the dividend before attachment of any dividend withholding payment credits is the aggregate amount of all dividends (not being non-cash dividends other than taxable bonus issues) paid by the company during the imputation year before attachment of any divi- dend withholding payment credits.
(b) 1522 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 13 (5) Where a company has in any imputation year paid any divi- dends (not being non-cash dividends other than taxable bonus issues),— (a) (b) (c) (d) the amount of any imputation credit attached to any of those dividends in accordance with subsection (3) is, for the purposes of section ME 5, a debit to the company’s imputation credit account arising on the date the com- pany paid the dividend; and the amount of any dividend withholding payment credit attached to any of those dividends in accordance with subsection (4) is, for the purposes of section MG 5, a debit to the company’s dividend withholding payment credit account arising on the date the company paid the dividend; and the company must complete a company dividend statement in accordance with section 67(1) of the Tax Administration Act 1994 in respect of all dividends (not being non-cash dividends other than taxable bonus issues) so paid (whether or not any imputation credits or dividend withholding payment credits are attached), which company dividend statement must— (i) detail the extent (if any) to which any of the divi- dends are assessable income and the extent (if any) to which any of the dividends are exempt income by virtue of subsection (1); and be completed by the 31 May ﬁrst succeeding the last day of the imputation year in which the divi- dends were paid; and (ii) the company must complete a shareholder dividend statement in accordance with section 29 of the Tax Administration Act 1994 in respect of all dividends (not being non-cash dividends other than taxable bonus issues) paid to the shareholder in the imputation year (whether or not any imputation credits or dividend withholding payment credits are attached), which shareholder dividend statement must— (i) detail the extent (if any) to which any of the divi- dends are assessable income and the extent (if 1523 Part H s HG 13 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) any) to which any of the dividends are
 exempt income by virtue of subsection (1); and be given by the 31 May ﬁrst succeeding the last day of the imputation year in which the dividends were paid; and (e) in addition to the information to be included in a share- holder dividend statement under paragraph (d), the company must, where it is requested to do so by the shareholder, include in the shareholder dividend state- ment a statement of the amount of non-cash dividends paid to the shareholder during the imputation year.
Sections ME 5(1)(i) and MG 5(1)(i) do not apply in the case of any qualifying company but, in the event that any qualifying company ceases to be a qualifying company,— (a) subsections (3) and (4) apply with respect to the im- putation year in which occurs the day (in this subsec- tion referred to as the relevant date) that immediately precedes the day on which the company ceases to be a qualifying company as if references in those subsec- tions to an imputation year were references to the period commencing with the ﬁrst day of the imputation year and ending with the close of the relevant date; and there is a debit recorded in the company’s imputation credit account on the relevant date equal to the lesser of— (i) the excess (if any) of the balance in the com- pany’s imputation credit account on the relevant date (being that balance before the attachment of any imputation credits in accordance with sub- section (3)) over the amount of such credits at- tached in accordance with subsection (3); and any debit (and, if more than 1, the greatest in amount) which would have arisen before the rele- vant date to the company’s imputation credit ac- count by virtue of the application of section ME 5(1)(i) had this subsection not applied; and there is a debit recorded in the company’s dividend withholding payment credit account on the relevant date equal to the lesser of— (ii) (b) (c) (6) 1524 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 14 (i) (ii) the excess (if any) of the balance in the com- pany’s dividend withholding payment credit ac- count on the relevant date (being that balance be- fore the attachment of any dividend withholding payment credits in accordance with subsection (4)) over the amount of such credits attached in accordance with subsection (4); and any debit (and, if more than 1, the greatest in amount) which would have arisen before the rele- vant date to the company’s dividend withholding payment credit account by virtue of the applica- tion of section MG 5(1)(i) had this subsection not
 applied.
Compare: 1994 No 164 s HG 13 Section HG 13(3)(a): substituted (with effect on 1 October 2007), on 6 October 2009, by section 809(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HG 13(3)(a): amended (with effect from 1 October 2007), on 19 De- cember 2007, by section 105(1) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).
Section HG 13(4)(a): substituted (with effect on 1 October 2007), on 6 October 2009, by section 809(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HG 13(4)(a): amended (with effect from 1 October 2007), on 19 De- cember 2007, by section 105(2) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).
HG 14 Loss attributing qualifying companies A company is in respect of any income year a loss attributing qualifying company to which section HG 16 applies where— the company is at all times in the income year a quali- (a) fying company; and each share in the company carries at all times in the income year the same— (i) right to exercise voting power and participate in any decision-making at any time concerning— (A) (b) the distributions to be made by the com- pany; and the constitution of the company; and any variation in the capital of the company; and (B) (C) 1525 Part H s HG 14 Income Tax Act 2004 Reprinted as at 29 August 2011 (D) the appointment or election of directors of the company; and (ii) right (in terms of priority, amount payable per share, and otherwise) to receive or have dealt with in the shareholder’s interest or on the share- holder’s behalf— (A) proﬁts that may be distributed at any time by the company; and distributions of assets of the company on any acquisition, redemption, or other can- cellation by the company of its shares or other reduction in or return of share capital of the company, whether on its liquidation or otherwise,— (B) as each other share in the company; and (c) a notice in such form as the Commissioner may allow electing that the company be a loss attributing qualify- ing company— (i) is executed by each person who is sui juris and is at the date on which the notice is furnished a shareholder or a director in the company; and is received by the Commissioner before the ﬁrst day of the income year, or, in the case of a com- pany that has not previously been required to fur- nish an annual return of income under the In- come Tax Act 1976 or the Tax Administration Act 1994, before the time speciﬁed in section HG 4(5) as that by which notice of shareholder elec- tions in respect of the company and that income year is required to be furnished to the Commis- sioner; and subject to section HG 15, has not been revoked; and (ii) (iii) (d) no share in the company has, at any time
 during that income year, in the opinion of the Commissioner, been subject to any arrangement or series of related or con- nected arrangements for the purpose, or for purposes including the purpose, of making the company a com- 1526 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 16 pany to which this section applies so as to defeat the intent and application of this section.
Compare: 1994 No 164 s HG 14 HG 14A Minority shareholders in loss attributing qualifying companies For the purposes only of section HG 14, the requirements of section HG 14(c) are treated as fulﬁlled in respect of a share- holder who has not executed the notice of election, and who has an effective interest of less than 50% in a company at the time at which an election under section HG 14(c) is made in respect of the company, if— (a) any 1 or more other shareholders in the company whose effective interests in that company at that time aggregate 50% or more have executed the notice required by sec- tion HG 14(c)(i); and all the conditions required by section HG 14 for a com- pany to be a loss attributing qualifying company are fulﬁlled except that the notice required by section HG 14(c)(i) is not executed by each person who is sui ju- ris and is at the date on which the notice is furnished a shareholder in the company.
(b) Compare: 1994 No 164 s HG 14A HG 15 Revocation of loss attribution elections Sections HG 3(4) and (5), HG 5, HG 6, and HG 7 apply to an election made under section HG 14 or HG 14A, in respect of the revocation of that election, as if that election were, in the case of an election made by a director, an election made under section HG 3(1) or, in the case of an election made by a shareholder, a shareholder election made under section HG 4(1).
Compare: 1994 No 164 s HG 15 HG 16 Net losses of loss attributing qualifying company to be (1) attributed to shareholders Subject to section HG 17, where a loss attributing qualifying company has a net loss for any income year, then, for the pur- poses of this Act,— 1527 Part H s HG 16 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) each shareholder who has an effective interest in the company for that income year is deemed to incur an amount of loss equal to the net loss of the company for that income year multiplied by the shareholder’s effect- ive interest in the company for that income year; and subject to subsection (2), the amount of loss deemed to be incurred by each shareholder is treated for the pur- poses of this Act as if it were a loss incurred by that shareholder in deriving assessable income of that share- holder for that income year (except to the extent that the net loss of the company includes an attributed CFC loss or a FIF loss, in either of which cases the shareholder’s amount of attributed loss is treated for the purposes of this Act as if it were attributed CFC loss or FIF loss, as the case may be, of the shareholder); and the company is not entitled to carry that net loss forward in accordance with any of sections IE 1, IE 3, IE 4, and IF 1 to any income year succeeding that income year, but without prejudice to any right of the company under this Act to carry forward any other net loss.
(2) Where, in respect of any company, any shareholder in that (c) company, and any income year,— (a) (c) (b) either the company, the shareholder, or both have a non- standard balance date for that income year; and the company has a later balance date for the income year than the shareholder; and by reason of the difference in balance dates it is not practicable for the shareholder to ascertain, within the time allowed in accordance with section 37 of the Tax Administration Act 1994 for the furnishing of the shareholder’s return of income for that income year, the amount of any net loss of the company attributable to the shareholder under this section in respect of that income year; and the shareholder elects that this subsection applies by applying accordingly the provisions of this Act,— the amount of any net loss of the company so attributable to the shareholder in respect of that income year is, notwithstanding section 38 of the Tax Administration Act 1994, treated for the (d) 1528 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 17 purposes of this Act as if it were incurred by the shareholder on the ﬁrst day of the immediately succeeding income year of the shareholder.
(3) Notwithstanding subsections (1) and (2), where and to the ex- tent that, in relation to any loss attributing qualifying company and any income year of that company,— (a) (c) (b) any shareholder has a part of that company’s net loss attributed to that shareholder in accordance with sub- sections (1) and (2); and that company’s net loss results in a reduction in the ag- gregate value of shares in that company; and that shareholder suffers no, or substantially no, part of such reduction, due to any factor or factors, including any right of the shareholder or any other person to sell any thing, or any right of any other person to require that shareholder or any other person to sell any thing,— the shareholder is, for the purposes of this Act in respect of that income year, deemed to have no part of that company’s net loss attributed to that shareholder in accordance with this section.
(4) Where the attribution of any amount of a company’s net loss is denied to a shareholder under subsection (3), that amount— (a) (b) may not be carried forward by the company under any is not attributed to any other shareholder; and of sections IE 1, IE 3, IE 4, and IF 1.
Compare: 1994 No 164 s HG 16 HG 17 Attributed CFC losses and FIF losses (1) Where a foreign loss election is deemed in accordance with this section to be in effect in respect of a loss attributing quali- fying company in any income year,— (a) the amount of any attributed CFC loss and any FIF loss of the company for the income year is not included within any net loss attributed to and deemed to be in- curred by shareholders under section HG 16(1)(a) and (b); and the company may carry that amount of attributed CFC loss or FIF loss forward to a succeeding income year subject to and in accordance with section IE 3 or IE 4.
(b) 1529 Part H s HG 17 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) A foreign loss election is deemed to be in effect in respect of any income year of a loss attributing qualifying company where— (a) the company is at all times in the income year a quali- fying company; and a notice in such form as the Commissioner may allow, executed by each person who is sui juris and is at the date on which the notice is furnished a shareholder in the company, electing that the company is to retain any attributed CFC losses and FIF losses, has been received by the Commissioner before— (i) (ii) the ﬁrst day of the income year; or in the case of a company that has not previously been required to furnish an annual return of in- come under the Income Tax Act 1976 or the Tax Administration Act 1994, before the time speci- ﬁed in section HG 4(5) as that by which notice of shareholder elections in respect of the company and that income year is required to be given; and no revocation of the foreign loss election is in effect for that income year.
(b) (c) (3) A foreign loss election under this section may be revoked only by furnishing to the Commissioner a notice of revocation, in such form as the Commissioner may allow, executed by all persons who are sui juris and are shareholders in the company at the time of the notice of revocation, and, subject to subsec- tion (4), any such revocation takes effect— (a) where no later income year is speciﬁed, on the ﬁrst day of the income year of the company in which the notice of revocation was received by the Commissioner; or on the ﬁrst day of such later income year as is speciﬁed in the notice.
(b) (4) Any revocation of a foreign loss election under this section does not apply in respect of any attributed CFC loss or FIF loss of the company that— (a) has been carried forward under section IE 3 or IE 4 to the income year in which the revocation takes effect; and 1530 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HG 18 arose for the company in an earlier income year.
(b) Compare: 1994 No 164 s HG 17 HG 18 Company that ceases to be loss attributing qualifying company also ceases to be qualifying company Where any company which is a loss attributing qualifying company for any income year ceases to be a loss attributing qualifying company for the immediately succeeding income year, that company is also deemed, for the purposes of this Act, and notwithstanding any other provision of this subpart, to have ceased to be a qualifying company on the ﬁrst day of that immediately succeeding income year, but without preju- dice to any ability of that company subsequently to become once again a qualifying company.
Compare: 1994 No 164 s HG 18 Subpart HH—Trusts Contents Interpretation HH 1 HH 1A Treatment of settlements on trust HH 2 Trusts settled by persons before becoming resident HH 3 Income of beneﬁciaries HH 3A Beneﬁciary income of minors HH 3B Exemption for beneﬁciary income $1,000 or less HH 3C Source of beneﬁciary income HH 3D Treatment of various settlements HH 3E Exceptions HH 3F Deﬁnitions of guardian, minor, and relative HH 4 Trustee income HH 5 Existing trusts becoming subject to tax HH 6 Distributions from trusts HH 7 Commissioner may determine amount of trustee income HH 8 Income received by trustee after death of deceased person Page 1532 1535 1535 1538 1540 1540 1541 1542 1542 1543 1544 1548 1550 1552 1552 1531 Part H s HH 1 Income Tax Act 2004 Reprinted as at 29 August 2011 HH 1 Interpretation (1) For the purposes of this section, where any person (in this sub- section referred to as the ﬁrst person) has made any settlement to or for the beneﬁt of a trust or on the terms of a trust,— (b) where such settlement is of a nominal amount made at the request of any other person,— that other person is, in relation to that settlement, deemed to be the settlor and not the ﬁrst person.
For the purposes of this section and the trust rules, without limiting the situations in which a person is a settlor by reason of that person indirectly undertaking any of the transactions speciﬁed in paragraph (a) of the deﬁnition of settlor, where a company (being at the time of settlement a controlled foreign company or which would have been at that time a controlled foreign company had it been at that time a foreign company) settles a trust or is deemed by virtue of this section to be a set- tlor of a trust, in respect of that trust the term settlor includes any person who at the time of the settlement of the trust held a control interest in any of the categories of control interest listed in section EX 5(1) of 10% or more, calculated in accordance with sections EX 2 to EX 7, or who would have at that time held such a control interest had that company been at that time a foreign company.
For the purposes of this section and the trust rules, where a trustee of a trust (in this subsection called the ﬁrst trust) settles a trust or makes any distribution to or on the terms of another trust (in this subsection called the second trust), paragraph (a) of the deﬁnition of settlor, in relation to the second trust, in- cludes any person who is a settlor of the ﬁrst trust, and includes any person who is a settlor of the ﬁrst trust by the operation of this subsection.
For the purposes of this section and the trust rules, where any person has, directly or indirectly, acquired any rights or powers in relation to a trustee or settlor of an existing trust, and that acquisition has the purpose or effect of enabling the person to require the trustee of the trust to treat the person or any other person nominated by that person as a beneﬁciary of that trust, the person is deemed to be a settlor of that trust.
(2) (3) (4) 1532 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HH 1 (5) (6) Subject to subsection (6), for the purposes of this section and the trust rules, a trust is a charitable trust in any tax year if the income derived by the trustees of that trust in that tax year and any income derived by the trustee of that trust in prior tax years and not previously distributed is held in trust solely for charitable purposes.
For the purposes of this section and the trust rules, no trust is a charitable trust in relation to any tax year if, in that tax year, a business is carried on by or on behalf of the trustees of that trust and, in the carrying on of that business, any beneﬁt or advantage, whether or not in money or money’s worth, or any income of any of the kinds referred to in sections CB 5 to CB 21, CB 27, CB 28, CC 1, CC 3 to CC 7, CC 9, CD 1, CE 1, CE 8, CF 1, CG 3, CQ 1, CQ 4, CZ 6, FF 3, and FF 4 is able to be afforded to, or received, gained, achieved, or derived by any person— (a) who is a settlor or trustee of the trust by which the busi- ness is carried on; or (b) who is a shareholder or director of the company by (c) which the business is carried on; or who is a settlor or trustee of a trust that is a shareholder of the company by which the business is carried on; or (d) where that person and that settlor or trustee or share- holder or director referred to in any of paragraphs (a) to (c) are associated persons by virtue of section OD 7 or OD 8(3),— and that person is able, by virtue of that capacity as settlor or trustee or shareholder or director or associated person, in any way (whether directly or indirectly) to determine, or to ma- terially inﬂuence in any way the determination of, the nature or the amount of that beneﬁt or advantage or that income or the circumstances in which it is or is to be so received, gained, achieved, afforded, or derived; and for the purposes of this subsection— (e) a person is, in relation to a trust, deemed to be a settlor of the trust and to gain a beneﬁt or advantage in the carrying on of a business of the trust, in any case where that person has disposed of or disposes of, to the trust, any asset that is used by the trust in the carrying on of 1533 Part H s HH 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (f) (g) (h) that business, and where that person retains or reserves an interest in that asset or where that asset will revert to that person: the deriving by any trustee of
 any rents, ﬁnes, pre- miums, or other revenues from any asset is, in any case where any person, being a person of any of the kinds referred to in paragraphs (a) to (d), has disposed of or disposes of, to the trust, any asset that is used by the trustee in the deriving of those rents, ﬁnes, premiums, or other revenues, and where that person retains or reserves an interest in that asset or that asset will revert to that person, deemed to be the carrying on of any business by the trustee: income is deemed not to be derived by any person of any of the classes referred to in paragraphs (a) to (d) in any case where the income consists of interest on money lent that, in the opinion of the Commissioner, is payable at not more than current commercial rates, having regard to the nature and term of the loan: a person is not, by reason only that the person renders professional services to any trust or company by which a business is carried on, considered to be able to deter- mine, or to materially inﬂuence the determination of, the nature or the amount of any beneﬁt or advantage or income afforded to, or received, gained, achieved, or derived by that person or the circumstances in which it is or is to be so received, gained, achieved, afforded, or derived, in any case where that ability to so determine or to so materially inﬂuence results from the rendering by that person, in the course of and as part of the carrying on as a business of a professional public practice by that person, of professional services to the trust or company by which the business ﬁrst mentioned in this paragraph is carried on; and, for the purposes of this paragraph, Public Trust, the Maori Trustee, and any trustee com- pany are each deemed to be a person carrying on as a business a professional public practice.
(7) For the purposes of this section and the trust rules, where any property of the kinds described in paragraph (b) of the def- 1534 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HH 2 inition of corpus is settled on a trust, the property is, unless this Act otherwise requires, deemed to be income derived by a trustee of that trust in the tax year in which it was settled on that trust.
This section and the trust rules do not apply to any unit trust or to any group investment fund to the extent to which it is treated as a company for the purposes of this Act.

(8) (9) Where a trust that is deemed for the purposes of this Act to be a company becomes a superannuation fund, the trust is for the purposes of this Act deemed to have been wound up on the date that it becomes a superannuation fund.
(10) For the purposes of this section and the trust rules, where any person resident in New Zealand makes a settlement as an em- ployer for the beneﬁt of 1 or more employees on the terms of a trust established or created principally for the purpose of pro- viding retirement beneﬁts to beneﬁciaries who are natural per- sons, which trust is neither a foreign superannuation scheme nor a superannuation fund, that person is, in relation to that settlement, deemed not to be a settlor of that trust.
Compare: 1994 No 164 ss HH 1, CF 2(3A)(b) Subsection (7) was amended, as from 1 April 2005, by section 64 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by inserting “paragraph (b) of” before the words “the deﬁnition” with application as from the 2005–06 income year.
HH 1A Treatment of settlements on trust For the purposes of this subpart, if a settlement is made on a trust and further settlements are made on the same terms, a trustee of the trust may treat all settlements as 1 trust.
Compare: 1994 No 164 s HH 1A HH 2 Trusts settled by persons before becoming resident (1A) This section applies to a trust if— (a) a settlor of the trust is a natural person who on a day (the transition day)— (i) becomes a New Zealand resident who is not a transitional resident: ceases to be a transitional resident and continues to be a New Zealand resident; and (ii) 1535 Part H s HH 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) the trust would be a foreign trust in relation to a distri- bution made from property of the trust if the distribution were made on the day immediately before the settlor be- came a New Zealand resident.
(1) A settlor, trustee, or beneﬁciary of the trust may, within 12 months of the transition day, elect under section HH 4(7) to satisfy the income tax liability in respect of the taxable income of the trustee of the trust.
(2) Where an election has been made in accordance with subsec- tion (1), for the purposes of the deﬁnition of taxable distribu- tion,— (a) (b) the trust is deemed to be a foreign trust to the extent to which any distribution from that trust consists of in- come, capital proﬁts, or capital gains derived by the trustee of the trust before the date on which the elec- tion was made; and the trust is deemed to be a qualifying trust to the ex- tent to which any distribution from the trust consists of income, capital proﬁts, or capital gains derived by the trustee of the trust on or after the date on which the elec- tion was made if the trustee’s obligations under this Act and the Tax Administration Act 1994 in respect of the trustee’s liability to income tax in respect of the trustee income derived by the trustee have been satisﬁed, and if, in the tax year in which the election was made or any subsequent tax year, the trustee’s obligations are not satisﬁed, the trust is deemed to be a non-qualifying trust with respect to any distributions made in that tax year and succeeding tax years (not being distributions to which paragraph (a) applies).
(3) Where an election has not been made in accordance with sub- section (1), for the purposes of the deﬁnition of taxable dis- tribution,— (a) the trust is deemed to be a foreign trust to the extent to which any distribution from that trust consists of in- come, capital proﬁts, or capital gains derived by the trustee of the trust before the date on which expires 12 months from the transition day (referred to in this sec- tion as the election expiry date); and 1536 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HH 2 (4) (b) the trust is deemed to be a non-qualifying trust to the extent to which any distribution from the trust consists of income, capital proﬁts, or capital gains derived by the trustee of the trust on or after the election expiry date.
For the purposes of subsections (2) and (3), the income, capital proﬁts, or capital gains derived in the part of the tax year before the election to pay tax was made or before the election expiry date, as the case may be, must be calculated at the option of any trustee, settlor, or beneﬁciary of the trust who is required to satisfy the income tax liability in respect of the taxable income of the trustee of the trust as— (a) the amount calculated in accordance with the following formula: where— a is the income, capital proﬁts, or capital gains derived by the trustee of the trust during the tax year in which the election is made or in which the election expiry date falls (b) b is the number of days in the tax year which fall before the day on which the election is made or before the election expiry date; or the income, capital proﬁts, or capital gains derived by the trustee of the trust in the part of the tax year which falls before the day on which the election is made or before the election expiry date.
Compare: 1994 No 164 s HH 2 Subsection (1A) was inserted, as from 1 October 2005, by section 116(1) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corres- ponding to the 2005–06 tax year.

See section 116(3) and (4) of that Act as to the application of this amendment.
Subsection (1) was substituted, as from 1 October 2005, by section 116(1) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corres- ponding to the 2005–06 tax year.

See section 116(3) and (4) of that Act as to the application of this amendment.
1537 Part H s HH 3 Income Tax Act 2004 Reprinted as at 29 August 2011 Subsection (3)(a) was amended, as from 1 October 2005, by section 116(2) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3) by substituting “the transition day” for “the day on which the settlor ﬁrst became resident in New Zealand” with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year.
See section 116(3) and (4) of that Act as to the application of this amendment.

HH 3 Income of beneﬁciaries (1) The income of any person in any tax year includes any bene- ﬁciary income and any taxable distribution derived other than from a non-qualifying trust by that person in that tax year.
(2) Where any beneﬁciary, other than a beneﬁciary of a commu- nity trust, derives in any tax year beneﬁciary income or a tax- able distribution, the trustee must in respect of that beneﬁciary income or taxable distribution satisfy the income tax liability of the beneﬁciary as agent of the beneﬁciary.
(3) Notwithstanding any other provision of this Act, where any person resident in New Zealand ceases to be resident in New Zealand and, within a period of not more than 5 years from the day upon which that person ceased to be resident, that person again becomes resident in New Zealand, for the purposes of this section that person is deemed to derive, on the day on which that person again becomes resident in New Zealand, any amount which would have been income of the person, if the person had during that period remained in New Zealand, as beneﬁciary income from a foreign trust or a non-qualifying trust or taxable distributions derived by that person during the period commencing with the day on which that person ceased to be resident in New Zealand and ending on the day on which that person again became resident in New Zealand: provided that this subsection does not apply to beneﬁciary in- come or taxable distributions derived by that person prior to 16 December 1988 (being the date upon which the Income Tax Amendment Act (No 5) 1988 received the Royal assent).
(4) Where any person derives in any tax year any taxable distri- bution from a trust which is, in relation to that distribution, a non-qualifying trust, that taxable distribution is not income of the person and the person is liable for tax by way of an income 1538 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HH 3 tax in respect of that taxable distribution at the rate speciﬁed in schedule 1: provided that where in that tax year the person has any net loss or net loss carried forward to which relief would be given under section IE 1 or IF 1, that person is entitled to subtract from that taxable distribution an amount calculated in accordance with the following formula: where— a is such part of the net loss or net loss carried forward as the person claims must be taken into account by virtue of this proviso b c is the minimum rate speciﬁed in schedule 1 for income tax on taxable income of trustees of trusts expressed as a decimal is the rate speciﬁed in schedule 1 ﬁrst mentioned in this subsection expressed as a decimal,— and, to the extent to which any net loss or net loss carried forward is taken into account by virtue of this proviso, the loss may not be offset by the person against the per- son’s net income or carried forward by the person.
(5) Distributions (not being beneﬁciary income) derived by any beneﬁciary in that beneﬁciary’s capacity as beneﬁciary in any tax year from any trust that is in relation to that distribution a qualifying trust is excluded from being income of the beneﬁ- ciary, subject to subsection (5A).
If the trustee of a community trust makes in a tax year a dis- tribution to a person as a beneﬁciary of the trust and the distri- bution is not beneﬁciary income of the person, the distribution is income of the person in the tax year to the extent that the distribution does not represent— (a) (5A) trustee income derived by the trustee of the trust in or before the 2003-04 tax year: the corpus of the trust: capital proﬁts or capital gains derived by the trustee of the trust: (b) (c) 1539 Part H s HH 3A Income Tax Act 2004 Reprinted as at 29 August 2011 (d) a distribution, settlement, or dividend that is made to the community trust in the 2004-05 or 2005-06 tax year on the winding up of a trust or company, if— (i) the community trust provided the corpus of the trust and the trust would have been for charitable purposes but for the distribution, settlement, or dividend: the company is wholly-owned by the commu- nity trust and would have been established, main- tained, and carried on for exclusively charitable purposes but for the distribution, settlement, or dividend.
(ii) (6) This section does not apply to a Maori authority.

Compare: 1994 No 164 s HH 3 Subsection (4) formula was substituted, as from 1 April 2005, by section 65 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
HH 3A Beneﬁciary income of minors (1) If a minor derives beneﬁciary income,— (a) a trustee of the trust from which the beneﬁciary income is derived must pay income tax on the beneﬁciary in- come as if the beneﬁciary income were trustee income: despite section HH 3(1), the beneﬁciary income is ex- cluded from being income of the minor.
(b) (2) For the purpose of debiting and crediting a beneﬁciary’s ac- count within a trust, income tax paid by the trustee of a trust on beneﬁciary income is paid on behalf of the beneﬁciary, be- ing a minor.

Compare: 1994 No 164 s HH 3A HH 3B Exemption for beneﬁciary income $1,000 or less Section HH 3A does not apply if the amount of beneﬁciary income derived by a minor in relation to a tax year is $1,000 or less.
Compare: 1994 No 164 s HH 3B 1540 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HH 3C HH 3C Source of beneﬁciary income (1) Section HH 3A does not apply to beneﬁciary income derived by a minor from a trust if all settlements on the trust were— (a) made by a person who is neither a relative or legal guardian of the minor nor a person associated with the relative or legal guardian: (b) made by a relative, legal guardian, or associated person as an agent of the minor if the settlor has received the property from someone other than a relative, guardian, or associated person: (c) made by a relative, legal guardian, or associated person if the settlor is required by a court order to pay damages or compensation to the minor: (d) made by a relative, a legal guardian, or an associated person, against whom a protection order has been made under section 14 of the Domestic Violence Act 1995: (e) made according to a will, codicil, intestacy, or a court variation of a will, codicil, or intestacy if— (i) the minor is alive within 12 months of the date of the settlor’s death: the minor has a brother, sister, half-brother, or half-sister who is alive within 12 months of the date of the settlor’s death.
(ii) (2) Subsection (1)(d) applies if— (a) the minor is a protected person, as deﬁned in section 2 of the Domestic Violence Act 1995, in relation to the protection order; and the settlement on the trust is made before the protection order is made or during the time the protection order is in force.

(b) (3) For the purposes of subsection (1)(d), a settlement on the trust may be made jointly with another person.
Compare: 1994 No 164 s HH 3C Subsection (1)(a) was amended, as from 1 October 2005, by section 95(a) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by omitting “either” in the words before para (a).

Subsection (1)(a) to (d) and (e)(i) was amended, as from 1 October 2005, by section 95(b) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “:” for “; or”.
1541 Part H s HH 3D Income Tax Act 2004 Reprinted as at 29 August 2011 HH 3D Treatment of various settlements (1) If more than 1 settlement is made on a trust and 1 or more settlements are not of the type referred to in section HH 3C, section HH 3A does not apply to beneﬁciary income derived by a minor from the trust if— (a) all the settlements that are not of the type referred to in section HH 3C satisfy either— (i) (ii) paragraph (a)(i) of the deﬁnition of settlor ; or paragraph (a)(ii) of the deﬁnition of settlor, be- ing ﬁnancial assistance by way of a loan for less than market value; and (b) (c) the settlements that satisfy paragraph (a)(i) of the def- inition of settlor have a total value of not more than $5,000 at the end of the trust’s tax year; and the settlements that satisfy paragraph (a)(ii) of the deﬁn- ition of settlor relate to loans that are for less than mar- ket value and the loans have a total value of not more than $1,000 on any day in the trust’s tax year.
(2) (3) (1A) Subsection (1) does not apply if more than 1 settlement is made on a trust and none of the settlements are of the type referred to in section HH 3C.

For the purposes of subsection (1)(b), a settlement is valued on the date of settlement.

This section does not apply if services are provided to a trust by a relative or a legal guardian of a minor or by a person associated with the relative or the legal guardian.
In subsection (3), services does not include services that are incidental to the operation of the trust, such as bookkeeping or accounting services or those provided in being a trustee.

Compare: 1994 No 164 s HH 3D (4) HH 3E Exceptions (1) Section HH 3A(1) does not apply to beneﬁciary income de- rived by a minor for whom a child disability allowance is paid under the Social Security Act 1964.
Section HH 3A(1) does not apply to beneﬁciary income de- rived directly by a minor from a group investment fund or de- rived by a minor from a Maori authority.
Compare: 1994 No 164 s HH 3E (2) 1542 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HH 3F HH 3F Deﬁnitions of guardian, minor, and relative (1) (2) (2A) (3) (4) (b) (c) In sections HH 3C and HH 3D, guardian has the correspond- ing meaning to the deﬁnition of guardianship as set out in section 15 of the Care of Children Act 2004, but does not in- clude a guardian appointed under— (a) section 110(1)(a), (b), (c), or (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) In sections HH 3A to HH 3E, LB 1, and LB 1A, minor means a natural person who is a New Zealand resident and who is, on the balance date of the trust making the distribution of beneﬁ- ciary income, under 16 years of age.

In subsection (2), the balance date of the trust is the balance date for the income year in which the income, from which the distribution of beneﬁciary income is made, is derived.
In sections HH 3C and HH 3D, relative, in relation to a person (person A), means another person (person B) connected with person A by blood relationship, marriage or partnership, or adoption and includes the trustee of a trust under which person B has beneﬁted or is eligible to beneﬁt.
In subsection (3),— (a) persons are connected by blood relationship if within the fourth degree of relationship: persons are connected by marriage or partnership if 1 person is in a marriage, civil union or de facto relation- ship with the other or with a person who is connected by blood relationship, adoption or guardianship to the other: persons are connected by adoption if one has been adopted as the child of the other or as a child of a person who is within the third degree of relationship to the other: persons are connected by guardianship if one is a guardian of the other.
(b) (c) (d) Compare: 1994 No 164 s HH 3F 1543 Part H s HH 4 Income Tax Act 2004 Reprinted as at 29 August 2011 Subsection (1) was amended, as from 1 July 2005, by section 151 Care of Chil- dren Act 2004 (2004 No 90) by substituting “section 15 of the Care of Children Act 2004” for “section 3 of the Guardianship Act 1968”.
Subsection (1)(b) was amended, as from 1 July 2005, by section 151 Care of Children Act 2004 (2004 No 90) by substituting “section 31 of the Care of Children Act 2004” for “section 10B of the Guardianship Act 1968”.

Subsection (3) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “marriage or partnership” for “marriage”.

Subsection (4)(b) was substituted, as from 26 April 2005, by section 3(1) In- come Tax Amendment Act 2005 (2005 No 11).
HH 4 Trustee income (1) Subject to this section and sections CX 34 and DV 1 to DV 4, a trustee is required to satisfy the income tax liability in respect of the taxable income of the trustee as if the trustee were an individual beneﬁcially entitled to the trustee income.

(2) A trustee is not entitled— (a) (b) to any rebate of income tax; or to be a cash basis person, unless the trustee meets the requirements of section EW 60.
(b) (c) Subject to subsection (7) and section HH 2, if a trustee who is not resident in New Zealand derives in a tax year any amount from outside New Zealand that would be income if derived by a resident of New Zealand, that amount is deemed to be income of the trustee if at any time in the tax year— (a) any settlor of the trust is a New Zealand resident who is not a transitional resident; or the trust is a superannuation fund; or any trustee of the trust was resident in New Zealand and the trust is a testamentary trust or an inter vivos trust where any settlor of the trust died resident in New Zealand, whether in that tax year or otherwise.
In calculating the taxable income of a trustee to whom subsec- tion (3) applies, and for no other purpose, the trustee is deemed not to be a non-resident for the purposes of section BD 1(4)(b) and is deemed to be resident in New Zealand for the purposes of sections EW 9, EW 11, LC 1, and MF 11, the FIF rules, and the international tax rules.
(3) (3A) 1544 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HH 4 (3B) If a trustee resident in New Zealand derives in a tax year any foreign-sourced amount, that amount is exempt income if no settlor of the trust is at any time in the tax year a New Zealand resident who is not a transitional resident and that trust is nei- ther— (a) (b) a superannuation fund; nor a testamentary trust or an inter vivos trust where any set- tlor of the trust died resident in New Zealand, whether in that tax year or otherwise.
(3BB) Subsection (3B) does not apply for an income year to the resident foreign trustees of a foreign trust to which sections 22(2)(fb) and (m) and 59B of the Tax Administration Act 1994 apply if a resident foreign 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 relation to information re- lating to the income year.
(b) (c) (3BC) Subsection (3BB) does not apply for an income year to the resident foreign trustees of a foreign trust if a resident foreign trustee is convicted of an offence under section 143A(1)(b) of the Tax Administration Act 1994 if— (a) the conviction is in relation to information relating to the income year; and the information is supplied to the Commissioner after the conviction is entered.
(b) (4) Subject to subsection (5), where, in relation to any trust (not being a charitable trust) and any tax year, a trustee of the trust derives trustee income, and a settlement was made to or for the beneﬁt of the trust or on the terms of the trust by any person after 17 December 1987 (whether or not that person or any other person may have also made a settlement on the terms of that trust on or before 17 December 1987), any settlor of the trust who is resident in New Zealand at any time during that tax year is liable as agent of the trustee for any income tax payable by the trustee (other than income tax payable by the trustee in the trustee’s capacity as agent) and, if there is more 1545 Part H s HH 4 Income Tax Act 2004 Reprinted as at 29 August 2011 than 1 such settlor, those settlors are, in respect of that income tax payable, jointly and severally so liable.
Subsection (4) does not apply to— (a) any settlor of a trust in any tax year where at all times during that tax year (or, where a settlement is ﬁrst made to or for the beneﬁt of that trust or on the terms of that trust during that tax year, at all times from the day of that settlement until the end of that tax year) a trustee of that trust is resident in New Zealand; or any settlor of a superannuation fund; or any settlor of a trust (being a natural person) who was at the time of any settlement by that settlor on the trust not resident in New Zealand and who had not at the time of any settlement previously (at any time after 17 Decem- ber 1987) been resident in New Zealand, unless the set- tlor elects to satisfy the income tax liability in respect of the taxable income of the trustee under subsection (7); or any settlor of a trust to the extent to which that settlor can establish to the satisfaction of the Commissioner by making full disclosure of all relevant facts that the li- ability of that settlor to satisfy the income tax liability of the trustee exceeds the liability which that settlor should bear by comparison to other persons who have made a settlement to or for the beneﬁt of the trust or on the terms of that trust having regard to the respective settlements made by that settlor and those other persons; or any settlor of a trust to the extent to which the trustee income is derived by virtue of the application of the ﬁnancial arrangements rules to any amounts remitted by the settlor under any ﬁnancial arrangement where section EW 31 applies: (b) (c) (d) (e) provided that paragraph (d) does not apply in determining the nature and extent of the obligations of the trustee of the trust and whether those obligations have been satisﬁed for the pur- poses of the deﬁnition of qualifying trust and the application of that deﬁnition.
(5) 1546 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HH 4 (6) Where in any tax year an amount is income under subsection (3) and— (a) either— (i) (ii) no settlement was made to or for the beneﬁt of the trust or on the terms of the trust after 17 Decem- ber 1987 and, where any election has been made under section HZ 2 to pay income tax on trustee income, that election has not been made by the trustee; or the only settlements made to or for the beneﬁt of the trust or on the terms of the trust have been made by settlors who, at the time of the settle- ment, were not resident in New Zealand nor had previously (at any time after 17 December 1987) been resident in New Zealand and, where an elec- tion has been made under section HZ 2 to pay in- come tax on trustee income, that election has not been made by the trustee; and (b) the trustee is at all times during that tax year resident outside New Zealand,— the amount is exempt income under subsection (3): provided that this subsection does not affect the income tax liability of any settlor of a trust under sections HH 1 and HH 2 and the trust rules: provided also that for the purpose of determining whether a trust is or remains a qualifying trust or is deemed to be a quali- fying trust, and for the purpose of the application of the def- inition of qualifying trust, this subsection does not apply in determining whether the trustee’s obligations in relation to that liability have been satisﬁed.
In relation to any trust and any tax year, any trustee, settlor, or beneﬁciary of a trust may furnish to the Commissioner within the prescribed period for furnishing an annual return of in- come for that tax year, or within such other period as may be speciﬁed in section HH 2, an election to satisfy the income tax liability of the trustee for that tax year or from the date of the election and, if an election is so made, the trustee, set- tlor, or beneﬁciary is liable for any income tax payable by the trustee (other than income tax payable in the trustee’s capacity (7) 1547 Part H s HH 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (8) as agent) and that election applies in respect of that tax year or from the date of the election, and in respect of all succeeding tax years.
This section does not apply to a Maori authority.

Compare: 1994 No 164 s HH 4 Subsection (3)(a) was substituted, as from 1 October 2005, by section 117(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
Subsection (3B) was amended, as from 1 October 2005, by section 117(2) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3) by substituting “at any time in the tax year a New Zealand resident who is not a transitional resident” for “resident in New Zealand at any time during the tax year” with application as from the income year corresponding to the 2005–06 tax year.
Subsections (3BB) and (3BC) were inserted, as from 1 October 2006, by section 117(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellan- eous Provisions) Act 2006 (2006 No 3).
HH 5 Existing trusts becoming subject to tax Where, in relation to any trust and any tax year, amounts derived by the trustee of that trust on or after any date in that tax year are trustee income, but would not have been trustee income had they been derived immediately before that date (other than only as non-resident with- holding income),— (a) the cost for the purposes of this Act at that date of the premises, plant, machinery, equipment, and trading stock of that trust is deemed to be, at the option of any person who is liable for any income tax payable by the trustee,— (i) the historical cost of the asset, less accu- mulated amounts of depreciation loss (if any), or other value at that date used for the purposes of income tax calculations in any country or territory in which there has been a liability to income tax in respect of the trustee income of the trust (being a value not higher than the market value at that date); or the value which would be used for the pur- poses of this Act at that date calculated as (ii) 1548 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HH 5 if the trustee income of that trust had at all times been assessable income under this Act (other than only as non-resident with- holding income): (b) the consideration for a ﬁnancial arrangement on that date is, at the option of the person who is liable for income tax payable by the trustee,— (i) the market value of the ﬁnancial arrange- ment on that date; or the absolute value of the result of the for- mula— (ii) consideration paid to the person + expenditure – consideration paid by the person – income where— consider- ation paid to the per- son is the consideration paid to the person for all periods before the accounting period expend- iture is expenditure that would have been incurred under the ﬁnancial arrangements rules for all periods before the accounting period consider- ation paid by the per- son is the consideration paid by the person for all periods before the accounting period income is income that would have been
 derived under the ﬁnancial arrangements rules for all periods before the accounting period.
Compare: 1994 No 164 s HH 5 1549 Part H s HH 6 Income Tax Act 2004 Reprinted as at 29 August 2011 HH 6 Distributions from trusts (1) Subject to subsection (2), where in any tax year any distribu- tion from a trust is made to a beneﬁciary by any trustee, that distribution is, for the purposes of sections HH 1 and HH 2 and the trust rules, deemed to consist of— (a) the income derived by the trustee in that tax year (whether, as between the parties to the trust, the income is treated as derived by a beneﬁciary or not) less any deductions in that tax year required to be taken into account under this Act for the purpose of calculating net or taxable income, not being income deemed by this section to have constituted part of any earlier or contemporaneous distribution from that trust in that tax year; and to the extent to which the distribution exceeds the amount speciﬁed in paragraph (a), income derived by the trustee in preceding tax years (not being beneﬁciary income) during which the trust was in existence less any deductions in that tax year required to be taken into account under this Act for the purpose of calculating net or taxable income, not being amounts deemed by this section to have constituted part of any earlier or contemporaneous distribution from that trust; and to the extent to which the distribution exceeds the amounts speciﬁed in paragraphs (a) and (b), proﬁts derived during that tax year by the trustee of the trust from realisation of a capital asset of the trust or any other capital proﬁt or capital gain realised during that tax year by the trustee (not being amounts required to be taken into account under this Act for the purpose of assessing income tax) less any capital loss incurred by the trust in that tax year (not being a loss required to be taken into account under this Act for the purpose of assessing income tax), not being proﬁts or gains deemed by this section to have constituted part of any earlier or contemporaneous distribution from that trust in that tax year; and to the extent to
 which the distribution exceeds the amounts speciﬁed in paragraphs (a), (b), and (c), the (b) (c) (d) 1550 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HH 6 distribution is deemed to be out of the amount speciﬁed in paragraph (c) for preceding tax years during which the trust was in existence, not being amounts deemed by this section to have constituted part of any earlier or contemporaneous distribution from that trust; and to the extent to which the distribution exceeds the amounts speciﬁed above, corpus of the trust.
(e) (2) Subsection (1) does not apply— (a) to any distribution from a trust which is a qualifying trust (other than a qualifying trust in relation to which an election to pay income tax on trustee income has been made for the purposes of section HZ 2); or to any distribution from a trust— (i) created by will or codicil or by an order of court varying or modifying the provisions of any will or codicil; or created on any intestacy or partial intestacy; or on which no settlement was made after 17 De- cember 1987,— (ii) (iii) and the trustee has no discretion as to the source nature and amount of distributions to beneﬁciaries, including but not limited to the classiﬁcation of trust property as capital or income; or to any distribution that is a distribution only by virtue of the application of paragraph (b)(i) or (ii) of the deﬁn- ition of distribution and not by virtue of the application of any other part of that deﬁnition; or to any distribution from a trust which is one to which section HH 2(2) applies (except where the trust is deemed to be a non-qualifying trust under paragraph (b) of that subsection)— (b) (c) (d) and in such case except in the case of a distribution speciﬁed in paragraph (c) of this subsection the distribution is deemed to consist of such amounts as reﬂect the terms of the trust or the terms of the exercise of the discretion of the trustee, and, in the case of a distribution speciﬁed in paragraph (c), the dis- tribution is a taxable distribution.
Subject to subsection (2), where and to the extent to which in relation to any distribution the records maintained in relation to (3) 1551 Part H s HH 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) any trust do not permit subsection (1) to be applied accurately to determine the constituent elements of any distribution, the distribution made is a taxable distribution.
For the purposes of this section, in determining in relation to any trust and to any beneﬁciary the constituent elements of any distribution, no amount of income or capital proﬁts or gains derived by the trustee of the trust is treated as having been distributed to any other beneﬁciary of that trust if the effect is that any part or all of the distribution in question would be treated as not being a taxable distribution, unless that amount distributed to that other beneﬁciary was distributed in a bona ﬁde transaction which placed the whole of that amount beyond the possession and control of the trustee in the trustee’s cap- acity as trustee of that trust and which transaction did not itself constitute a settlement.
Compare: 1994 No 164 s HH 6 HH 7 Commissioner may determine amount of trustee income Where any person— (a) (b) has failed to disclose for any tax year in accordance with section 59 of the Tax Administration Act 1994 a trust of which that person is a settlor or any of the further details required by the Commissioner; or has failed to disclose any information requested by the Commissioner under section 17 of the Tax Administration Act 1994 in relation to that trust; or is unable to obtain sufﬁcient information to calculate the trustee income of that trust for any tax year,— the Commissioner may determine the amount of trustee in- come for the tax year in such manner as the Commissioner considers fair and reasonable.
Compare: 1994 No 164 s HH 7 (c) HH 8 Income received by trustee after death of deceased person Any amount received in any tax year by the trustee of the es- tate of a deceased person is deemed to be income derived by the trustee in that tax year if it does not represent income de- rived by the deceased person during that person’s lifetime, but 1552 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HI 1 would have been included in that person’s income if that per- son had been alive when it was received.
Compare: 1994 No 164 s HH 8 Subpart HI—Maori authorities Contents HI 1 HI 2 HI 3 HI 4 HI 5 HI 6 HI 7 HI 8 Application of Act to Maori authority Eligibility to be Maori authority Election to become Maori authority Distributions by Maori authority Amount distributed to member by Maori authority Proportional allocation required if distribution includes amount other than taxable Maori authority distribution Distribution includes Maori authority credit attached and RWT deducted Treatment of companies and trusts that elect to apply this subpart HI 9 Market value calculations Page 1553 1554 1555 1556 1557 1558 1558 1558 1561 HI 1 Application of Act to Maori authority (1) The application to a Maori authority of a provision that is not in the Maori authority rules is subject to the Maori authority rules.
(2) A Maori authority may not— (a) (b) (c) (d) (e) offset any part of a net loss against net income of another taxpayer that is not a Maori authority: offset net income against any part of a net loss of another taxpayer that is not a Maori authority: amalgamate with a company that is not a Maori author- ity: be part of a consolidated group that includes a company that is not a Maori authority: be a co-operative company if a shareholder is not a Maori authority.
Compare: 1994 No 164 s HI 1 1553 Part H s HI 2 Income Tax Act 2004 Reprinted as at 29 August 2011 HI 2 Eligibility to be Maori authority The following persons are eligible to be a Maori authority: (a) (b) (c) (d) (e) (f) (g) (h) (i) (ia) a company that is established by an order made under Te Ture Whenua Maori Act 1993 (Maori Land Act 1993): the trustees of a trust that is established by an order made under Te Ture Whenua Maori Act 1993 (Maori Land Act 1993): a company that owns land that is subject to Te Ture Whenua Maori Act 1993 (Maori Land Act 1993): the trustees of a trust who own land that is subject to Te Ture Whenua Maori Act 1993 (Maori Land Act 1993): 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 (Maori Land Act 1993): a Maori Trust Board, as deﬁned in section 2 of the Maori Trust Boards Act 1955: the Crown Forestry Rental Trust, established by deed in accordance with section 34 of the Crown Forest Assets Act 1989: Te Ohu Kai Moana Trustee Limited, established in ac- cordance with section 33 of the Maori Fisheries Act 2004: Aotearoa Fisheries Limited, established in accordance with section 60 of the Maori Fisheries Act 2004: 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) (ib) (j) (k) 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 the trusts that are established by Te Ohu Kai Moana Trustee Limited in accordance with sections 79 and 92 of the Maori Fisheries Act 2004: a company that— 1554 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HI 3 (l) (i) (ii) 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 referred to in subparagraph (i): 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 referred to in subparagraph (i).
(ii) Compare: 1994 No 164 s HI 2 Paragraphs (h), (i) and (j) were substituted, as from 29 November 2004, by sec- tion 214 Maori Fisheries Act 2004 (2004 No 78).

See clause 3 Maori Fisheries (Appointed Day) Order 2004 (SR 2004/401).

Paragraphs (ia) and (ib) were inserted, as from 29 November 2004, by sec- tion 214 Maori Fisheries Act 2004 (2004 No 78).

See clause 3 Maori Fisheries (Appointed Day) Order 2004 (SR 2004/401).
HI 3 Election to become Maori authority (1) A person who is eligible to be a Maori authority may elect to become a Maori authority by giving notice to the Commis- sioner.

(2) Upon receiving a notice of election by a person, the Commis- sioner must give to the person a notice accepting the election.
(3) A person who elects to become a Maori authority becomes a Maori authority— (a) (b) on the ﬁrst day of the income year in which the per- son gives notice of the election to the Commissioner, if paragraph (b) does not apply: on the ﬁrst day of the income year immediately succeed- ing the income year in which the person gives notice of the election to the Commissioner, if the person nomin- ates that date in the notice of the election.
(4) An election by a person to become a Maori authority ceases to be effective if the person— 1555 Part H s HI 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) gives notice to the Commissioner that the election is cancelled, whereupon the election ceases to be effective from the date that is given in the notice: ceases to be a Maori authority.
(5) A person who is a Maori authority under this Act at the end of the 2003-04 tax year ceases to be a Maori authority at that time unless the person— (a) is eligible at the beginning of the 2004-05 tax year to be a Maori authority; and gives to the Commissioner a notice of an election to be- come a Maori authority that the Commissioner accepts at or before the end of the 2004-05 tax year.
(b) Compare: 1994 No 164 s HI 3 Subsection (3) was substituted, as from 1 October 2005, by section 209 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
HI 4 Distributions by Maori authority (1) The following amounts are treated as distributions by a Maori authority: (a) an amount that is paid or credited by the Maori authority to a member in any manner or under any name: an amount that is applied by the Maori authority exclu- sively for the member: an amount that is advanced by the Maori authority to a member to the extent to which the making of the ad- vance is not a bona ﬁde investment by the Maori author- ity but is virtually a distribution of income: if property is disposed of by the Maori authority to a member without consideration in money or money’s worth, or for a consideration that is less than the market value of the property, the amount by which the market value of the property is more than the amount of con- sideration: if property is disposed of by a member to the Maori au- thority for a consideration that is more than the market value of the property, the amount by which the market value of the property is less than the amount of consid- eration: a taxable bonus issue.
(b) (c) (d) (e) (f) 1556 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HI 5 (2) A distribution by a Maori authority to a member that, but for this subsection, would be a dividend for the member— (a) is treated as being a distribution by the Maori authority to the member; and is treated as not being a dividend paid by the Maori au- thority to the member except for the purposes of section CW 10.
(b) (3) A Maori authority that is a co-operative company may make a notional distribution to a member under section ME 35 as if a Maori authority credit were an imputation credit.

Compare: 1994 No 164 s HI 4 Subsection (1)(e) was amended, as from 1 October 2005, by section 210 Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “consideration:” for “consideration:”.
Subsection (1)(f) was inserted, as from 1 October 2005, by section 210 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Subsection (3) was amended, as from 1 April 2005, by section 96 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “ME 35” for “ME 5”.
(a) (2) HI 5 Amount distributed to member by Maori authority (1) An amount distributed by a Maori authority to a member is— income of the member, if the amount is a taxable Maori authority distribution or a notional distribution: not income of the member, otherwise.
(b) Subject to subsection (3), an amount distributed by a Maori authority to a member is a taxable Maori authority distri- bution if the distribution is made from income of the Maori authority that is— (a) derived by the Maori authority in the 2004-05 tax year or a subsequent tax year; and not exempt from tax in the hands of the Maori authority.
(3) A cash distribution by a Maori authority to a member is not a taxable Maori authority distribution if the Maori authority— (a) makes the distribution in respect of a notional distribu- (b) (b) tion; and has made a determination under section ME 35 in re- spect of the notional distribution.

1557 Part H s HI 6 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) A taxable bonus issue that is made by a Maori authority to a member is a taxable Maori authority distribution.
Compare: 1994 No 164 s HI 5 Subsection (4) was inserted, as from 1 October 2005, by section 211 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
HI 6 Proportional allocation required if distribution includes amount other than taxable Maori authority distribution If a Maori authority makes a distribution that consists of a taxable Maori authority distribution and another amount, the Maori authority must allocate an equal proportion of each type of distribution to every member to whom the distribution is made.
Compare: 1994 No 164 s HI 6 HI 7 Distribution includes Maori authority credit attached and RWT deducted For the purposes of this Act, the income of a member includes the amount of a Maori authority credit attached, or treated as being attached under section NF 8A, to a distribution.
Compare: 1994 No 164 s HI 7 HI 8 Treatment of companies and trusts that elect to apply this subpart Table HI 8—Transitional rules CONSEQUENCES OF CHANGE IN ENTITY STAUS FOR PURPOSE OF MAORI AUTHORITY RULES Row If becomes then 1558 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HI 8 Table HI 8—continued 1 a com- pany a Maori authority (a) (b) the company ceases to be an imputation credit account company and the rules relating to a company ceasing to be an imputation credit account company apply; and retained earnings, accumulated proﬁts, and capital reserves are treated as an amount from which may be made a distribution that is not a taxable Maori authority distribution.
2 3 a trust a Maori authority trustee income is treated as an amount from which may be made a distribution that is not a taxable Maori authority distribution.
a Maori Author- ity a company (a) the Maori authority may transfer a credit balance that is not a in the Maori authority credit account to the company’s imputation rity credit account, and section MK 8 applies in respect of a debit balance in the 1559 Part H s HI 8 Income Tax Act 2004 Reprinted as at 29 August 2011 Table HI 8—continued (b) Maori authority credit account; and taxable income derived by the Maori authority in the 2003-04 or an earlier tax year is available subscribed capital.
4 a Maori authority a trust that is not a Maori authority taxable income derived by the Maori authority is treated as trustee income Row If 5 a Maori authority then becomes and re- verts to be- ing (a) a Maori author- ity a company that is not a Maori authority (b) market value cal- culations are re- quired in accord- ance with section HI 9; and the company must apply row 1.
1560 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HI 9 Table HI 8—continued 6 a Maori authority a trust that is not a Maori authority (a) a Maori author- ity (b) market value cal- culations are re- quired in accord- ance with section HI 9; and the trust must apply row 2.

How to use this table Read columns from left to right according to the row that ﬁts your situation.

(1) (2) (3) (4) If a company becomes a Maori authority, the company must apply row 1 of table HI 8.
If a trust becomes a Maori authority, the trust must apply row 2 of table HI 8 If a Maori authority is a company and ceases to be a Maori authority, the former Maori authority must apply row 3 of table HI 8.

If a Maori authority is a trust and ceases to be a Maori author- ity, the former Maori authority must apply row 4 of table HI 8.
Compare: 1994 No 164 s HI 8 Row 4 of Table HI 8 was substituted, as from 1 October 2005, by section 212 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

HI 9 Market value calculations (1) This section applies to a company or the trustees of a trust that, having ceased to be a Maori authority, become a Maori authority again.
1561 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) (3) (4) (5) (6) (b) For the purposes of this Act, such a company is treated as— (a) disposing of its property immediately before becoming a Maori authority for a consideration that is the market value of the property on the date of disposal; and acquiring the property of the Maori authority for a con- sideration that is the market value of the property on the date of the disposal referred to in paragraph (a).
The market value of the property is the market value for both the company and the Maori authority.

For the purposes of this Act, such trustees are treated as— (a) disposing of the trust’s property immediately before be- coming a Maori authority for a consideration that is the market value of the property 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 the disposal referred to in paragraph (a).
The market value of the property is the market value for both the trustees and the Maori authority.

For the purpose of applying depreciation provisions, the cost to a Maori authority of property that is affected by this section is the lower of— (a) the market value of the property on the date of acquisi- tion; and the original cost of the property to the company or the trust.
(b) (b) Compare: 1994 No 164 s HI 9 Subpart HJ—Superannuation Contents HJ 1 Government Superannuation Fund Page 1562 HJ 1 Government Superannuation Fund The Government Superannuation Fund Authority is liable for income tax in the same manner in all respects as if the Fund were a superannuation scheme that is a trust and the Govern- 1562 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HJ 1 ment Superannuation Fund Authority were the trustee of that scheme.
Compare: 1994 No 164 s HJ 1 Subpart HK—Agency Contents Agents generally HK 1 Agent to make returns and be assessed as principal HK 2 Rate and amount of tax payable by agent HK 3 Liability of principal not affected HK 4 Agent may recover tax from principal HK 5 Agent may retain from money of principal amount required for tax HK 6 Assessment deemed authority for payment of tax by agent HK 7 Agents to be personally liable for payment of tax HK 8 Relation of principal and agent arising in effect Special cases of agency HK 9 Guardian of person under disability to be agent HK 10 Liability of mortgagee in possession HK 11 Liability for tax payable by company left with insufﬁcient assets HK 12 Company deemed agent of debenture holders HK 13 Modiﬁcation of agency provisions in respect of income from company debentures Agents of absentees and non-residents HK 16 Liability of agent of absentee principal for returns and tax HK 17 Partner of absentee deemed agent HK 18 Master of ship deemed agent of absentee owner HK 19 Tenant, mortgagor, or other debtor to be agent of absentee landlord, mortgagee, or other creditor HK 20 Person having disposal of income deemed agent HK 21 Company to be agent of absentee shareholders HK 22 Trustee of group investment fund to be agent of absentee investors HK 23 Banking company to be agent of absentee depositors HK 24 Liability as agent of employer of non-resident taxpayer and employer’s agent Page 1564 1564 1564 1565 1565 1565 1566 1566 1566 1567 1567 1571 1571 1572 1573 1573 1573 1574 1574 1574 1574 1575 1563 Part H s HK 1 Income Tax Act 2004 Reprinted as at 29 August 2011 HK 25 Non-resident trader to be agent of employees in New Zealand HK 26 Agents in New Zealand of principals resident abroad 1576 1576 Agents generally HK 1 Agent to make returns and be assessed as principal (1) A person who is an agent for a principal under this Act or under the Tax Administration Act 1994 is, in the person’s capacity as agent for that principal, treated as being a separate taxpayer with respect to the
 income in respect of which the person is agent and must— (a) make all assessments that the principal is required to make; and furnish all tax returns that the principal is required to furnish; and satisfy the income tax liability of the principal.
(b) (c) (2) A person who is an agent under subsection (1) is not entitled to a rebate other than a rebate to which the agent’s principal is entitled.
Compare: 1994 No 164 s HK 1 HK 2 Rate and amount of tax payable by agent Except where otherwise expressly provided by this Act, the rate of tax used to calculate an agent’s income tax liability must be determined by reference to the taxable income of the principal, but it must be charged and payable in the same pro- portion as the income subject to section HK 1 bears to the tax- able income of the principal.
Compare: 1994 No 164 s HK 2 HK 3 Liability of principal not affected (1) Nothing in this Act relating to an agent is to be so construed as to release the principal from liability to make assessments, furnish returns, and to be charged with tax.
(1A) With the Commissioner’s agreement, a principal may agree with their agent that the principal will— 1564 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HK 6 (a) make an assessment that the agent would be required to (b) (c) make; and furnish a return that the agent would be required to fur- nish; and satisfy an income tax liability that the agent would be required to satisfy.
(2) No assessment of the agent precludes an assessment of the principal for the same tax, nor does an assessment of the prin- cipal by the Commissioner preclude an assessment of the agent by the Commissioner for the same tax, and the principal and agent are jointly and severally liable for all tax for which the agent is liable.

(3) When 2 or more persons are liable as agents in respect of the same tax, they are jointly and severally liable for it.
Compare: 1994 No 164 s HK 3 HK 4 Agent may recover tax from principal When an agent pays any tax, the agent may recover the amount so paid from the agent’s principal or may deduct the amount from any money in the agent’s hands belonging or payable to the agent’s principal.
Compare: 1994 No 164 s HK 4 HK 5 Agent may retain from money of principal amount required for tax An agent may from time to time during the tax year, or at any later time, retain out of any money belonging or payable to the agent’s principal such sums as may reasonably be deemed sufﬁcient to pay the tax for which the agent is or may become liable.
Compare: 1994 No 164 s HK 5 HK 6 Assessment deemed authority for payment of tax by agent An assessment made by the Commissioner is, as between an agent and the agent’s principal, a sufﬁcient authority for the payment by the agent of the tax so assessed and the agent is entitled as against the agent’s principal to reimbursement ac- cordingly.
Compare: 1994 No 164 s HK 6 1565 Part H s HK 7 Income Tax Act 2004 Reprinted as at 29 August 2011 HK 7 Agents to be personally liable for payment of tax (1) Every person who is an agent is personally liable for the in- come tax liability of the person in respect of the person’s tax- able income as agent.
(2) When the Commissioner is satisﬁed that an agent has no money of the agent’s principal with which the agent can pay the tax, and that the agent has not paid away any such money after an assessment in respect of the agent has been made, and that immediate enforcement of payment by the agent would be a cause of hardship, the Commissioner may set a new due date for payment of the tax assessed as payable in the notice of assessment.
Compare: 1994 No 164 s HK 7 HK 8 Relation of principal and agent arising in effect When the Commissioner is satisﬁed that any person carrying on business in New Zealand (in this section referred to as the agent) is so far under the control of any other person carry- ing on business in New Zealand or elsewhere (in this section referred to as the principal) that the relation between them is in effect that of agent and principal, the Commissioner may treat the ﬁrst-mentioned business as that of the principal, and as being carried on by the agent on the principal’s behalf, and may require returns to be made, and may make assessments accordingly, and the principal and agent are liable for income tax accordingly.
Compare: 1994 No 164 s HK 8 Special cases of agency HK 9 Guardian of person under disability to be agent Every person who, as guardian, manager, or otherwise, has the receipt, control, or disposition of any income derived by a person under any legal disability is for the purposes of this Act and the Tax Administration Act 1994 the agent of that person in respect of that income.
Compare: 1994 No 164 s HK 9 1566 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HK 11 HK 10 Liability of mortgagee in possession For the purposes of this Act and the Tax Administration Act 1994, a mortgagee in possession of any land or other prop- erty is deemed to be the agent of the mortgagor in respect of any income derived by that mortgagee from that land or other property on behalf of or for the beneﬁt of the mortgagor.
Compare: 1994 No 164 s HK 10 HK 11 Liability for tax payable by company left with insufﬁcient assets This section applies where— (a) (1) (2) (b) (c) (b) any arrangement has been entered into in relation to a company; and an effect of that arrangement is that the company is un- able to satisfy under this Act a liability (called in this section the tax liability) of the company, whether aris- ing before or after the arrangement is entered, for— (i) (ii) (iii) income tax: a civil penalty: an amount payable under Part 7 of the Tax Administration Act 1994; and it can reasonably be concluded that— (i) a director of the company at the time of entry into the arrangement who had made all reasonable inquiries into the affairs of the company would have anticipated at that time that the tax liability would be, or would be likely to be, required to be satisﬁed by the company under this Act; and a purpose of the arrangement was to have the effect speciﬁed in paragraph (b).
(ii) This section does not apply to— (a) any arrangement to which the Commissioner is a party; or any arrangement to the extent that the Commissioner is satisﬁed that the tax liability is less than or equal to any amount of income tax— (i) arising under this Act as a direct result of the performance of the arrangement; and 1567 Part H s HK 11 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) the liability for which has been duly satisﬁed under this Act; or (c) any arrangement entered into at a time when the com- pany is under statutory management under the Reserve Bank of New Zealand Act 1989 or the Corporations (Investigation and Management) Act 1989.
(3) Where any arrangement to which this section applies has been entered into, all persons who were directors of the company at the time the arrangement was entered into are, subject to subsection (6), jointly and severally liable for the tax liability as agent of the company.
(4) Where any arrangement to which this section applies has been (b) entered into, any person who was— (a) a controlling shareholder at the time the arrangement was entered into; or a person who had a voting interest or market value in- terest in the company (calculated, in any case where the person is a company, as if the person were not a company) at the time the arrangement was entered into, where it could reasonably be concluded, having regard to the materiality of the beneﬁt derived by the person from the arrangement, that the person was a party to the arrangement,— is liable as agent of the company for— (c) the tax liability (excluding a civil penalty or an amount payable under Part 7 of the Tax Administration Act 1994 that is part of the tax liability) to the extent that the amount of the tax liability (so exclusive) does not exceed the greater of— (i) the market value of the person’s direct and indi- rect shareholding in the company at the time of entry into the arrangement; and the value of any beneﬁt derived by the person from the arrangement; and (ii) (d) that proportion of a civil penalty or an amount payable under Part 7 of the Tax Administration Act 1994 that is part of the tax liability, which is equal to the proportion which the amount for which the person is liable under paragraph (c) represents as a proportion of the tax liabil- 1568 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HK 11 ity (excluding the civil penalty or the amount payable under Part 7 of the Tax Administration Act 1994).
(5) A limitation placed on the liability of any person under sub- section (4) applies notwithstanding section HK 3(3).
(6) Notwithstanding subsection (3), a director is not liable under that subsection for any tax liability of the company where the Commissioner is satisﬁed that the director derived no beneﬁt from the arrangement and either— (a) the director has, at the ﬁrst reasonable opportunity after becoming aware of the arrangement, or of those aspects of the arrangement that render it subject to this sec- tion,— (i) formally recorded with the company his or her dissent in relation to the arrangement; and notiﬁed the Commissioner of the arrangement and of his or her dissent from that arrangement; or (ii) (7) (b) (ii) the director satisﬁes the Commissioner that— (i) the director was not at the material time or times involved in the executive management of the company; and the director had no knowledge of the arrange- ment, or of those aspects of the arrangement that render it subject to the application of this section.
Subject to the time bar, but notwithstanding any other provi- sion of this Act or the Tax Administration Act 1994, for the purposes of giving effect to this section where a company has been liquidated, the Commissioner may at any time after the li- quidation make or amend any assessment of a company under this Act or an earlier Act or the Tax Administration Act 1994 in respect of any tax liability of the company as if the company had not been liquidated.
(8) Where the Commissioner makes or amends any assessment under subsection (7), the Commissioner must nominate 1 or more persons whom the Commissioner considers to be liable in respect of the tax liability speciﬁed in that assessment and that person or those persons are treated, for the purposes of this Act and the Inland Revenue Acts in respect of any notiﬁ- 1569 Part H s HK 11 Income Tax Act 2004 Reprinted as at 29 August 2011 cation or objection procedure in relation to that assessment or amended assessment, as the agent or agents of the company.
(9) No person is liable under this section as agent for the tax liabil- ity of a company in respect of any particular tax year where— the company has furnished returns for that tax year be- (a) fore the expiry of the time allowed under section 37 of the Tax Administration Act 1994 for the furnishing of returns for the tax year in which the company is liqui- dated; and the Commissioner fails to issue a notice of assessment of the company for the particular tax year before the expiry of 4 years following the end of the tax year in which the company is liquidated.
(b) (10) In this section,— controlling shareholder means, at any time at which an ar- rangement to which this section applies is entered into, in re- spect of any company, any person whose voting interest or market value interest in that company, aggregated with the vot- ing interest or market value interest or interests (as the case may be) of any other person or persons who are at that time associated with that person, at that time (calculated, in any case where either the person or any such associated person is a company, as if neither that person nor any such associated persons were companies and as if sections OD 3(3)(c) and (d) and OD 4(3)(c) and (d) were omitted from this Act) is equal to or greater than 50% director means— (a) a person occupying the position of director by whatever name called: in the case of an entity deemed or assumed to be a com- pany by virtue of any provision of this Act, which en- tity does not have directors as such, any trustee, man- ager, or other person who acts in relation to that en- tity in the same or a similar fashion as a director would act were that entity a company incorporated in New Zealand under the Companies Act 1993.
(b) 1570 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HK 13 (11) Except as otherwise speciﬁcally provided in this section, a per- son’s market value interest or voting interest in a company is determined in accordance with sections OD 2 to OD 4.

Compare: 1994 No 164 s HK 11 Subsection (1)(b) was substituted, as from 21 June 2005, by section 66(1) Taxa- tion (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
Subsection (4)(c) was amended, as from 21 June 2005, by section 66(2) Taxa- tion (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “(excluding a civil penalty or an amount payable under Part 7 of the Tax Administration Act 1994 that is part of the tax liability)” for “(ex- clusive of any late payment penalty or interest arising under this Act or the Tax Administration Act 1994 for late payment of any part of the tax liability)” with application as from the 2005–06 income year.
Subsection (4)(d) was amended, as from 21 June 2005, by section 66(3)(a) Tax- ation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “a civil penalty or an amount payable under Part 7 of the Tax Administration Act 1994 that is part of the tax liability” for “any late payment penalty or interest arising under this Act or the Tax Administration Act 1994 for late payment, which comprises part of the tax liability” with application as from the 2005–06 income year.
Subsection (4)(d) was amended, as from 21 June 2005, by section 66(3)(b) Tax- ation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “(excluding the civil penalty or the amount payable under Part 7 of the Tax Administration Act 1994)” for “(exclusive of any such late payment penalty or interest)” with application as from the 2005–06 income year.
HK 12 Company deemed agent of debenture holders Save as otherwise provided in sections FC 1 and HK 13, every company which has issued debentures, whether charged on the property of the company or not, is for the purposes of this Act and the Tax Administration Act 1994 the agent of all deben- ture holders, whether absentees or not, in respect of all income derived by them from those debentures.
Compare: 1994 No 164 s HK 12 HK 13 Modiﬁcation of agency provisions in respect of income (1) from company debentures The duty to act as the agents of debenture holders imposed on companies by section HK 12 does not apply with respect to debentures that are a stapled debt security to which section FC 2B applies, or to debentures issued to any person resident in New Zealand if the company that has issued the debentures has supplied to the Commissioner, before an assessment has 1571 Part H s HK 16 Income Tax Act 2004 Reprinted as at 29 August 2011 been made, or should have been made, in any tax year tak- ing into account the income derived from those debentures, a certiﬁed list specifying the numbers of the debentures or other particulars sufﬁcient to identify them, the names, addresses, and descriptions of the persons to whom the debentures have been issued, the interest derived or derivable from the deben- tures, and such other particulars as may be prescribed.
(2) Where any such list is supplied the person named in it as the holder of any debentures is liable for income tax (though not to the exclusion of any other person) accordingly, unless and until that person satisﬁes the Commissioner that they have trans- ferred or assigned the debentures, and has given notice to the Commissioner in the prescribed form of the name, address, and description of the transferee or assignee.
Every person being the transferee or assignee of any deben- tures in like manner remains personally liable in respect of them (though not to the exclusion of any other person) unless and until the person has given notice to the Commissioner in the prescribed form of the transfer or assignment of the deben- tures.
(3) (4) Any tax paid by the former holder of any debentures in re- spect of the taxable income calculated taking into account in- come derived from the debentures by a subsequent holder is deemed to be paid on behalf of that subsequent holder so far as it does not exceed the income tax liability which the sub- sequent holder might personally have had in respect of those debentures and may be recovered by the former holder from the subsequent holder accordingly.
Compare: 1994 No 164 s HK 13 Section HK 13(1): amended (with effect on 25 February 2008), on 6 October 2009, by section 810 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Agents of absentees and non-residents HK 16 Liability of agent of absentee principal for returns and tax Every person who in New Zealand carries on any business for and on behalf of a principal who is an absentee is for the purposes of this Act and the Tax Administration Act 1994 the 1572 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HK 19 agent of that principal in respect of all income derived by the principal through the business so carried on in New Zealand by means of that agent, whether the income comes to the hands of the agent or not.
Compare: 1994 No 164 s HK 16 HK 17 Partner of absentee deemed agent Every person who in New Zealand carries on business in part- nership with an absentee is for the purposes of this Act and the Tax Administration Act 1994 the agent of that absentee in respect of the absentee’s share of the amount that would be in- come of the business if the business were a person resident in New Zealand.
Compare: 1994 No 164 s HK 17 HK 18 Master of ship deemed agent of absentee owner (1) When an absentee, by means of any ship owned by the absen- tee or under charter to the absentee, carries on the business of the carriage of merchandise, mails, or passengers, the master of that ship is (though not to the exclusion of any other agent) the agent of that absentee for the purposes of this Act and the Tax Administration Act 1994 in respect of all income so de- rived by the absentee.
Pending the payment of any tax assessed against such an ab- sentee or against any person who is the absentee’s agent for the purposes of this Act and the Tax Administration Act 1994, a Customs ofﬁcer must, on the requisition of the Commissioner, withhold the clearance of the ship in respect of which the tax is payable.
Compare: 1994 No 164 s HK 18 (2) HK 19 Tenant, mortgagor, or other debtor to be agent of absentee landlord, mortgagee, or other creditor (1) Any tenant, mortgagor, or other person who transmits from New Zealand to any landlord, mortgagee, or other creditor, being an absentee, any rent, interest, or other money being income derived by that absentee from New Zealand, is for the purposes of this Act and the Tax Administration Act 1994 the agent of that absentee in respect of all money so transmitted at 1573 Part H s HK 20 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) any time after the Commissioner has given notice to the person that the person is accountable as the agent of that absentee.
For the purposes of this section, any money paid by or on ac- count of a person resident in New Zealand from a fund situated out of New Zealand is deemed to be money transmitted by that person from New Zealand.
Compare: 1994 No 164 s HK 19 HK 20 Person having disposal of income deemed agent Every person who in New Zealand has the receipt, control, or disposal of any income derived by a principal who is an absen- tee is for the purposes of this Act and the Tax Administration Act 1994 the agent of the principal in respect of that income.
Compare: 1994 No 164 s HK 20 HK 21 Company to be agent of absentee shareholders A New Zealand company is the agent of all absentee share- holders and of all absentee holders of debentures to which sec- tion FC 1 or FC 2 applies, and the company must treat as in- come of the company and make returns in respect of all divi- dends paid or credited by the company to any such shareholder or debenture holder while that shareholder or debenture holder is an absentee.
Compare: 1994 No 164 s HK 21 HK 22 Trustee of group investment fund to be agent of absentee investors The trustee of any group investment fund is the agent of every investor in the group investment fund, being an investor who is an absentee, and must treat as income of the trustee and make returns in respect of all dividends paid or credited by the group investment fund to any such investor while that investor is an absentee.
Compare: 1994 No 164 s HK 22 HK 23 Banking company to be agent of absentee depositors Every banking company, and every other company, local or public authority, or other person, who in the course of busi- ness receives or holds money by way of deposit and allows 1574 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HK 24 interest on the deposit is, for the purposes of this Act and the Tax Administration Act 1994, the agent of all depositors who are absentees and must treat as income of the person as agent and make returns in respect of any interest which is paid or credited to a depositor while the depositor is an absentee, if that interest exceeds $100 in any tax year.
Compare: 1994 No 164 s HK 23 HK 24 Liability as agent of employer of non-resident taxpayer (1) and employer’s agent The employer or the agent of the employer of every non-resi- dent taxpayer is, for the purposes of this Act and the Tax Administration Act 1994, the agent of the non-resident tax- payer in respect of the salary, wages, or other emoluments re- ceived by the non-resident taxpayer.
(2) Where any such non-resident taxpayer has, whether before or after the commencement of this Act, made default in the pay- ment of any income tax payable by the non-resident taxpayer in respect of his or her salary, wages, or other emoluments, the amount of that tax must, on application by the Commissioner, be deducted by the employer or the employer’s agent from any salary, wages, or other emoluments to be paid and must be paid to the Commissioner on behalf of the taxpayer.
(3) Where any non-resident taxpayer is in receipt of any pension or annuity payable by the Government of New Zealand or payable out of any superannuation scheme established in New Zealand, any income tax payable by the non-resident taxpayer in respect of the pension or annuity must, on application by the Commissioner, be deducted from any instalment or instal- ments of the pension or annuity to be paid and must be paid to the Commissioner on behalf of the taxpayer.
In this section, non-resident taxpayer means any person who, being liable for income tax in respect of salary, wages, or other emoluments derived from New Zealand, or in respect of any annuity or pension derived from New Zealand, has no ﬁxed and permanent residence or place of abode in New Zealand.
Compare: 1994 No 164 s HK 24 (4) 1575 Part H s HK 25 Income Tax Act 2004 Reprinted as at 29 August 2011 HK 25 Non-resident trader to be agent of employees in New Zealand Every non-resident trader is, for the purposes of this Act and the Tax Administration Act 1994, the agent of all persons in the non-resident trader’s employment in New Zealand in re- spect of the salary, wages, or other emoluments received by them.
The agent in New Zealand of a non-resident trader is, for the purposes of this section, under the same obligations as the agent’s principal.
Compare: 1994 No 164 s HK 25 HK 26 Agents in New Zealand of principals resident abroad (1) Subject to this section, when any person in New Zealand, on behalf of a principal who is resident in a country or territory outside New Zealand and is not resident in New Zealand, is instrumental in procuring the purchase from that principal of goods or merchandise which are in New Zealand or are to be imported into New Zealand in pursuance of or in consequence of that purchase, whether the contract of purchase is made in New Zealand or elsewhere, the principal is in respect of the sale by the principal of the goods or merchandise deemed to be carrying on business in New Zealand through the agency of that person; and the income derived from that business is deemed to be derived from New Zealand, in the same manner and to the same extent as if the contract had been made in New Zealand.
(2) An agent is not required under subsection (1) to pay income tax in New Zealand in respect of any principal or class or classes of principals, being resident in a country or territory outside New Zealand and not being resident in New Zealand, if and so far as the Commissioner is satisﬁed that in corresponding circumstances the like principal or the like class or classes of principals, being resident in New Zealand, are not liable to or are exempt from income tax imposed by the laws of that country or territory.
Every exemption granted under subsection (2) to a principal extends to exempt from income tax in New Zealand (in the capacity of agent, but not otherwise) the agent of that principal.

Compare: 1994 No 164 s HK 26 (3) 1576 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HK 26 Subpart HL—Portfolio investment entities Subpart HL: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Contents Introductory provisions Intended effect on portfolio tax rate entities and investors Scheme of subpart HL 1 HL 2 Eligibility requirements: portfolio investment entities and foreign investment vehicles HL 3 Eligibility requirements for entities HL 4 Effect of failure to meet eligibility requirements for entities Foreign investment vehicles HL 5 HL 5B Meaning of investor and portfolio investor class HL 5C Income interest requirement HL 6 HL 7 Investor membership requirement Investor return adjustment requirement: portfolio tax rate entity Imputation credit distribution requirement: portfolio listed company Investor interest size requirement HL 9 HL 10 Further eligibility requirements relating to investments HL 8 Page 1579 1580 1584 1586 1588 1589 1590 1591 1594 1596 1596 1600 Becoming and ceasing to be portfolio investment entity HL 11 Election to become portfolio investment entity and 1604 cancellation of election HL 11B Unlisted company may choose to become portfolio listed 1605 company HL 12 Becoming portfolio investment entity HL 13 Tax consequences from transition HL 14 Ceasing to be portfolio investment entity 1606 1609 1610 Periods relevant to calculation of portfolio entity tax liability HL 15 Portfolio allocation period and portfolio calculation 1611 period Allocation of income in some cases HL 16 Treatment of income from interest if no investor entitled 1612 or investor has conditional entitlement 1577 Income Tax Act 2004 Reprinted as at 29 August 2011 HL 17 Certain new investors treated as part of existing portfolio 1614 investor class Calculating portfolio entity tax liability HL 18 Portfolio class net income and portfolio class net loss for 1615 portfolio allocation period HL 19 Portfolio class taxable income and portfolio class taxable 1616 loss for portfolio allocation period HL 19B Treatment of certain provisions made by portfolio tax 1617 rate entity HL 20 Portfolio entity tax liability and rebates of portfolio tax 1618 rate entity for period Payment by portfolio tax rate entity of tax for
 tax year HL 21 Payments of tax by portfolio tax rate entity making no 1622 election HL 22 Payments of tax by portfolio tax rate entity choosing to 1623 pay provisional tax HL 23 Payments of tax by portfolio tax rate entity choosing to 1624 make payments when investor leaves HL 23B Optional payments of tax by portfolio tax rate entities 1626 Results for investors HL 24 Portfolio investor allocated income and portfolio investor 1627 allocated loss HL 25 Treatment of portfolio investor allocated loss for 1630 zero-rated portfolio investors and investors with portfolio investor exit period Rebate for entity HL 26 Treatment of portfolio investor allocated loss for other 1631 investors Treatment of credits received by entity HL 27 Credits received by portfolio tax rate entity or portfolio 1632 investor proxy Treatment of losses for entity HL 28 Portfolio entity formation loss HL 29 Portfolio class taxable income and portfolio class taxable loss for tax year HL 30 Treatment of portfolio class taxable loss and portfolio class land loss for tax year 1638 1641 1642 1578 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 1 HL 31 Portfolio investor proxies 1643 Portfolio investor proxies Introductory provisions Heading: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
HL 1 Intended effect on portfolio tax rate entities and investors (1) (2) (3) 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 portfolio 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 1579 Part H s HL 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) 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 receives on the investment in the entity an economic re- turn 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: investor, portfolio investment entity, portfolio investor rate, portfolio tax rate entity, tax Section HL 1: inserted, on 1 October 2007, by section 97 of the Taxation (Sav- ings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

HL 2 Scheme of subpart (1) 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 (2) An entity may choose under section HL 11 to be a portfolio investment entity that is a— (a) portfolio tax rate entity if the entity is— (i) a company, superannuation fund, or group invest- ment fund; and eligible under section HL 3(1) to make an elec- tion; or (ii) portfolio listed company if the entity is— (i) a company listed on a recognised exchange in New Zealand; 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- (b) (c) (d) 1580 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 2 ance policies under which beneﬁts are directly linked to the value of the investments held in the fund; and eligible under section HL 3(7) to make an elec- tion.
(ii) (3) (4) 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 12 and HL 13.

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 14.
Portfolio allocation period and portfolio calculation period (5) An entity who is a portfolio tax rate entity has under section HL 15— (a) (b) 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.
(6) 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 16.
Portfolio entity tax liability (7) 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 18— (i) for each portfolio investor class and each port- folio allocation period: 1581 Part H s HL 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) from the entity’s assessable income and allow- able deductions allocated to the class and the period (b) (c) (d) (e) (f) (ii) the portfolio class taxable income or portfolio class tax- able loss calculated under section HL 19— (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 28, and any portfolio class tax- able loss under section HL 29 that is portfolio class land loss under section HL 30: the portfolio entity tax liability calculated under section HL 20— (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 to the entity by the investor.
Payments of tax by portfolio tax rate entity (8) 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 21 to HL 23, depending on the entity’s portfolio allocation period and port- folio calculation period.
Portfolio investor allocated income and portfolio investor allocated loss (9) An investor in a portfolio tax rate entity in a tax year is treated as— 1582 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 2 (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 24 for the tax year exceeds the investor’s total portfolio investor allocated loss under section HL 24 for the tax year: having, if the investor is a zero-rated portfolio investor, for the tax year a deduction under section HL 25 equal to the amount by which the investor’s total portfolio in- vestor allocated loss under section HL 24 for the tax year exceeds the investor’s total portfolio investor allo- cated income under section HL 24 for the tax year.
Rebate to entity for some portfolio investor allocated loss If a portfolio tax rate entity does not make an election under section HL 22, the entity has a rebate under section HL 26 if it has an investor in a portfolio investor class who is not a zero-rated portfolio investor and who has total portfolio in- vestor 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 22, 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 section HL 27 for credits that are received by the entity and allocated to the investor for the portfolio al- location period.
(10) (11) Portfolio investor proxies (12) An entity who meets the requirements of section HL 31— (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 taxable income, portfolio investment entity, portfolio investor allocated income, portfolio investor allocated loss, portfolio investor class, portfolio investor in- terest, portfolio investor interest fraction, portfolio investor proxy, portfolio in- vestor rate, portfolio tax rate entity, tax, tax year Section HL 2: inserted, on 1 October 2007, by section 97 of the Taxation (Sav- ings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
1583 Part H s HL 3 Income Tax Act 2004 Reprinted as at 29 August 2011 Section HL 2(2) heading: substituted (with effect from 1 October 2007), on 19 December 2007, by section 106(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 2(2): substituted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 106(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 2(7)(c)(ii): amended (with effect from 1 October 2007), on 19 De- cember 2007, by section 106(2) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).

Section HL 2(7)(d): added (with effect from 1 October 2007), on 19 December 2007, by section 106(2) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Section HL 2(7)(e): added (with effect from 1 October 2007), on 19 December 2007, by section 106(2) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).

Section HL 2(7)(f): added (with effect from 1 October 2007), on 19 December 2007, by section 106(2) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Eligibility requirements: portfolio investment entities and foreign investment vehicles Heading: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
HL 3 Eligibility requirements for entities Eligibility requirements for entity electing to be portfolio tax rate entity (1) 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 (2) A portfolio tax rate entity must meet— (a) (b) 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.
Eligibility requirements for entity electing to be portfolio listed company (3) An entity that is choosing under section HL 11 to be a portfolio investment entity and portfolio listed company must meet the 1584 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 3 eligibility requirements described in subsections (9), (10), and (11).
Eligibility requirements for portfolio listed company (4) A portfolio listed company must meet— (a) (b) 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.
Eligibility requirements for entity electing to be portfolio deﬁned beneﬁt fund (5) 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 (6) A portfolio deﬁned beneﬁt fund must meet— (a) (b) the eligibility requirements described in subsections (9), (10), and (11); and the further eligibility requirements described in sections HL 6, HL 9, and HL 10.
Eligibility requirements for separate identiﬁable fund electing to be portfolio investment-linked life fund (7) An entity that is choosing under section HL 11 to be a portfolio investment entity and portfolio investment-linked life fund must meet the eligibility requirements described in subsections (10) and (11).
Eligibility requirements for portfolio investment-linked life fund (8) A portfolio investment-linked life fund must meet— (a) (b) the eligibility requirements described in subsections (10) and (11); and the further eligibility requirements described in sections HL 6, HL 9, and HL 10.

(9) Business requirement The business requirement is that the entity must not carry on a business of life insurance.
1585 Part H s HL 4 Income Tax Act 2004 Reprinted as at 29 August 2011 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 14(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 fundportfolio listed company, portfolio tax rate en- tity, resident in New Zealand, superannuation fund Section HL 3: inserted, on 1 October 2007, by section 97 of the Taxation (Sav- ings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section HL 3: substituted (with effect from 1 October 2007), on 19 December 2007, by section 107 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HL 4 Effect of failure to meet eligibility requirements for entities Failure to meet certain requirements (1) 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 (2) 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— (i) 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- the ment by the entity to its investors that (ii) 1586 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 4 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 (ii) the failure referred to in paragraph (a)— (i) 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 following the quarter referred to in paragraph (a) and ending more than 3 months before the announcement referred to in paragraphs (a)(ii) and (ab)(ii).
(ii) Deﬁned in this Act: investor, portfolio deﬁned beneﬁt fund, portfolio investment entity, portfolio listed company, portfolio tax rate entity, quarter Section HL 4: inserted, on 1 October 2007, by section 97 of the Taxation (Sav- ings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Section HL 4(1)(a): substituted (with effect on 1 October 2007), on 6 October 2009, by section 811(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 October 2007), on 6 October 2009, by section 811(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 4(2)(a): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 108(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 4(2)(ab): inserted (with effect on 1 October 2007), on 6 October 2009, by section 811(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 4(2)(b): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 108(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 4(2)(b)(ii): substituted (with effect on 1 October 2007), on 6 Octo- ber 2009, by section 811(3) of the Taxation (International Taxation, Life Insur- ance, and Remedial Matters) Act 2009 (2009 No 34).
1587 Part H s HL 5 Income Tax Act 2004 Reprinted as at 29 August 2011 HL 5 Foreign investment vehicles When entity becomes foreign investment vehicle (1) An entity becomes a foreign investment vehicle if the entity— (a) (b) (c) (d) 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 section 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 investment entity; and (e) meets the further eligibility requirements relating to in- vestments under section HL 10.
When entity ceases to be foreign investment vehicle (2) An entity that becomes a foreign investment vehicle ceases under this section to be a foreign investment vehicle if the en- tity— (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 quarter referred to in subparagraph (i).
(b) Deﬁned in this Act: foreign investment vehicle, portfolio investment entity, portfolio investor class, quarter, resident in New Zealand, superannuation scheme Section HL 5: inserted, on 1 October 2007, by section 97 of the Taxation (Sav- ings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Section HL 5(1)(b): substituted, on 1 October 2007, by section 15(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 5(1)(c): amended, on 1 October 2007, by section 15(2) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

1588 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 5B Section HL 5(1)(d): substituted, on 1 October 2007, by section 15(3) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 5(1)(e): substituted, on 1 October 2007, by section 15(3) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
HL 5B Meaning of investor and portfolio investor class Investor (1) An investor, in relation to a portfolio investment entity or for- eign investment vehicle (the entity), means,— (a) (b) (c) (d) if the entity is a company and paragraph (d) does not apply, a shareholder in the company: if the entity is not a company and paragraphs (c) and (d) do 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) if the entity is a portfolio investment-linked life fund and paragraph (d) does not apply, a person whose bene- ﬁts under the relevant life insurance policy are directly linked to the value of investments held in the portfolio investment-linked life fund: for a share, entitlement, or life insurance policy held through a portfolio investor proxy by a person, the port- folio investor proxy.
Portfolio investor class (2) 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 (b) 1589 Part H s HL 5C Income Tax Act 2004 Reprinted as at 29 August 2011 (c) 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.
(3) 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 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.
(b) Deﬁned in this Act: investor, portfolio entity investment, portfolio investment entity, portfolio investor class, portfolio investor interest Section HL 5B: inserted (with effect from 1 October 2007), on 19 December 2007, by section 109 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

HL 5C Income interest requirement Application 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 fundportfolio investor inter- est (1) (2) 1590 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 6 Section HL 5C: inserted (with effect from 1 October 2007), on 19 December 2007, by section 109 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
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).
(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 persons associ- ated under section OD 8(3) (Further deﬁnitions of asso- ciated persons) 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: (i) the Earthquake Commission: (ib) Auckland Regional Holdings: (j) less than 20 persons, as determined under paragraph (a), if— (i) 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 (ii) 1591 Part H s HL 6 Income Tax Act 2004 Reprinted as at 29 August 2011 (iii) 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 (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 includes an investor that is— (a) 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 Superannuation 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 (b) (c) 1592 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 6 (iii) has no investor, other than the fund’s manager or trustee, that can control the investment decisions relating to that class: (d) a public unit trust.
(4) 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 a person who is associated under section OD 8(3) with an investor in a portfolio investor 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 associated person has a portfolio investor interest fraction of 5% or more.
(c) Deﬁned in this Act: associated person, company, foreign investment vehicle, group investment fund, investor, portfolio entity investment, portfolio invest- ment entity, portfolio investor class, portfolio investor interest, portfolio in- vestor proxy, qualifying unit trust, recognised exchange, registered superannu- ation schemeunit trust Section HL 6: inserted, on 1 October 2007, by section 97 of the Taxation (Sav- ings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section HL 6(1A) heading: inserted (with effect from 1 October 2007), on 19 December 2007, by section 110(1) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section HL 6(1A): inserted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 110(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 6(1) heading: substituted (with effect from 1 October 2007), on 19 December 2007, by section 110(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 6(1): amended (with effect from 1 October 2007), on 19 December 2007, by section 110(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 6(1)(a): substituted, on 1 October 2007, by section 16 of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 6(1)(ib): inserted (with effect on 1 October 2007), on 6 October 2009, by section 812(1) 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 October 2007), on 6 October 2009, by section 812(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

1593 Part H s HL 7 Income Tax Act 2004 Reprinted as at 29 August 2011 Section HL 6(1)(j)(iii): amended (with effect from 1 October 2007), on 19 De- cember 2007, by section 110(2)(c) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section HL 6(1)(k): repealed (with effect on 1 October 2007), on 6 October 2009, by section 812(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 6(1)(k): added (with effect from 1 October 2007), on 19 December 2007, by section 110(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 October 2007), on 6 October 2009, by section 812(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 6(3): substituted (with effect on 1 October 2007), on 6 October 2009, by section 812(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 6(3): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 110(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 6(3)(c): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 110(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 6(3)(d): added (with effect from 1 October 2007), on 19 December 2007, by section 110(4) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).

Section HL 6(3B) heading: inserted (with effect on 1 October 2007), on 6 Oc- tober 2009, by section 812(3) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 6(3B): inserted (with effect on 1 October 2007), on 6 October 2009, by section 812(3) 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 October 2007), on 6 October 2009, by section 812(4) 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 October 2007), on 6 October 2009, by section 812(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

HL 7 Investor return adjustment requirement: portfolio tax rate entity 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- (1) (2) 1594 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 7 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 the amount of a rebate under section HL 26 or HL 27 allocated to the investor as a member of the portfolio investor class.
(b) Nature of adjustment (3) 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 21; 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 22; 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 23: (ii) (iii) (b) (c) the amount of each distribution to the investor as a mem- ber of the portfolio investor class or another portfolio 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 (4) A portfolio tax rate entity may offer an investor a choice of the method of adjustment.

Deﬁned in this Act: company, investor, portfolio calculation period, portfolio entity tax liability, portfolio investor interest, portfolio investor rate, recognised exchange, tax year, unit trust Section HL 7: inserted, on 1 October 2007, by section 97 of the Taxation (Sav- ings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section HL 7(2): amended, on 1 October 2007, by section 17(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 7(2)(a): amended, on 1 October 2007, by section 17(2) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
1595 Part H s HL 8 Income Tax Act 2004 Reprinted as at 29 August 2011 Section HL 7(2)(b): amended, on 1 October 2007, by section 17(3) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 7(3): substituted (with effect from 1 October 2007), on 19 De- cember 2007, by section 111 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 7(3)(a): substituted, on 1 October 2007, by section 17(4) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 7(3)(b): substituted, on 1 October 2007, by section 17(4) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

HL 8 Imputation credit distribution requirement: portfolio listed company (1) (2) When this section applies This section applies to a portfolio investment entity that is an portfolio listed company.
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 32 (Available subscribed capital amount) to the extent permitted by the imputation credits that the dir- ectors of the entity determine are available.
Deﬁned in this Act: director, imputation credit, portfolio investment entity, portfolio investor class, portfolio listed company Section HL 8: inserted, on 1 October 2007, by section 97 of the Taxation (Sav- ings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Section HL 8 heading: amended, on 1 October 2007, by section 18(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 8(1): amended, on 1 October 2007, by section 18(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 8 list of deﬁned terms: substituted, on 1 October 2007, by section 18(3) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
HL 9 Investor interest size requirement 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 (1) 1596 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 9 not hold more than 20% of the total portfolio investor interests of investors in the class.
(2) No investor interest size requirement for entities similar to unit trusts and certain superannuation ﬁnds There is no investor interest size requirement for an investor in a portfolio investor class that,— (a) (b) (c) (d) if treated as a unit trust, would meet the requirements of 1 or more of paragraphs (a) and (c) to (e) of the deﬁn- ition of qualifying unit trust: is 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: is the fund established by the Government Superannu- ation Fund Act 1956: is 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 paragraphs (a) and (c) to (e) of the deﬁnition of qualifying 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) Exception for certain investors (3) An entity with an investor holding of more than 20% of the total portfolio investor interests in a class does not breach the investor interest size requirement if the investor is listed in subsection (4).
Investors to which exception applies (4) An investor may hold portfolio investor interests in a portfolio investment entity that would otherwise breach the investor in- terest size requirement for the entity if the investor is— (a) (b) (c) (d) a portfolio investment entity: a foreign investment vehicle: [Repealed] an entity that— 1597 Part H s HL 9 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) meets the requirements in section HL 3 that would be relevant if the entity were choosing to be a portfolio investment entity; and (ib) Auckland Regional Holdings: (ic) a portfolio investor class of less than 20 persons, treating 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 en- tity’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 port- folio investor interests with a total value of less than 10% of the total value of portfolio investor interests in the entity: has not chosen to be a portfolio investment entity: (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: a person who meets the requirements of subsection (5) [Repealed] (e) (f) (g) (h) (i) (j) (k) Exception for shares in portfolio listed company held from 17 May 2006 (5) An investor who is not listed in subsection (4)(a) to (ic) 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 1598 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 9 investors on each day in the period beginning on 17 May 2006 and ending before the date.
(6) 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 a person who is associated under section OD 8(3) (Further deﬁnitions of associated persons) with an investor in a portfolio investor class are included with the port- folio investor interests of the investor if— (a) (b) the investor is not listed in subsection (4)(a) to (ic); and the associated person is not listed in subsection (4)(a) to (ic); and the associated person has a portfolio investor interest fraction of 5% or more.
(c) 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, recognised exchange, qualifying unit trust, superannuation fund, unit trust Section HL 9: inserted, on 1 October 2007, by section 97 of the Taxation (Sav- ings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section HL 9(2): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 112(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 9(2)(c): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 112(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 9(2)(d): added (with effect from 1 October 2007), on 19 December 2007, by section 112(2) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).

Section HL 9(3): substituted (with effect from 1 October 2007), on 21 Decem- ber 2010, by section 166 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section HL 9(4)(c): repealed, on 1 October 2007, by section 19 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 9(4)(ib): inserted (with effect on 1 October 2007), on 6 October 2009, by section 813(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 9(4)(ic): inserted (with effect on 1 October 2007), on 6 October 2009, by section 813(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 9(4)(j): amended (with effect on 1 October 2007), on 6 October 2009, by section 813(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

1599 Part H s HL 10 Income Tax Act 2004 Reprinted as at 29 August 2011 Section HL 9(4)(j): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 112(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 9(4)(k): repealed (with effect on 1 October 2007), on 6 October 2009, by section 813(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 9(4)(k): added (with effect from 1 October 2007), on 19 December 2007, by section 112(3) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Section HL 9(5): amended (with effect on 1 October 2007), on 6 October 2009, by section 813(3) 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 October 2007), on 6 October 2009, by section 813(4) 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 October 2007), on 6 October 2009, by section 813(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HL 10 Further eligibility requirements relating to investments 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) (1) (2) 1600 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 10 (iv) proceeds from the disposal of property referred to in subsection (1)(a) to (d): FIF income: (v) (vi) portfolio investor allocated income: (vii) distributions from superannuation funds: (viii) an amount of income under section CW 4 (An- nuities under life insurance policies) or CX 34 (Superannuation fund deriving amount from life insurance policy).
(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 1601 Part H s HL 10 Income Tax Act 2004 Reprinted as at 29 August 2011 has not chosen to be a portfolio investment entity: (ii) [Repealed] a portfolio land company.
(d) (e) Class shareholding investment requirement The class shareholding investment requirement is that, for each portfolio investor class and each investment referred to in sub- section (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 incomeportfolio investor class, portfolio land company, sharesuperannuation fund, voting interest Section HL 10: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 10(1): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 113(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 10(2): amended, on 1 October 2007, by section 20(1) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 10(2)(b)(ib): inserted (with effect from 1 October 2007), on 19 December 2007, by section 113(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

(5) 1602 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 10 Section HL 10(2)(b)(iii): substituted (with effect on 1 October 2007), on 6 Oc- tober 2009, by section 814 of the Taxation (International Taxation, Life Insur- ance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 10(2)(b)(iii): substituted (with effect from 1 October 2007), on 19 December 2007, by section 113(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 10(2)(b)(iv): amended (with effect from 1 October 2007), on 19 December 2007, by section 113(2)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 10(2)(b)(v): amended, on 1 October 2007, by section 20(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 10(2)(b)(vi): added, on 1 October 2007, by section 20(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 10(2)(b)(vii): added, on 1 October 2007, by section 20(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 10(2)(b)(viii): added (with effect on 1 October 2007), on 29 Au- gust 2011, by section 203 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section HL 10(3)(a): substituted, on 1 October 2007, by section 20(3) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 10(3)(b): substituted, on 1 October 2007, by section 20(3) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 10(4): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 113(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 10(4)(d): repealed, on 1 October 2007, by section 20(4) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 10(5): substituted, on 1 October 2007, by section 20(5) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 10 list of deﬁned terms portfolio investor allocated income: in- serted, on 1 October 2007, by section 20(6) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 10 list of deﬁned terms superannuation fund: added, on 1 Octo- ber 2007, by section 20(6) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 10 list of deﬁned terms voting interest: added, on 1 October 2007, by section 20(6) of the Taxation (KiwiSaver and Company Tax Rate Amend- ments) Act 2007 (2007 No 19).

1603 Part H s HL 11 Income Tax Act 2004 Reprinted as at 29 August 2011 Becoming and ceasing to be portfolio investment entity Heading: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
HL 11 Election to become portfolio investment entity and cancellation of election Notice of election (1) An entity that meets the eligibility requirements in section HL 3 for an electing entity may choose to be a portfolio invest- ment entity by giving a notice in the prescribed foil!’ to the Commissioner at any time after 1 April 2007.
When election effective (2) 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 (3) 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 (4) 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) 1604 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 11B the date of receipt.
(c) Deﬁned in this Act: Commissioner, company, notice, portfolio investment en- tity, portfolio investment-linked life fundquarter, recognised exchange, tax year Section HL 11: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

inserted, on 1 October 2007, by section 97 of the Taxation Section HL 11(2B) heading: inserted (with effect from 1 October 2007), on 19 December 2007, by section 114(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 11(2B): inserted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 114(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 (with effect from 1 October 2007), on 19 December 2007, by section 114(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HL 11B Unlisted company may choose to become portfolio listed company Election (1) 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 the company— (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 (2) A company that makes an election under subsection (1) ceases to be a portfolio listed company from the last day of the period of 2 years from when the election is effective, if the company is not listed on a recognised exchange in New Zealand on that day.
1605 Part H s HL 12 Income Tax Act 2004 Reprinted as at 29 August 2011 Extension in certain cases (3) 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— (a) 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.
(b) Further extension granted by Commissioner (4) 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: company, portfolio investment entity, portfolio listed com- pany, qualifying unit trust, recognised exchange, unit trust, widely-held com- pany.

Section HL 11B: inserted, on 1 October 2007, by section 21 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 11B(1)(a): substituted (with effect on 1 October 2007), on 6 October 2009, by section 815 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 11B(1)(a): substituted (with effect from 1 October 2007), on 19 De- cember 2007, by section 115 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 11B(3) heading: added (with effect on 1 October 2007), on 7 De- cember 2009, by section 159 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HL 11B(3): added (with effect on 1 October 2007), on 7 December 2009, by section 159 of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section HL 11B(4) heading: added (with effect on 1 October 2007), on 7 De- cember 2009, by section 159 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HL 11B(4): added (with effect on 1 October 2007), on 7 December 2009, by section 159 of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
HL 12 Becoming portfolio investment entity Requirement for effective election (1) An entity that makes an election under section HL 11 becomes a portfolio investment entity unless, in the period ending 12 1606 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 12 months after the date on which the election would be effect- ive,— (a) (b) the entity cancels the election: the entity, if treated as becoming a portfolio investment 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 electing 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 21 or HL 23, 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 supplier in a re- turning share transfer, that— (i) satisfy section CX 44C(1)(a) and (b) (Proceeds from disposal of certain shares by portfolio investment entities or New Zealand Superannu- ation 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 (b) 1607 Part H s HL 12 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) 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).
New Zealand Superannuation Fund treated as disposing of, and reacquiring, property 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.
Refund of dividend withholding payments made before election If a dividend withholding payment account company becomes a portfolio investment entity on a day in an imputation year other than the end of the imputation year, the balance of the company’s dividend withholding payment account at the end of the imputation year for the purposes of section NH 4(5)(f) (Refund for overpayment and to company in loss) is equal to the balance of the company’s dividend withholding payment account immediately before the company becomes a portfolio investment entity.
Deﬁned in this Act: amount, Commissioner, company, group investment fund, life insurer, portfolio investment entity, portfolio tax rate entity, share, super- annuation fund, tax year Section HL 12: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 12(1)(b): substituted (with effect on 1 October 2007), on 6 October 2009, by section 816 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 12(1)(b): substituted, on 1 October 2007, by section 22(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 12(3)(a): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 116(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 12(3)(a)(i): amended, on 1 October 2007, by section 22(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 12(4) heading: added, on 1 October 2007, by section 22(3) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 12(4): added, on 1 October 2007, by section 22(3) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

(4) (5) 1608 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 13 Section HL 12(5) heading: added (with effect from 1 October 2007), on 19 December 2007, by section 116(2) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section HL 12(5): added (with effect from 1 October 2007), on 19 December 2007, by section 116(2) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).

HL 13 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: a payment of provisional tax due before the end of the 2-month period beginning after the entity becomes a portfolio investment entity.
(b) Payment of tax liability arising from transition (2) 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 12(3) may satisfy the liability by making payments to the Commissioner of at least— (a) (b) (c) 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.
Deﬁned in this Act: entity, provisional tax, tax year income tax, income year, interest, portfolio investment 1609 Part H s HL 14 Income Tax Act 2004 Reprinted as at 29 August 2011 Section HL 13: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 13(1) heading: substituted (with effect from 1 October 2007), on 19 December 2007, by section 117 of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section HL 13(1): substituted (with effect from 1 October 2007), on 19 De- cember 2007, by section 117 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 13(1B) heading: inserted (with effect from 1 October 2007), on 19 December 2007, by section 117 of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).

Section HL 13(1B): inserted (with effect from 1 October 2007), on 19 December 2007, by section 117 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HL 14 Ceasing to be portfolio investment entity Cancellation or loss of eligibility (1) An entity that has chosen to be a portfolio investment entity ceases to be a portfolio investment entity if— (a) (b) the entity cancels the election under section HL 11: the entity is no longer eligible to be a portfolio invest- ment entity under section HL 4.
When entity ceases to be portfolio investment entity (2) An entity ceases to be a portfolio investment entity under sub- section (1) on— (a) (b) 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.
Entity treated as disposing of and reacquiring, property (3) 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 44C(1)(a) and (b) (Proceeds from disposal of certain shares 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 1610 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 15 (b) 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 Section HL 14: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

inserted, on 1 October 2007, by section 97 of the Taxation Section HL 14(3)(a): amended, on 1 October 2007, by section 23 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Periods relevant to calculation of portfolio entity tax liability Heading: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

HL 15 Portfolio allocation period and portfolio calculation (1) (2) period When this section applies This section applies to a portfolio tax rate entity.
(ab) 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 (ab), (b), or (c); or a month, if the entity has a portfolio calculation period of a quarter and 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: (b) (c) 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).
1611 Part H s HL 16 Income Tax Act 2004 Reprinted as at 29 August 2011 (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 22 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 22.
(ii) Deﬁned in this Act: Commissioner, notice, portfolio allocation period, portfolio calculation period, portfolio tax rate entity, quarter, tax year Section HL 15: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

inserted, on 1 October 2007, by section 97 of the Taxation Section HL 15(2)(a): amended, on 1 October 2007, by section 24(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
inserted, on 1 October 2007, by section 24(2) of the Section HL 15(2)(ab): Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Allocation of income in some cases Heading: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
HL 16 Treatment of income from interest if no investor entitled or investor has conditional entitlement 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.
(1) 1612 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 16 Treatment of income from interest if investor has conditional entitlement (2) A portfolio investment entity that is a superannuation fund may for the purposes of section HL 20 allocate a portfolio in- vestor 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) Deﬁned in this Act: income, investor, portfolio investor class, portfolio investor interest, portfolio tax rate entity, superannuation fund Section HL 16: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

inserted, on 1 October 2007, by section 97 of the Taxation Section HL 16 heading: substituted, on 1 October 2007, by section 25(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 16(2) heading: substituted, on 1 October 2007, by section 25(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 16(2): amended, on 1 October 2007, by section 25(3) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
1613 Part H s HL 17 Income Tax Act 2004 Reprinted as at 29 August 2011 Section HL 16(2)(b): amended, on 1 October 2007, by section 25(4) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 16(2)(e): substituted (with effect from 1 October 2007), on 19 De- cember 2007, by section 118 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 16(2)(e)(ii): amended, on 1 October 2007, by section 25(5) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 16(2)(f): added (with effect from 1 October 2007), on 19 December 2007, by section 118 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HL 17 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 port- folio entity investments corresponding to the interests; 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 inter- estportfolio investor investment Section HL 17: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

inserted, on 1 October 2007, by section 97 of the Taxation Calculating portfolio entity tax liability Heading: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
1614 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 18 HL 18 Portfolio class net income and portfolio class net loss for portfolio allocation period (1) (2) (3) (4) Portfolio class net income for portfolio allocation period The portfolio class net 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 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 Section HL 18: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation 1615 Part H s HL 19 Income Tax Act 2004 Reprinted as at 29 August 2011 HL 19 Portfolio class taxable income and portfolio class taxable loss for portfolio allocation period 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).
(1) (2) (3) (4) Class net income (5) Class net income is the amount of the portfolio class net in- come under section HL 18 of the class for the period.

Class net loss (6) Class net loss is the amount of the portfolio class net loss under section HL 18 of the class for the period.
Other loss used (7) Other loss used is the lesser of the following amounts: the total amount for the class of— (i) (a) the portfolio entity formation loss that is allo- cated to the portfolio allocation period and the portfolio investor class as allowed by section HL 28: the portfolio class land loss that has not been off- set against portfolio class net income for an ear- (ii) 1616 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 19B lier allocation period and may be allocated to the allocation period under section HL 30: (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 Section HL 19: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 19(7)(a)(i): substituted, on 1 October 2007, by section 26 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
HL 19B Treatment of certain provisions made by portfolio tax rate entity (1) (2) When this section applies This section applies for the purposes of section HL 19 when— (a) a portfolio tax rate entity— (i) (ii) makes a provision for future expenditure or loss; is likely to have future income: and (b) the amount— (i) is reﬂected in the entity’s valuation of portfolio investor interests; or if subparagraph (i) does not apply, is shown in its ﬁnancial statements.
(ii) Future amounts For the purposes of determining an amount for a portfolio al- location period under section HL 19(3), a portfolio tax rate entity may take account of an amount of future income or fu- ture expenditure or loss that is— (a) for future income, an amount that, when derived, would be class assessable income under section HL 19(4)(a): for future expenditure or loss,— (i) (b) an expense likely to be incurred by the entity in the tax year in which the portfolio allocation period falls, or within 93 days after the end of the tax year; and 1617 Part H s HL 20 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) an amount that, when incurred, would be a class deduction under section HL 19(4)(b).
(3) Reasonable estimation For the purposes of subsection (2), the entity must make a rea- sonable estimate of the amount and must be able to demon- strate, if required, the reasonableness of the estimation by— (a) explaining why and when the income is likely to be de- rived or the expense is likely to be incurred, as applic- able; and providing the calculation method and actual calcula- tions used to determine the amount, with details show- ing why the method is appropriate.
(b) Credit impairment provisions (4) A portfolio tax rate entity may take account of a credit im- pairment provision under this section but only if the provision is counted as a credit impairment provision under NZIAS 39.

However, the time limit set out in subsection (2)(b)(i) does not apply in relation to a credit impairment provision.

Deﬁned in this Act: amount, , deduction, , income, , NZIAS 39, , portfolio allocation period, , portfolio investor interest, , portfolio tax rate entity, , tax year.
Section HL 19B: inserted (with effect from 1 October 2007), on 21 December 2010, by section 167(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
HL 20 Portfolio entity tax liability and rebates of portfolio tax rate entity for period (1) 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) 1618 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 20 (2) (3) Amount of rebate under section KI 1 For the purposes of section KI 1 (Rebate for portfolio tax rate entity relating to certain investors), the amount of a rebate for a portfolio tax rate entity for a calculation period is— (a) the amount by which zero exceeds the total of the amounts calculated under subsection (3) for the cal- culation period and each portfolio investor class and each investor in the portfolio investor class to which the rebate 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— (a) each day of a portfolio allocation period in the calcula- tion period; and each portfolio allocation period in the calculation period.
[Repealed] (b) (c) Formula The formula is— (4) investor fraction × (income – loss) × rate days in allocation period – (expenses – rebates) × rate.

(5) (6) (7) 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 19 for the investor’s portfolio investor class and the portfolio allocation period.
1619 Part H s HL 20 Income Tax Act 2004 Reprinted as at 29 August 2011 (8) Loss Loss is the portfolio class taxable loss under section HL 19 for the investor’s portfolio investor class and the portfolio alloca- tion period.

Rate (9) 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 16.
(b) Days in allocation period (10) Days in allocation period is the number of days in the portfolio allocation period.

Expenses (11) Expenses is the total amount for the day in the portfolio allo- cation period of— (a) 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 to the entity.
(b) Rebates (12) Rebates is the amount of rebates of 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.
Determining investors’ prescribed investor rate (13) For the purposes of determining the item rate in subsection (9), the taxable income of the investor does not include an amount that— (a) arises because their portfolio investor rate is lower than their prescribed investor rate; and is treated as taxable income because section CX 44D (Portfolio investor allocated income and distributions of income by portfolio investment entities) does not apply.
Deﬁned in this Act: amount, investor, portfolio allocation period, portfolio class taxable income, portfolio investor class, portfolio investor interest fraction, port- (b) 1620 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 20 folio investor rate, portfolio tax rate entity, prescribed investor rate, tax year, taxable income Section HL 20: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 20(1)(a): amended, on 1 October 2007, by section 27(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 20(2)(a): amended, on 1 October 2007, by section 27(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 20(3): amended, on 1 October 2007, by section 27(3)(a) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 20(3)(b): amended, on 1 October 2007, by section 27(3)(b) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 20(3)(c): repealed, on 1 October 2007, by section 27(3)(c) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 20(4) formula: substituted, on 1 October 2007, by section 27(4) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 20(4) formula: amended (with effect from 1 October 2007), on 19 December 2007, by section 119(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 20(5): amended, on 1 October 2007, by section 27(5) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 20(9)(b): amended, on 1 October 2007, by section 27(6) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 20(11) heading: substituted (with effect from 1 October 2007), on 19 December 2007, by section 119(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 20(11) heading: added, on 1 October 2007, by section 27(7) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 20(11): substituted (with effect from 1 October 2007), on 19 De- cember 2007, by section 119(2) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).

Section HL 20(11): added, on 1 October 2007, by section 27(7) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 20(12) heading: added, on 1 October 2007, by section 27(7) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 20(12): added, on 1 October 2007, by section 27(7) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

1621 Part H s HL 21 Income Tax Act 2004 Reprinted as at 29 August 2011 Section HL 20(13) heading:added, (with effect on 1 October 2007), on 29 Au- gust 2011, by section 204(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section HL 20(13): added (with effect on 1 October 2007), on 29 August 2011, by section 204(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section HL 20 list of deﬁned terms prescribed investor rate: inserted (with effect on 1 October 2007), on 29 August 2011, by section 204(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section HL 20 list of deﬁned terms taxable income: inserted (with effect on 1 October 2007), on 29 August 2011, by section 204(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Payment by portfolio tax rate entity of tax for tax year Heading: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
HL 21 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 22 or HL 23 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.
Amount of payments (3) 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 23B; and (b) within the period of 1 month beginning from the end of the portfolio calculation period.
1622 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 22 (4) (5) Entity not required to pay provisional tax The entity is not required to pay provisional tax under subpart MB (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 Section HL 21: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 21(2B) heading: inserted (with effect from 1 October 2007), on 19 December 2007, by section 120(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 21(2B): inserted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 120(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 21(3)(a): substituted, on 1 October 2007, by section 28 of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 21(3)(a): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 120(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HL 22 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— (a) 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.
(b) 1623 Part H s HL 23 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) (3) Provisional tax The entity must pay provisional tax under subpart MB (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 Section HL 22: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation HL 23 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 (2) 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— (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— 1624 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 23 (i) (ii) 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.
Amount of payment for investors remaining at end of tax year (3) After each tax year, the entity must make a payment to the (4) (5) 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 23B by the entity for any of the investors; and (b) within the period of 1 month beginning from the end of the tax year.
Entity not required to pay provisional tax The entity is not required to pay provisional tax under subpart MB (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 Section HL 23: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 23(1B) heading: inserted (with effect from 1 October 2007), on 19 December 2007, by section 121(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 23(1B): inserted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 121(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1625 Part H s HL 23B Income Tax Act 2004 Reprinted as at 29 August 2011 Section HL 23(2)(a): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 121(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 23(2)(b): substituted (with effect from 1 October 2007), on 19 De- cember 2007, by section 121(3) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).
Section HL 23(3)(a): amended, on 1 October 2007, by section 29 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

HL 23B Optional payments of tax by portfolio tax rate entities (1) (2) When this section applies This section applies to a portfolio tax rate entity that makes payments of tax under section HL 21 or HL 23 if an investor reduces the portfolio investor interest for which the investor is a member of a portfolio investor class of the entity.
Optional payment during tax year of income tax relating to investor The entity may make a payment of income tax to the Com- missioner representing an amount of the portfolio entity tax liability of the entity for the investor and the investor’s port- folio investor interest for the tax year.
Time of optional payment (3) A payment under this section must be made by— (a) (b) 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.

Deﬁned in this Act: Commissioner, income tax, investor, portfolio entity tax liability, portfolio investor interest, portfolio tax rate entity, tax year.
Section HL 23B: inserted, on 1 October 2007, by section 30 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 23B(1): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 122(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 23B(3) heading: substituted (with effect from 1 October 2007), on 19 December 2007, by section 122(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

1626 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 24 Section HL 23B(3): substituted (with effect from 1 October 2007), on 19 De- cember 2007, by section 122(2) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).
Results for investors Heading: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

HL 24 Portfolio investor allocated income and portfolio investor allocated loss (1) (2) (3) 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 from the portfolio tax rate entity in an income year an amount of portfolio investor al- located income 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 in relation to the portfolio tax rate entity in an income year an amount of portfolio investor allocated loss equal to,— (a) if the portfolio tax rate entity makes payments of tax under section HL 21 or HL 23, 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) if the portfolio tax rate entity makes payments of tax under section HL 22, zero.
(b) (4) 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 1627 Part H s HL 24 Income Tax Act 2004 Reprinted as at 29 August 2011 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.
Formula The formula is— (5) investor fraction × (income – loss) days in allocation period – (expenses – rebates).
Deﬁnition of items in formula In the formula,— (a) (b) (c) (d) (e) (f) 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 19 of the port- folio class taxable income for the portfolio allocation period: loss is the amount under section HL 19 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 transferred under sub- part DV to the entity: (ii) rebates is the amount of rebates of fees paid by the en- tity and derived by the investor as a member of the port- folio 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- (6) 1628 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 24 folio investor allocated income, portfolio investor allocated loss, portfolio in- vestor class, portfolio investor interest fraction, portfolio investor proxy, tax year Section HL 24: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 24(2) heading: substituted, on 1 October 2007, by section 31(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 24(2): substituted, on 1 October 2007, by section 31(1) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 24(3) heading: substituted, on 1 October 2007, by section 31(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 24(3): substituted, on 1 October 2007, by section 31(1) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 24(4): amended, on 1 October 2007, by section 31(2)(a) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 24(4)(a): amended, on 1 October 2007, by section 31(2)(b) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 24(5) formula: substituted, on 1 October 2007, by section 31(3) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 24(5) formula: amended (with effect from 1 October 2007), on 19 December 2007, by section 123(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 24(6)(b): amended, on 1 October 2007, by section 31(4)(a) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 24(6)(c): amended, on 1 October 2007, by section 31(4)(b) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 24(6)(d): amended, on 1 October 2007, by section 31(4)(c) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 24(6)(e): substituted (with effect from 1 October 2007), on 19 De- cember 2007, by section 123(2) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).

Section HL 24(6)(e): added, on 1 October 2007, by section 31(4)(c) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 24(6)(f): added, on 1 October 2007, by section 31(4)(c) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
1629 Part H s HL 25 Income Tax Act 2004 Reprinted as at 29 August 2011 HL 25 Treatment of portfolio investor allocated loss for zero-rated portfolio investors and investors with portfolio investor exit period 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 21 and the period is a portfolio investor exit period for the investor.
(b) Deduction for excess of portfolio investor allocated loss The investor has a deduction under section DB 43B(1) (Zero- rated portfolio investor and portfolio investor allocated loss) 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 24 for the period.
Deﬁned in this Act: amount, deduction, income tax, income year, investor, port- folio investor allocated loss, portfolio investor exit period, portfolio tax rate en- tity, tax year, zero-rated portfolio investor Section HL 25: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 25(2): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 124(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 25 list of deﬁned terms income tax: inserted (with effect from 1 October 2007), on 19 December 2007, by section 124(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 25 list of deﬁned terms portfolio allocation period: omitted (with effect from 1 October 2007), on 19 December 2007, by section 124(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 25 list of deﬁned terms portfolio investor allocated income: omitted (with effect from 1 October 2007), on 19 December 2007, by section 124(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 25 list of deﬁned terms portfolio tax rate entity: inserted (with effect from 1 October 2007), on 19 December 2007, by section 124(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

(1) (2) 1630 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 26 Rebate for entity Heading: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
HL 26 Treatment of portfolio investor allocated loss for other investors Investor in entity making payments of tax under section HL 21 (1) A portfolio tax rate entity that makes payments of tax under section HL 21 has a rebate of tax under section KI 1 (Rebate for portfolio tax rate entity 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 23 (2) A portfolio tax rate entity that makes payments of tax under section HL 23 has a rebate of tax under section KI 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 rebate.
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 year, zero-rated port- folio investor Section HL 26: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 26(1): amended, on 1 October 2007, by section 32(1) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 26(2): amended, on 1 October 2007, by section 32(2) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 26(2): amended, on 1 October 2007, by section 32(3) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Treatment of credits received by entity Heading: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
1631 Part H s HL 27 Income Tax Act 2004 Reprinted as at 29 August 2011 HL 27 Credits received by portfolio tax rate entity or portfolio investor proxy (1) (2) (3) 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 22: a portfolio investor proxy for an investor in a portfolio tax rate entity that has not made an election under sec- tion HL 22.
(b) 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) 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: (b) (c) (5) 1632 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 27 (d) days in period is the number of days in the portfolio allocation period.
(6) (7) 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- tion HL 21 and the portfolio calculation period includes part of a portfolio investor exit period: subsections (10) and (11) apply to the credits if para- graph (a) does not apply.
(b) 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 LC (Foreign 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 LC: (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, portfolio 1633 Part H s HL 27 Income Tax Act 2004 Reprinted as at 29 August 2011 investor proxies, and investors having portfolio investor exit period (8) An investor to whom subsection (7)(a) applies is treated as receiving for the tax year, for credits under subpart LC, 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) (ii) if the investor is not a zero-rated portfolio in- vestor, the investor’s portfolio investor rate for the portfolio allocation period ending before the investor’s portfolio investor exit period; or if the investor is a zero-rated portfolio investor, the basic rate of tax for the investor for the tax year under schedule 1 (Basic rate of income tax and speciﬁed superannuation contribution with- holding tax).
Investor with portfolio investor exit period for interest in entity that makes payments under section HL 23 [Repealed] [Repealed] (9) Other investor: 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 LC allo- cated to a portfolio investor class and an investor other than a zero-rated portfolio investor as a member of the portfolio in- vestor class, a credit of an amount given by subsection (10C) against income tax payable by the entity as described by sub- section (10B).
Use of credit (10B) The credit is against income tax payable by the entity for— (a) the portfolio calculation period and portfolio calcula- tion periods— (i) later in the tax year, if the entity makes payments of tax under section HL 21; or earlier or later in the tax year, if the entity makes payments of tax under section HL 23; and (ii) 1634 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 27 (b) 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 (10C) The amount of the credit is the lesser of the following: (a) (b) 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 portfolio investor class or another portfolio in- vestor class: 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 (11) The amount of the credits not under subpart LC 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 (10C)(b), re- duced by the amount of the credit given subsec- tion (10C): (b) a rebate of tax under section KI 1 (Rebate for portfolio tax rate entity relating to certain investors), for the entity 1635 Part H s HL 27 Income Tax Act 2004 Reprinted as at 29 August 2011 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 year, zero-rated portfolio investor Section HL 27: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 27(3): amended, on 1 October 2007, by section 33(1) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 27(6) heading: substituted (with effect from 1 October 2007), on 19 December 2007, by section 125(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 27(6): substituted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 125(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 27(6): amended, on 1 October 2007, by section 33(2) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 27(6)(a): substituted, on 1 October 2007, by section 33(3) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 27(7) heading: substituted (with effect from 1 October 2007), on 19 December 2007, by section 125(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 27(7): substituted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 125(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 27(7): amended (with effect on 1 October 2007), on 6 October 2009, by section 817 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 27(7): amended, on 1 October 2007, by section 33(4) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 27(7)(a): substituted, on 1 October 2007, by section 33(5) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 27(7)(b): amended, on 1 October 2007, by section 33(6) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 27(8) heading: substituted, on 1 October 2007, by section 33(7) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 27(8) heading: amended (with effect from 1 October 2007), on 19 December 2007, by section 125(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1636 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 27 Section HL 27(8): substituted, on 1 October 2007, by section 33(7) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 27(9): repealed (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 125(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 27(10) heading: substituted, on 1 October 2007, by section 33(8) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 27(10): substituted, on 1 October 2007, by section 33(8) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 27(10B) heading: inserted, on 1 October 2007, by section 33(8) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 27(10B): inserted, on 1 October 2007, by section 33(8) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 27(10B)(a)(ii): amended (with effect from 1 October 2007), on 19 December 2007, by section 125(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 27(10B)(b): substituted (with effect from 1 October 2007), on 19 December 2007, by section 125(6) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section HL 27(10C) heading: inserted, on 1 October 2007, by section 33(8) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 27(10C): inserted, on 1 October 2007, by section 33(8) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 27(11): amended, on 1 October 2007, by section 33(9) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 27(11)(a)(ii): amended (with effect from 1 October 2007), on 19 December 2007, by section 125(7)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 27(11)(a)(ii): amended (with effect from 1 October 2007), on 19 December 2007, by section 125(7)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 27(11)(a)(ii): amended, on 1 October 2007, by section 33(10)(a) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 27(11)(a)(ii): amended, on 1 October 2007, by section 33(10)(b) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Treatment of losses for entity Heading: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
1637 Part H s HL 28 Income Tax Act 2004 Reprinted as at 29 August 2011 HL 28 Portfolio entity formation loss (1) (2) (3) 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 net loss arising from a period ending before the entity becomes a portfolio invest- ment entity that may be carried forward under subparts IE and IF (which relate to tax losses generally) 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 22 may be carried for- ward under subparts IE and IF to an income year in which the entity is a portfolio investment entity.
Amount of portfolio entity formation loss available for allocation to portfolio allocation period 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 portfolio entity formation loss that has not been allocated to an earlier portfolio allocation period, if, at the time the entity becomes a portfolio in- vestment entity, the amount of portfolio entity forma- tion 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) (4) Formula The maximum amount of portfolio entity formation loss under subsection (3)(b) that a portfolio tax rate entity may allocate to a relevant period is calculated using the formula— Deﬁnition of items in formula In the formula in subsection (4),— (5) 1638 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 28 (a) (b) (c) 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.
Amount of portfolio entity formation loss available for allocation to portfolio investor class and portfolio allocation period 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 given for the relevant period by subsection (3): the amount calculated using the formula— (b) Deﬁnition of items in formula In the formula in subsection (6)(b),— (a) (b) 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 in- vestor class and the relevant period of— imputation credits: (i) (ii) Maori authority credits: (iii) (iv) credits for resident withholding tax: dividend withholding payment credits: (6) (7) 1639 Part H s HL 28 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) rate is the rate of tax for companies given by schedule 1, part A, clause 5 (Basic rates of income tax and speciﬁed superannuation contribution withholding tax).
Deﬁned in this Act: amount, dividend withholding payment credit, imputation credit, Maori authority creditnet income, net loss, portfolio allocation period, portfolio class net income, portfolio entity formation loss, portfolio entity in- vestmentportfolio investment entity, portfolio investor classportfolio tax rate entityresident withholding tax Section HL 28: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 28(3) heading: substituted, on 1 October 2007, by section 34(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 28(3): substituted, on 1 October 2007, by section 34(1) of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 28(4) heading: added, on 1 October 2007, by section 34(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 28(4): added, on 1 October 2007, by section 34(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 28(5) heading: added, on 1 October 2007, by section 34(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 28(5): added, on 1 October 2007, by section 34(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 28(6) heading: added, on 1 October 2007, by section 34(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 28(6): added, on 1 October 2007, by section 34(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 28(7) heading: added, on 1 October 2007, by section 34(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 28(7): added, on 1 October 2007, by section 34(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 28 list of deﬁned terms dividend withholding payment credit: inserted, on 1 October 2007, by section 34(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 28 list of deﬁned terms imputation credit: inserted, on 1 Octo- ber 2007, by section 34(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 28 list of deﬁned terms Maori authority credit: inserted, on 1 October 2007, by section 34(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
1640 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 29 Section HL 28 list of deﬁned terms portfolio entity investment: inserted, on 1 October 2007, by section 34(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 28 list of deﬁned terms portfolio investor class: inserted, on 1 October 2007, by section 34(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 28 list of deﬁned terms resident withholding tax: added, on 1 October 2007, by section 34(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
HL 29 Portfolio class taxable income and portfolio class taxable loss for tax year 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— (a) 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.
(b) 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).
(1) (2) (3) (4) Class tax income (5) Class tax income is the amount of the portfolio class taxable income under section HL 19 of the portfolio investor class for the portfolio allocation period.

1641 Part H s HL 30 Income Tax Act 2004 Reprinted as at 29 August 2011 Class tax loss (6) Class tax loss is the amount of the portfolio class taxable loss under section HL 19 of the portfolio investor class for the port- folio 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 Section HL 29: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation HL 30 Treatment of portfolio class taxable loss and portfolio class land loss for tax year (1) (2) Portfolio class taxable loss for tax year other than portfolio class land loss If a portfolio investor class of an entity making payments of tax under section HL 21 or HL 23 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 portfolio calculation periods and used to reduce the amount of portfolio class taxable income under section HL 19 for a later portfolio allocation period.
Meaning of portfolio class land loss (3) 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 an investment of the type listed in subsection (4); 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) 1642 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HL 31 (b) for which the class has a portfolio class taxable loss of more than zero.
(4) Investment types For the purposes of subsection (3)(a)(i), the investment must be— (a) (b) an investment in land: an investment in a portfolio land company that is resi- dent in New Zealand: an investment in a non-resident portfolio land company in which the portfolio investor class has a voting interest of more than 20%.
(c) 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 Section HL 30: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 30(1): amended, on 1 October 2007, by section 35 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section HL 30(3)(a)(i): substituted (with effect on 1 October 2007), on 7 Sep- tember 2010, by section 204(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section HL 30(4) heading: added (with effect on 1 October 2007), on 7 Septem- ber 2010, by section 204(2) of the Taxation (Annual Rates, Trans-Tasman Sav- ings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).

Section HL 30(4): added (with effect on 1 October 2007), on 7 September 2010, by section 204(2) of the Taxation (Annual Rates, Trans-Tasman Savings Porta- bility, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Portfolio investor proxies Heading: inserted, on 1 October 2007, by section 97 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
HL 31 Portfolio investor proxies Eligibility of person to be portfolio investor proxy (1) 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 1643 Part H s HL 31 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) 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 investor interest as a portfolio investor proxy; and other information that the Commissioner re- quires the entity to provide with the notice.
(ii) Role of portfolio investor proxy (2) An entity who is a portfolio investor proxy holding a portfolio investor interest for an investor for a portfolio allocation period must perform the responsibilities given by subsection (3) in re- lation 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 in- vestor 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, or the payments re- quired from the investor, to reﬂect the effect of the in- vestor’s portfolio investor rate on the amount of distri- butions under paragraph (b) and payments under para- graph (c); and provide to the Commissioner— (b) (c) (d) (e) (3) 1644 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HZ 1 (f) (i) (ii) 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- 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- 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 Section HL 31: (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
inserted, on 1 October 2007, by section 97 of the Taxation Section HL 31(3)(d): amended (with effect from 1 October 2007), on 19 De- cember 2007, by section 126 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 31(3)(e)(ii): amended, on 1 October 2007, by section 36 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section HL 31(3)(f): added, on 1 October 2007, by section 36 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Subpart HZ—Terminating provisions Contents HZ 1 Trust distributions HZ 2 Trusts that may become qualifying trusts Page 1645 1646 HZ 1 Trust distributions Where and to the extent to which any distribution received from a trust (not being a unit trust, a group investment fund, or a superannuation scheme) consists of income, capital proﬁts, or capital gains derived by the trustee of that trust in the 1987-88 or any earlier tax year which was not also income 1645 Part H s HZ 2 Income Tax Act 2004 Reprinted as at 29 August 2011 derived by a beneﬁciary entitled in possession to the receipt of that income under the trust during the same tax year,— (a) the provisions of this Act and of the Tax Administration Act 1994 that correspond to those provisions of the In- come Tax Act 1976 and of the Income Tax Amendment Act (No 5) 1988 speciﬁed in the proviso to section 9 of the latter Act (as substituted by section 13 of the Income Tax Amendment Act 1990) do not apply in respect of that distribution; and that distribution is not income.
(b) Compare: 1994 No 164 s HZ 1 HZ 2 Trusts that may become qualifying trusts Where a settlement was ﬁrst made on the terms of a trust on or before 17 December 1987 (whether or not any further settle- ments were made to or for the beneﬁt of the trust or on the terms of the trust after 17 December 1987), and any settlor, trustee, or beneﬁciary of that trust has made an election 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 and subsequent tax years, for the purposes of deter- mining the liability of any person for income tax on any dis- tribution from that trust, all trustee income of that trust— (a) (b) derived from outside New Zealand; or derived from New Zealand only as non-resident with- holding income, if the obligations of all persons to pay income tax in relation to that non-resident withholding income tax have been satisﬁed,— in the 1987-88 and earlier tax years during any period dur- ing which there was no trustee of that trust resident in New Zealand is deemed to have been liable under this Act to New Zealand income tax (other than only as non-resident withhold- ing income) and all the trustee’s obligations under this Act in relation to the trustee’s liability to New Zealand income tax in respect of that trustee income are deemed to have been satis- ﬁed.
Compare: 1994 No 164 s HZ 2 1646 Reprinted as at 29 August 2011 Income Tax Act 2004 Part H s HZ 2 Part I Treatment of net losses Contents Subpart ID—Application of Part to schedular income ID 1 No offset in calculating some income tax liabilities IE 1 IE 2 IE 3 IE 4 IF 1 IF 2 IF 3 IF 4 IF 5 IF 6 IF 7 IG 1 IG 2 IG 3 IG 4 IG 5 IG 6 IG 7 IG 8 IG 9 Subpart IE—Net losses Net losses may be offset against future net income Speciﬁed activity net losses Attributed CFC net losses FIF net losses Subpart IF—Net losses: companies Net losses may be offset against future net income Special provision in relation to net losses of companies for 1990-91 and 1991-92 income years Attributed CFC net losses Losses, attributed CFC net losses, and FIF net losses of amalgamating company Ordering of losses of amalgamated company Losses, attributed CFC net losses, and FIF net losses of amalgamated company Offsetting supplementary dividend against net income Subpart IG—Net losses: groups of companies Companies included in group of companies Net loss offset between group companies Special provisions in relation to group companies for 1991-92 tax year Group of companies attributed CFC net losses Group of companies FIF net losses Loss carry forward and grouping by consolidated group and consolidated group members Attributed CFC net losses and FIF net losses of consolidated group members Net losses, attributed CFC net losses, and FIF net losses of amalgamated company Net losses, attributed CFC net losses, and FIF net losses offset against net income of amalgamated company IG 10 Net losses used to pay penalties Page 1648 1649 1650 1655 1656 1657 1661 1662 1662 1663 1663 1664 1665 1668 1679 1680 1682 1683 1687 1691 1691 1692 1647 Income Tax Act 2004 Reprinted as at 29 August 2011 Subpart IH—Losses: miners Losses of mining companies and petroleum miners Companies engaged in exploring for, searching for, or mining petroleum Loss carry back by petroleum miners Companies engaged in exploring for, searching for, or mining certain minerals Resident
 mining operators Subpart II—Losses: life insurers Policyholder net losses Policyholder net loss for tax year preceding 1990-91 Carry forward of policyholder net loss IH 1 IH 2 IH 3 IH 4 IH 5 II 1 II 2 II 3 Subpart IZ—Withdrawal tax Application of this subpart Rate of withdrawal tax IZ 1 IZ 2 IZ 3 Withdrawal income IZ 4 IZ 5 IZ 6 IZ 7 Payment of withdrawal tax Evidence of liability in proceedings for recovery Relief in certain cases Application of other provisions to withdrawal tax Subpart ID—Application of Part to schedular income Contents ID 1 No offset in calculating some income tax liabilities 1693 1697 1698 1699 1702 1703 1703 1704 1705 1705 1705 1706 1707 1708 1708 Page 1648 ID 1 No offset in calculating some income tax liabilities (1) A taxpayer may not take an available net loss into account in calculating the schedular income tax liability relating to schedular income that is of a type described in any of para- graphs (c) or (e) to (h) of the deﬁnition of schedular income.
(2) 1648 Compare: 1994 No 164 s ID 1 Subsection (2) was omitted, as from 1 October 2005, by section 213 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IE 1 Subpart IE—Net losses Contents IE 1 IE 2 IE 3 IE 4 Net losses may be offset against future net income Speciﬁed activity net losses Attributed CFC net losses FIF net losses Page 1649 1650 1655 1656 (b) (b) IE 1 Net losses may be offset against future net income (1) Subject always to the express provisions of this section and section IF 1, this section and section IF 1 are intended— (a) to permit taxpayers to carry forward net losses that arise in an income year for offset against net income of the taxpayer in a later income year; but in the case of taxpayers who are companies, to limit the circumstances in which a net loss can be so carried forward and offset to those where the tax beneﬁt arising from the offset is obtained (directly or indirectly), at least to the extent of 49%, only by the same natural persons holding (directly or indirectly) rights in relation to the company who, by virtue of holding such rights, effectively bore the net loss.
(2) Any taxpayer who has a net loss for any income year is, subject to this section and section IF 1, entitled to claim that— (a) the net loss be carried forward to the income year im- mediately succeeding that income year and be offset against the net income for that immediately succeeding income year, so far as that net income extends; and so far as it cannot then be offset, the net loss be carried forward from that immediately succeeding income year to the next succeeding income year and be offset against the net income for that next succeeding income year and so on.
(2B) A taxpayer who is a partner in a special partnership may not under this section carry forward a net loss if— (a) the taxpayer has a deduction in an income year that arises from the activities of the special partnership; and 1649 Part I s IE 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) the net loss arises from the deduction; and during the income year, the taxpayer derives no assess- able income, whether from the activities of the special partnership or otherwise.
(2BB) If a taxpayer is a portfolio tax rate entity that does not make payments of tax under section HL 22, the taxpayer may not carry forward a net loss under this section.

(2C) A taxpayer may not carry forward under this section a net loss to the extent that the net loss is offset against a remitted amount of an associated person as determined by the Commissioner under section CX 41B or EW 47B.
(3) Where net losses for 2 or more income years are carried for- ward to an income year in accordance with the provisions of this section,— (a) the aggregate amount of those net losses that may be offset against net income for that income year must not exceed the amount of that net income; and those net losses must be offset in the order in which they arose.
(b) Compare: 1994 No 164 s IE 1 Section IE 1(2BB): inserted, on 1 October 2007, by section 98 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
IE 2 Speciﬁed activity net losses (1) Subject to this section, where in any income year any taxpayer, being an existing farmer, commences to conduct another spe- ciﬁed activity that is different from the speciﬁed activity, or every 1 of the speciﬁed activities, by virtue of which the tax- payer is, immediately before that commencement, an existing farmer and that other speciﬁed activity is 1 that is usually con- ducted in association with and is complementary to the speci- ﬁed activity or any of the speciﬁed activities by virtue of which the taxpayer is, immediately before that commencement, an existing farmer, that other speciﬁed activity is deemed to be an activity related to the speciﬁed activity to which it is com- plementary.
Subject to this section, where in any income year any taxpayer, being an existing farmer, commences to conduct another spe- ciﬁed activity that is different from the speciﬁed activity or (2) 1650 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IE 2 every 1 of the speciﬁed activities by virtue of which the tax- payer is, immediately before that commencement, an existing farmer and that other speciﬁed activity is conducted on land that the taxpayer has owned, or has held under any lease, li- cence, or other agreement, throughout the period of 5 years ending on the date of that commencement, that other speciﬁed activity is deemed to be an activity related to (as the case may be)— (a) the speciﬁed activity by virtue of which the taxpayer is, immediately before that commencement, an existing farmer; or such 1 of the speciﬁed activities by virtue of which the taxpayer is, immediately before that commencement, an existing farmer— (i) (b) as the taxpayer elects by notice (which notice is irrevocable) given to the Commissioner within the time within which the taxpayer is required to furnish a return of the taxpayer’s income for the income year in which the taxpayer commenced to conduct that other speciﬁed activity, or within such further time as the Commissioner may allow in any case or class of cases; or (ii) where the taxpayer does not so elect, as the Com- missioner determines.
(3) (4) For the purposes of subsections (4) to (7), any speciﬁed activity that is a related activity is deemed to be part of the speciﬁed activity in relation to which it is a related activity.

Subsection (6) does not apply in respect of any speciﬁed ac- tivity net loss for any income year of any taxpayer, who is an existing farmer, in the conduct of any established activity.
(5) Where, in relation to a taxpayer and to any income year, this section would have effect more favourably if the words “not including crops for which the preparation of the land, and the planting and cultivation of the tree or plant, and the harvesting of the crop are accomplished within 12 months” were omitted from paragraph (c)(iii) of the deﬁnition of speciﬁed activity, this section, in relation to the taxpayer and to the income year, applies as if those words were omitted.
1651 Part I s IE 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (5A) Sections IE 1, IF 1, and IG 2, subject to subsection (6), apply to any speciﬁed activity net loss carried forward from a preceding income year as if it were a net loss carried forward from a preceding income year.
(6) Where in any income year (referred to in this subsection as the year of offset) any taxpayer has carried forward from the preceding income year any speciﬁed activity net loss, the fol- lowing provisions apply: (a) the amount of that speciﬁed activity net loss which may be offset against the net income of the taxpayer or an- other taxpayer for the year of offset is the lesser of the amount of that speciﬁed activity net loss and,— (i) where the offset is made against the net income of the taxpayer, the sum of the taxpayer’s speciﬁed activity net income for the year of offset from the conduct of the same speciﬁed activity as gave rise to the speciﬁed activity net loss and $10,000: (b) (c) (ii) where the offset is made against the net income of another taxpayer, $10,000: in any case where the speciﬁed activity was conducted in any income year by 2 or more persons, the preceding provisions of this subsection apply as if every reference in those provisions to a taxpayer and to the amount of a speciﬁed activity net loss of the taxpayer attributable to the conduct of the speciﬁed activity were a reference to each such person and to the amount of each such per- son’s share of the amount of any joint speciﬁed activity net loss for that income year: where in the year of offset a taxpayer has carried for- ward from the preceding income year any speciﬁed ac- tivity net losses to which this subsection applies and which arise from the conduct of 2 or more speciﬁed ac- tivities, the aggregate amount of those speciﬁed activity net losses that may be offset against the taxpayer’s net income for the year of offset is the lesser of the sum of those speciﬁed activity net losses and the sum of— (i) the sum of the taxpayer’s speciﬁed activity net income from each of those speciﬁed activities for the year of offset; and 1652 Reprinted as at 29 August 2011 (d) Income Tax Act 2004 Part I s IE 2 $10,000: (ii) in any year of offset in which paragraph (c) applies, the taxpayer may elect, by notice (which notice is irrevoc- able) given to
 the Commissioner within the time within which the taxpayer is required to furnish a return of the taxpayer’s income for the year of offset, or within such further time as the Commissioner may allow in any case or class of cases, that, of the aggregate of the amount of the losses referred to in paragraph (c), the amount that may be offset under that paragraph comprises such amount (if any) of each of those speciﬁed activity net losses as the taxpayer speciﬁes in that notice.
(b) (7) Notwithstanding anything in the preceding subsections of this section, in any case where in any income year any taxpayer— is engaged (on average in respect of the whole of the in- (a) come year) principally and personally in conducting any speciﬁed activity (not being a speciﬁed activity within the meaning of paragraph (j) of the deﬁnition of speci- ﬁed activity) which is the livelihood of the taxpayer or the taxpayer is in the course of establishing as the tax- payer’s livelihood; and derives income from personal exertion, being income derived otherwise than from the conduct of that spe- ciﬁed activity and being income which the taxpayer is compelled, by reason of circumstances that arise in the course of and as a result of the conduct of that speciﬁed activity, to derive; and derives that income from personal exertion for the purposes of enabling the taxpayer to meet expenditure (whether or not the expenditure is required to meet losses suffered through any adverse event, happening, or cause) essential for the maintenance of the taxpayer and the taxpayer’s dependants or for the continuance of that speciﬁed activity; and (c) (d) would, in the opinion of the Commissioner, suffer hard- ship from the application of subsection (6),— the Commissioner may determine that an amount of speciﬁed activity net loss greater than that authorised in subsection (6) (being a speciﬁed activity net loss arising from the conduct 1653 Part I s IE 2 Income Tax Act 2004 Reprinted as at 29 August 2011 of the speciﬁed activity) may, subject to section IF 1(1), be offset against the taxpayer’s net income in such income year or income years as the Commissioner speciﬁes.
In this section,— established activity in relation to a taxpayer who is an exist- ing farmer, means any speciﬁed activity or speciﬁed activities (not being a speciﬁed activity within the meaning of paragraph (j) of the deﬁnition of speciﬁed activity) that the taxpayer con- ducted on 11 October 1982, where, in the opinion of the Com- missioner, the conduct of the speciﬁed activity or the speciﬁed activities constituted the livelihood of the taxpayer and the tax- payer’s sole or principal source of income income from personal exertion means income of any of the kinds referred to in sections CB 1 and CE 1; but does not in- clude income from any business of renting, or lending money, or making ﬁnancial investments related activity, in relation to a speciﬁed activity conducted by any taxpayer in any income year, means— (a) any other speciﬁed activity conducted by the taxpayer in the income year that is of the same kind as that speciﬁed activity, whether or not conducted on the same land as that on which that speciﬁed activity is conducted: any other speciﬁed activity conducted by the taxpayer in the income year which is deemed, under subsection (1) or (2), to be an activity related to that speciﬁed activity speciﬁed activity net income means, in respect of a speciﬁed activity conducted by a taxpayer in an income year, the result of subtracting from the sum of the income of the taxpayer al- located to that activity and that income year the sum of the deductions of the taxpayer allocated to that activity and that income year, if that result is a positive amount speciﬁed activity net loss means, in respect of a speciﬁed ac- tivity conducted by a taxpayer in an income year preceding, in the case of an activity referred to in paragraphs (a) to (i) of the deﬁnition of speciﬁed activity, the 1986-87 tax year and, in the case of an activity referred to in paragraph (j) of that deﬁn- ition, the 1990-91 tax year, a loss from that speciﬁed activity referred to in section 188A of the Income Tax Act 1976.
Compare: 1994 No 164 s IE 2 (b) (8) 1654 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IE 3 IE 3 Attributed CFC net losses (1) (2) Subject to this section, section IE 1 applies to any attributed CFC net loss as if it were a net loss.
If a person has carried forward to an income year an attributed CFC net loss, the maximum amount of that loss that the person may offset against the person’s net income for that income year is an amount equal to the total of— (a) any attributed CFC income of the taxpayer for that in- come year in respect of— (i) the controlled foreign company in respect of which the loss arose, where that company re- mains resident in the relevant country; and any other controlled foreign company resident in the relevant country; and (ii) (b) any FIF income, calculated under the branch equivalent method, of the taxpayer derived in that income year in respect of any foreign investment fund resident in the relevant country.
(3) A person may only take an amount of attributed CFC income or an amount of FIF income into account under subsection (2) to the extent that the person has not taken the amount into account— (a) in determining under section DN 4 or DN 9 the deduc- tions that the person is allowed under section DN 1 or DN 5; or in any other calculation under subsection (2) in respect of any other attributed CFC net loss; or in determining the person’s entitlement to offset under sections IG 2 and IG 4.
(4) If, in an income year,— (a) a person has an attributed CFC net loss in relation to an income interest in a controlled foreign company; and by virtue of section 38 of the Income Tax Amendment Act (No 2) 1993 the income interest becomes an interest of the person in a foreign investment fund,— with effect from that income year the attributed CFC net loss is treated as a FIF net loss of the person (as if the controlled for- eign company were the relevant fund) not calculated under the branch equivalent method, except where the person calculates 1655 (b) (c) (b) Part I s IE 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (5) the person’s FIF income or loss under the branch equivalent method with respect to the interest and the period commenc- ing with the date upon which the income interest becomes an interest in a foreign investment fund.
If a person is unable to offset any part of the maximum amount calculated under subsection (2) for an income year against net income for the income year because there is insufﬁcient net income, the excess is treated as if it were a net loss for the income year determined under section BC 4 and ceases to be part of the attributed CFC net loss available to the person.
Compare: 1994 No 164 s IE 3 IE 4 FIF net losses (1) Subject to this section, section IE 1 applies to any FIF net loss as if it were a net loss.
(2) (3) (4) If a person has carried forward to an income year a FIF net loss in respect of an attributing interest in a foreign investment fund calculated under the branch equivalent method, the maximum amount of that loss that the person may offset against the per- son’s net income for that income year is the amount that could be offset in respect of that loss under section IE 3 if— (a) the interest in the fund were an income interest in a controlled foreign company; and the FIF net loss were an attributed CFC net loss arising in respect of a branch equivalent loss; and references to the controlled foreign company were ref- erences to the fund.
(b) (c) (a) (5) Notwithstanding any other provision of this section, where— a person has carried forward to any income year a FIF net loss; and section CQ 5(1)(d) or (db) applies in respect of the per- son and the income year,— (b) the person may offset the FIF net loss against the person’s net income for the income year, to the extent that the FIF net loss does not exceed the person’s assessable income in respect of 1656 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IF 1 attributing interests that would give rise to FIF income in the income year but for section CQ 5(1)(d) or (db).
(6) Compare: 1994 No 164 s IE 4 Subsections (2) and (3) were repealed, as from 1 April 2007, by section 99(1)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

See section 99(2) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
Subsection (5) was amended, as from 1 April 2007, by section 99(1)(b) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “or (db)” after “CQ 5(1)(d)” in both places it appears.

See section 99(2) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.

Subsection (6) was repealed, as from 1 April 2007, by section 99(1)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
See section 99(2) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
Subpart IF—Net losses: companies Contents IF 1 IF 2 IF 3 IF 4 IF 5 IF 6 IF 7 Net losses may be offset against future net income Special provision in relation to net losses of companies for 1990-91 and 1991-92 income years Attributed CFC net losses Losses, attributed CFC net losses, and FIF net losses of amalgamating company Ordering of losses of amalgamated company Losses, attributed CFC net losses, and FIF net losses of amalgamated company Offsetting supplementary dividend against net income Page 1657 1661 1662 1662 1663 1663 1664 IF 1 Net losses may be offset against future net income (1) Subject to the succeeding provisions of this section, no tax- payer being a company (in this subsection referred to as the loss company) may carry forward, in accordance with section IE 1(2), the whole or any part of a net loss for any income year (in this subsection referred to as the year of loss) to any later income year (in this subsection referred to as the year of carry forward), unless there is a group of persons— 1657 Part I s IF 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) the aggregate of whose minimum voting interests in the loss company in the period from the beginning of the year of loss to the end of the year of carry forward (in this subsection referred to as the continuity period) is equal to or greater than 49%; and in any case where at any time during the continuity period a market value circumstance exists in respect of the loss company, the aggregate of whose minimum market value interests in the loss company in the con- tinuity period is equal to or greater than 49%,— and, for the purposes of this subsection, the minimum voting interest or minimum market value interest (as the case may be) of any person in the loss company in the continuity period is equal to the lowest voting interest or market value interest (as the case may be) in the loss company which that person has during the continuity period.
Subsection (1) does not apply to prevent any company from carrying forward, in accordance with section IE 1(2), the whole or part of any net loss for any income year (in this subsection referred to as the year of loss) where and to the extent that— (a) subsection (1) would not have applied to prevent carry forward if regard were had, for the purposes of applying that subsection (to the extent to which it requires regard to be had to the circumstances in the year of loss and without prejudice to the application of that subsection to the extent to which it requires regard to be had to later periods), to part only of the year of loss; and adequate accounts have been prepared and furnished to the Commissioner by the company relating to that part of that year of loss which detail sufﬁciently that part of the net loss for the year of loss which was reasonably and fairly attributable to that part of that year of loss,— in which event that claim for carry forward is allowed in re- spect of that part of the net loss for the year of loss as those accounts indicate was reasonably and fairly attributable to that part of that year of loss.
Subsection (1) does not apply to prevent any company from carrying forward, in accordance with section IE 1(2), the (b) (2) (3) 1658 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IF 1 whole or part of any net loss for any income year (in this subsection referred to as the year of loss) to any later income year where and to the extent that— (a) subsection (1) would not have applied to prevent the carry forward if regard were had, for the purposes of ap- plying such subsection (to the extent to which it requires regard to be had to the later income year and without prejudice to the application of such subsection to the extent to which it requires regard to be had to earlier periods), to part only of the later income year; and adequate accounts have been prepared and furnished to the Commissioner by the company relating to that part of that later income year which detail sufﬁciently that part of the net income for the whole of the later income year which was reasonably and fairly attributable to that part of that later income year,— (b) (4) in which event that claim for carry forward to the later income year is allowed in respect of the net loss for the year of loss to the extent to which it does not exceed that amount of net income as those accounts indicated was reasonably and fairly attributable to that part of that later income year.
For the purposes of this section, where adequate accounts are required to be prepared and furnished to the Commissioner in respect of the net loss or net income of any company which is reasonably and fairly attributable to a period which is part only of an income year of that company, those accounts must be prepared, to the extent to which reasonable and fair, by applying the provisions of this Act to that period as if it were an income year.
(5) Any taxpayer is entitled to claim to carry forward and offset against net income of the taxpayer in accordance with section IE 1(2) any net loss of the taxpayer for any income year prior to the 1977-78 income year if that taxpayer would have been entitled to claim to carry forward that net loss to that subse- quent tax year for the purpose of assessing income tax under section 137 of the Land and Income Tax Act 1954 if the In- come Tax Act 1976, the Income Tax Act 1994, and this Act had not been passed.
1659 Part I s IF 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (6) Where any taxpayer (being a company) claims, in accordance with section IE 1(2), to carry forward the whole or part of a net loss incurred by it in the 1991-92 income year or any earlier income year (in this subsection referred to as the pre- 1993 year of loss) to any later income year, the provisions of subsection (1) do not preclude such claim where— (a) the taxpayer would have been entitled to claim to carry forward the whole or part of the net loss to the later income year under section 188 of the Income Tax Act 1976, as that section applied before its repeal and re- placement by section 22 of the Income Tax Amendment Act (No 2) 1992, if that section 188 had continued to apply— (i) (ii) as modiﬁed by section 188AA of the Income Tax Act 1976; and as if the continuity percentage referred to in sec- tion 188(7) of the Income Tax Act 1976 were al- ways 40%,— in respect of the later income year; and (b) in respect of the period commencing on the ﬁrst day of the 1992-93 income year and ending with the last day of that later income year (referred to in this subsection as the relevant period), there is a group of persons— (i) (ii) the aggregate of whose minimum voting interests in the taxpayer in the relevant period is equal to or greater than 49%; and in any case where at any time during the rele- vant period a market value circumstance exists in respect of the taxpayer, the aggregate of whose minimum market value interests in the taxpayer in the relevant period is equal to or greater than 49%— and, for the purposes of this paragraph, the minimum voting interest or minimum market value interest (as the case may be) of any person in the taxpayer in the relevant period is equal to the lowest voting interest or market value interest (as the case may be) in the taxpayer which that person has during the relevant period.
Compare: 1994 No 164 s IF 1 1660 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IF 2 IF 2 Special provision in relation to net losses of companies for 1990-91 and 1991-92 income years Where and to the extent that the Commissioner is satisﬁed that— (a) (b) (c) a company (in this section referred to as the loss com- pany) has a net loss for the 1990-91 income year or the 1991-92 income year (the relevant income year being referred to in this section as the year of loss); and section 188(7B) of the Income Tax Act 1976 (as inserted by section 7 of the Income Tax Amendment Act (No 5) 1991 and in force before the repeal of section 188 by section 22 of the Income Tax Amendment Act (No 2) 1992) would not have applied to prevent the loss com- pany from carrying forward the whole or part of that net loss if regard were had, for the purposes of that subsec- tion (7B) (to the extent to which it required regard to be had to that part of the period commencing with 8.00 pm New Zealand Standard Time on 30 July 1991 which falls within the year of loss (in this paragraph referred to as the relevant part of the year of loss) and without prejudice to the application of that subsection (7B) to the extent to which it required regard to be had to later periods), to part only of the relevant part of the year of loss (that part of the relevant part of the year of loss be- ing in this section referred to as the relevant continuity period); and adequate accounts have been prepared by the loss com- pany and furnished to the Commissioner relating to the relevant continuity period which detail sufﬁciently that part of the net loss for the whole of the year of loss which was reasonably and fairly attributable to the rele- vant continuity period,— that subsection (7B) does not apply to prevent the loss com- pany carrying forward, in accordance with section 188(2) (as in force before its repeal by section 22 of the Income Tax Amendment Act (No 2) 1992), that part of the net loss as those accounts indicate was reasonably and fairly
 attributable to the relevant continuity period.
Compare: 1994 No 164 s IF 2 1661 Part I s IF 3 Income Tax Act 2004 Reprinted as at 29 August 2011 IF 3 Attributed CFC net losses For the purposes of sections IF 1 and IG 2, an attributed CFC net loss or a FIF net loss is deemed to arise on the last day of the income year in respect of which the loss is attributed.
Compare: 1994 No 164 s IF 3 IF 4 Losses, attributed CFC net losses, and FIF net losses of amalgamating company If— (a) (c) (d) (b) an amalgamating company ceases to exist on a qualify- ing amalgamation; and the amalgamating company, in respect of a tax year, has a net loss, an attributed CFC net loss, or a FIF net loss; and the net loss, the attributed CFC net loss, or the FIF net loss has not, under any of sections IE 1, IF 1, and IG 2, been offset against net income of the amalgamating company or any other company in any period prior to the amalgamation (including any part of the tax year in which the amalgamation takes place); and under section IG 2, the net loss, the attributed CFC net loss, or the FIF net loss could have been offset against net income (if there were sufﬁcient such income) of the amalgamated company (unless it is a company in- corporated only on the amalgamation) and any com- pany which has, at any time before or during the tax year in respect of which the net loss, the attributed CFC net loss, or the FIF net loss is offset under this section, amalgamated with the amalgamated company, that is at- tributable to that part of the tax year of the relevant com- pany which ends with the date of the amalgamation,— the net loss, the attributed CFC net loss, or the FIF net loss (as the case may be) is attributed to the amalgamated com- pany and may be offset against, under section IE 1 or IF 1, the net income of the amalgamated company in periods commenc- ing on or after the amalgamation, but applying sections IE 1 and IF 1 (and any other provisions of this Act the application of which is dependent upon the application of either of those provisions) as if, with respect to all times prior to the amalgam- 1662 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IF 6 ation, the amalgamated company did not separately exist and was instead the amalgamating company with the same holders of shares and options over shares each holding the same num- ber and class of shares and options over shares as
 they held at the time in the amalgamating company.
Compare: 1994 No 164 s IF 4 IF 5 Ordering of losses of amalgamated company Where net losses, attributed CFC net losses, or FIF net losses of 2 or more amalgamating companies are allowed under sec- tion IF 4 to be offset against the net income for a tax year of the amalgamated company, those net losses, attributed CFC net losses, or FIF net losses must— (a) if arising in 2 or more tax years, be offset in the same order as they arose; and if arising in the same tax year, be offset, so far as the net income extends,— (i) in the order elected by the amalgamated company by notice to the Commissioner in such form as the Commissioner may allow; or if no such election is made, on a pro rata basis.
(ii) (b) Compare: 1994 No 164 s IF 5 IF 6 Losses, attributed CFC net losses, and FIF net losses of amalgamated company Where— (a) (b) an amalgamated company, in respect of a tax year prior to the tax year in which the amalgamation takes place, has a net loss, an attributed CFC net loss, or a FIF net loss; and the net loss, the attributed CFC net loss, or the FIF net loss has not, under any of sections IE 1, IF 1, and IG 2, been offset against net income of the amalgamated company or any other company in any period prior to the amalgamation (including any part of the tax year in which the amalgamation takes place),— the amalgamated company is entitled to carry forward the net loss, the attributed CFC net loss, or the FIF net loss into the tax 1663 Part I s IF 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) year in which the amalgamation takes place or any subsequent tax year only if— (c) the amalgamated company satisﬁes the relevant require- ments of sections IE 1 and IF 1; and under section IG 2, the net loss, the attributed CFC net loss, or the FIF net loss could have been offset against net income (if there were sufﬁcient such income) at- tributable to that part of the tax year of the relevant com- pany which ends with the date of the amalgamation, by each amalgamating company.
Compare: 1994 No 164 s IF 6 IF 7 Offsetting supplementary dividend against net income (1) If a taxpayer is a section LE 3 holding company and derives a supplementary dividend in a tax year, the maximum aggregate amount that the taxpayer may offset under section IE 1, IG 2, or IH 4 against its net income for that tax year is the amount calculated in accordance with the following formula: is the taxpayer’s net income where— NI NRC is the total amount of non-refundable credits that are available under Part L to be set off against the taxpayer’s income tax liability CC is the total amount of convertible credits that are avail- able under Part L to be set off against the taxpayer’s income tax liability SDD is the total amount of supplementary dividends derived by the taxpayer in the tax year (2) is the applicable basic tax rate.
T Subsection (1) does not affect the calculation under Part L of the non-refundable credits and convertible credits of a section LE 3 holding company for a tax year.
Compare: 1994 No 164 s IF 7 1664 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IG 1 Subpart IG—Net losses: groups of companies Contents IG 1 IG 2 IG 3 IG 4 IG 5 IG 6 IG 7 IG 8 IG 9 Companies included in group of companies Net loss offset between group companies Special provisions in relation to group companies for 1991-92 tax year Group of companies attributed CFC net losses Group of companies FIF net losses Loss carry forward and grouping by consolidated group and consolidated group members Attributed CFC net losses and FIF net losses of consolidated group members Net losses, attributed CFC net losses, and FIF net losses of amalgamated company Net losses, attributed CFC net losses, and FIF net losses offset against net income of amalgamated company IG 10 Net losses used to pay penalties Page 1665 1668 1679 1680 1682 1683 1687 1691 1691 1692 IG 1 Companies included in group of companies (1) Subject always to the express provisions of this section and section IG 2, the provisions of this section and section IG 2 are intended to limit the circumstances in which a company that has a net loss for an income year, or that has a net loss able to be carried forward to that income year in accordance with section IE 1 or IF 1, may offset part or the whole of that net loss against the net income of another company to those circumstances where, at all times during the income year in which the net loss arises and all succeeding income years (if any) up to and including the income year in which the net loss is offset, the company which has the net loss and the other company are, at least to the extent of 66%, commonly owned (whether or not always during that period by the same group of persons).
For the purposes of this Act, in relation to any 2 or more com- panies, none of which is a portfolio tax rate entity,— where at any time there is a group of persons— (a) (2) 1665 Part I s IG 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) the aggregate of whose common voting interests is equal to or greater than 66%; and in any case where at that time a market value cir- cumstance exists in respect of any of the com- panies, the aggregate of whose common market value interests is equal to or greater than 66%,— those companies are treated as a group of companies at that time; and (b) where, in relation to any income year or other period, there is at all times during that income year or other period a group of persons (whether or not always dur- ing that income year or other period the same group of persons)— (i) the aggregate of whose common voting interests is equal to or greater than 66%; and in any case where at any relevant time a mar- ket value circumstance exists in respect of any of the companies, the aggregate of whose common market value interests is equal to or greater than 66%,— (ii) those companies are treated as a group of companies for that income year or other period.
(2B) For the purposes of this Act, in relation to any 2 or more com- panies of which 1 is a portfolio tax rate entity, the companies are treated as being a group of companies for an income year or other period if— (a) a portfolio tax rate entity owns 100% of the voting inter- ests in the other companies; and each company that is not a portfolio tax rate entity is a portfolio land company.
(b) (3) For the purposes of this Act, references to any 2 or more com- panies being at any time or for any period a wholly-owned group of companies mean any 2 or more companies which would be a group of companies at that time or for that period if— (a) the references in subsection (2) to 66% were instead references to 100%; or the companies would be a wholly-owned group of com- panies under paragraph (a) if— (b) 1666 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IG 1 (4) (5) (i) (ii) any nominal shareholding held by any person solely for the purpose of complying with the re- quirements of company law were disregarded; or the shares in any such company held by the trustee of, or held by employees or former em- ployees of the company as a consequence of the operation of, any share purchase scheme were disregarded to the extent that the shares so held by the trustee or employees or former employ- ees— (A) (B) represent no more than 3% of the voting interests in the company; and in any case where at that time or during that period a market value circumstance exists in respect of the company, represent no more than 3% of the market value inter- ests in the company.
Except as expressly provided in this Act, every company in a group of companies is liable for income tax in the same manner as if it were a company not included in a group of companies.
For the purposes of this section, in relation to any 2 or more companies at any time,— (a) the common voting interest of any person who has or is treated as having a voting interest in each of those companies at that time by virtue of section OD 3 is that percentage which is equal to— (i) the percentage voting interest of the person in each of the companies at that time, if those per- centages are the same in the case of each com- pany; or the lowest of the percentage voting interests of the person in each of the companies at that time, if those percentages differ as between the com- panies; and (ii) (b) the common market value interest of any person who is treated as having a market value interest in each of those companies at that time by virtue of section OD 4 is that percentage which is equal to— 1667 Part I s IG 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) the percentage market value interest of the per- son in each of the companies at that time, if those percentages are the same in the case of each com- pany; or the lowest of the percentage market value inter- ests of the person in each of the companies at that time, if those percentages differ as between the companies.
Compare: 1994 No 164 s IG 1 (ii) Section IG 1(2): amended, on 1 October 2007, by section 37 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section IG 1(2): amended, on 1 October 2007, by section 100 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Section IG 1(2B): inserted (with effect from 1 October 2007), on 19 December 2007, by section 127 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
IG 2 Net loss offset between group companies (1) (b) For the purposes of this section, continuity of ownership is treated as being maintained in respect of any company and any period where there is a group of persons— (a) the aggregate of whose minimum voting interests in the company is equal to or greater than 49%; and in any case where at any time during the period a market value circumstance exists in respect of the company, the aggregate of whose minimum market value interests in the company is equal to or greater than 49%— and, for the purposes of this paragraph, the minimum voting interest or the minimum market value interest of any person in the company in the period is equal to the lowest voting interest or market value interest (as the case may be) in the company which that person has during the period.
Subject to the succeeding subsections of this section, where in respect of any income year (in this subsection referred to as the year of offset)— (a) a company (in this subsection referred to as the loss company) has— (i) a net loss for the year of offset that does not con- sist of a mining outgoing excess and is not pre- (2) 1668 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IG 2 (b) (ii) vented by section IE 1(2B) or (2C) from being carried forward under sections IE 1 and IF 1: carried forward under sections IE 1 and IF 1 such a net loss of the loss company which arose in a preceding income year (in this subsection re- ferred to as the preceding loss year) to the year of offset; and the loss company either— (i) elects by notice in accordance with subsection (3) that the whole or part of the net loss be offset against the net income for the year of offset of another company; or receives a payment from another company under an agreement providing for the other company to bear or share in the net loss— (ii) that other company being in this subsection referred to as the proﬁt company ; and (c) the proﬁt company is in the same group of companies as the loss company for— (i) (ii) (iii) (iv) the year of offset of the loss company; and in any case where the year of offset of the proﬁt company ends on a date later than the last day of the year of offset of the loss company, the year of offset of the proﬁt company; and in the case of a net loss or part of a net loss of the loss company, for any preceding loss year that was the 1981-82 income year or any subsequent year, the preceding loss year of the loss company; and in the case of a net loss or part of a net loss of the loss company, for any preceding loss year that was the 1991-92 income year or any subsequent year, all income years of the loss company (if any) falling between the preceding loss year of the loss company and the year of offset of the loss company; and (d) the loss company is at all times in— (i) the year of offset of the loss company;
 and 1669 Part I s IG 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) (B) in the case of a net loss or part of a net loss of the loss company, for any preceding loss year,— (A) the preceding loss year of the loss com- pany; and in any case where the preceding loss year is the 1991-92 income year or a later in- come year, all income years of the loss company (if any) falling between the pre- ceding loss year of the loss company and the year of offset of the loss company— not a dual resident company and is at all times in those years either— (iii) (iv) incorporated in New Zealand; or carrying on business in New Zealand through a ﬁxed establishment in New Zealand; and continuity of ownership is maintained in respect of the loss company for— (i) (ii) the year of offset of the loss company; and in any case where the year of offset of the proﬁt company ends on a date later than the last day of the year of offset of the loss company, the year of offset of the proﬁt company; and the amount so elected to be offset or payment so re- ceived does not exceed the amount that would, were that offset not allowed or that payment not made, be the tax- able income (after offsetting any net loss which is avail- able to the proﬁt company under this section or other than under this section) of the proﬁt company for the year of offset; and in the case of any payment made by the proﬁt com- pany,— (i) the payment does not exceed the amount of the net loss; and the payment is made not later than the 31 March that, in relation to the loss company and the year of offset, is the latest date to which the time for the furnishing of the return for that income year may be extended under section 37(5) of the Tax (e) (f) (g) (ii) 1670 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IG 2 (iii) (iv) Administration Act 1994 or is made within such further time as the Commissioner may allow; and the payment would not (otherwise than under this subsection) be taken into account in
 calculating the taxable income of either the loss company or the proﬁt company; and the loss company gives notice of the payment to the Commissioner in accordance with subsection (3),— the amount so elected to be offset or the payment (as the case may be) must— (h) be offset against net income of the proﬁt company in the year of offset; and to the extent so offset, give rise to a reduction in the available net losses of the loss company (in the same order in which the losses arose); and in the case of any payment made by the proﬁt company, to the extent so offset, not be treated as a dividend paid by the proﬁt company to the loss company,— and any election made in accordance with this subsection is ir- revocable.
(i) (j) (3) Every notice under subsection (2) must be given to the Com- missioner not later than the 31 March that, in relation to the loss company and the year of offset, is the latest date to which the time for the furnishing of the return of its income for the year of offset may be extended under section 37(5) of the Tax Administration Act 1994 or within such further time as the Commissioner may allow.
(a) (4) Notwithstanding subsection (2), where and to the extent that— an offset under that subsection would not, but for the ap- plication of this subsection, be available to a company (in this subsection referred to as the proﬁt company) in an income year (in this subsection referred to as the year of offset) in respect of all or part of a net loss of another company (in this subsection referred to as the loss com- pany) for that income year because the requirements of either or both of subsection (2)(c)(i) and (ii) and (e) are not met; and 1671 Part I s IG 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) (d) an offset under the relevant subsection would be avail- able if regard were had, for the purposes of subsection (2)(c) and (e) to a period (in this subsection referred to as the loss company commonality period) which is part only of the year of offset of the loss company; and adequate accounts have been prepared by the loss com- pany and furnished to the Commissioner which detail sufﬁciently that part of the net loss (in this subsection referred to as the part-year loss, and that net loss to be calculated after taking into account any amount that has been offset under this section against the net income of any company other than the proﬁt company) as is rea- sonably and fairly attributable to the loss company com- monality period; and adequate accounts have been prepared by the proﬁt company and furnished to the Commissioner which detail sufﬁciently that part of the amount (in this sub- section referred to as the part-year proﬁt) that would be the proﬁt company’s taxable income if this subsec- tion did not apply to that net loss for the whole of the year of offset of the proﬁt company as is reasonably and fairly attributable to,— (i) in any case where the year of offset of the proﬁt company is co-extensive with the year of offset of the loss company, the loss company commonality period (in this subsection in respect of that case referred to as the proﬁt company commonality period); and in any
 other case, that part of the year of offset of the proﬁt company (in this subsection in respect of that case referred to as the proﬁt company commonality period)— (A) which includes (but is not limited to) all or part of the loss company commonality period; and in which the proﬁt company and the loss company are at all times members of the same group of companies; and (B) (ii) 1672 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IG 2 (C) in which continuity of ownership has been maintained in respect of the loss com- pany,— the loss company may, in any notice given to the Commis- sioner, in accordance with subsection (3) in respect of the net loss, the proﬁt company, the loss company, and the year of off- set, elect that regard must be had in applying subsection (2) in respect of the net loss, the proﬁt company, the loss company, and the year of offset only to the loss company commonality period and, where that election is made, subsection (2) applies for the purpose of determining the amount able to be offset against the net income of the proﬁt company in respect of the net loss and the year of offset as if— (e) the year of offset of the loss company were co-exten- sive with the loss company commonality period and the net loss of the loss company for that deemed year were equal to the part-year loss; and the year of offset of the proﬁt company were co-ex- tensive with the proﬁt company commonality period and the taxable income of the proﬁt company for that deemed year were equal to the part-year proﬁt.
(f) (a) (5) Notwithstanding subsection (2), where and to the extent that— an offset under that subsection would not, but for the ap- plication of this subsection, be available to a company (in this subsection referred to as the proﬁt company) in an income year (in this subsection referred to as the year of offset) in respect of all or part of a net loss of an- other company (in this subsection referred to as the loss company) for a preceding income year (in this subsec- tion referred to as the preceding loss year) because the requirements of any 1 or more of— (i) (ii) (iii) paragraph (c)(i); or paragraph (c)(ii); or in the case where the preceding loss year is the 1991-92 income year or a subsequent income year, paragraph (c)(iii); or paragraph (e)— (iv) of subsection (2) are not met; and (b) an offset under that subsection would be available if— 1673 Part I s IG 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) in any case where subsection (2)(c)(i) or (ii) or (e) is not met,— (A) regard were had for the purposes of ap- plying subsection (2)(c)(i), (ii), and (e) to a period (in this subsection referred to as the loss company commonality period) which is part only of the year of offset of the loss company; and section IF 1(3) were to apply as if the loss company had, in that part of the year of offset of the proﬁt company which falls within the loss company commonality period, net income equal to that part of the proﬁt company’s net income for the year of offset speciﬁed in paragraph (c); and (B) in any case where subsection (2)(c)(iii) is not met in respect of a preceding loss year being the 1991-92 income year or a subsequent income year, regard were had for the purposes of apply- ing that paragraph (c)(iii) to a period (in this sub- section referred to as the preceding year loss company commonality period) which is part only of the preceding loss year; and (c) in any case where subsection (2)(c)(i) or (ii) or (e) is not met, adequate accounts have been prepared by the proﬁt company and furnished to
 the Commissioner which de- tail sufﬁciently that part of the amount that would, if this subsection did not apply to the net loss of the loss com- pany, be the proﬁt company’s taxable income (in this subsection referred to as the part-year proﬁt) for the whole of the year of offset of the proﬁt company as is reasonably and fairly attributable to— (i) in any case where the year of offset of the proﬁt company is co-extensive with the year of offset of the loss company, the loss company commonality period (in this subsection in respect of that case referred to as the proﬁt company commonality period); and 1674 Reprinted as at 29 August 2011 (ii) Income Tax Act 2004 Part I s IG 2 in any other case, that part of the year of offset of the proﬁt company (in this subsection in respect of that case referred to as the proﬁt company commonality period)— (A) which includes (but is not limited to) all or part of the loss company commonality period; and in which the proﬁt company and the loss company are members of the same group of companies; and in which continuity of ownership has been maintained in respect of the loss company; and (B) (C) (d) in any case where subsection (2)(c)(iii) is not met in respect of a preceding loss year being the 1991-92 in- come year or a subsequent income year, adequate ac- counts have been prepared by the loss company and furnished to the Commissioner which detail sufﬁciently that part of the net loss (in this subsection referred to as the part-year loss, and that net loss to be calculated after taking into account any amount that has been offset against net income by any company other than the proﬁt company) as is reasonably and fairly attributable to the preceding year loss company commonality period,— the loss company may, in any notice given to the Commis- sioner in accordance with subsection (3) in respect of the net loss, the proﬁt company, the loss company, and the year of off- set, elect that, in respect of the net loss, the proﬁt company,
 the loss company, and the year of offset,— (e) in any case where subsection (2)(c)(i) or (ii) or (e) is not met, regard must be had in applying those para- graphs only to the loss company commonality period, and, where such an election is made,— (i) for the purposes of determining the amount able to be offset by the proﬁt company in respect of the loss company’s net loss and the year of off- set, subsection (2) applies as if the year of off- set of the proﬁt company were co-extensive with the proﬁt company commonality period and the 1675 Part I s IG 2 Income Tax Act 2004 Reprinted as at 29 August 2011 taxable income of the proﬁt company for that deemed year were equal to the part-year proﬁt; and (ii) where and to the extent that— (B) (A) the whole or part net loss of the loss com- pany could only be carried forward by the loss company under section IE 1(2) to the year of offset by virtue of section IF 1(3); and by virtue of this subsection an offset is allowed to the proﬁt company,— section IF 1(3) applies as if the loss company has, in that part of the proﬁt company commonality period which falls within the loss company com- monality period, net income equal to the part- year proﬁt; and (f) in any case where subsection (2)(c)(iii) is not met in respect of a preceding loss year being the 1991-92 in- come year or a subsequent income year, regard must be had in applying that paragraph (c)(iii) only to the preceding year loss company commonality period, and, where such an election is made, for the purposes of de- termining the amount able to be offset by the proﬁt com- pany in respect of the loss company’s net loss and the year of offset, subsection (2) applies as if the preced- ing loss year were co-extensive with the preceding year loss company commonality period and the net loss of the loss company for such deemed year were equal to the part-year loss.
a company (referred to in this subsection as the loss company) has a net loss for any income year; and a deduction has been allowed under this Act or an ear- lier Act, in the 1993-94 or any subsequent income year (referred to in this subsection as the year of write off), to any company (referred to in this subsection as the write-off company) other than the loss company for— (i) a bad debt; or (6) Where— (a) (b) 1676 Reprinted as at 29 August 2011 (ii) Income Tax Act 2004 Part I s IG 2 (B) a decline in the value of any shares determined as follows: (A) if the shares have not been disposed of, from a valuation made under subpart EB or otherwise; or if the shares have been disposed of by the taxpayer, as the amount by which the in- come of the company in respect of the dis- posal is less than the deduction allowed to the company in respect of the cost of the shares; and (c) the application by the loss company of an amount which— (i) (ii) was paid by any person for the subscription of the gave rise to the debt; or shares— was taken into account in calculating the net loss,— no offset is available in respect of the net loss under subsection (2) in the year of write off or in any income year succeeding the year of write off in calculating the net income of any company which is the write-off company or which is at any time in the income year in which the net loss arises in the same group of companies as the write-off company, except to the extent that the net loss exceeds the aggregate of the deductions referred to in paragraph (b).
(7) Where— (a) an amount of net loss apparently arising for a company (in this subsection referred to as the loss company) in an income year (in this subsection referred to as the year of loss) is offset by more than 1 company (in this subsection referred to as the proﬁt companies) under subsection (2); and the actual net loss of the loss company for the year of loss is determined by the Commissioner to be less than the aggregate amounts offset in respect of the apparent net loss by the proﬁt companies against their net in- come,— (b) then, notwithstanding any other provision of this section,— 1677 Part I s IG 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) (d) where the loss company so elects by notice in such form as the Commissioner may allow, given to the Commis- sioner within 6 months after the date upon which the Commissioner gave notice to the loss company of the determination of the reduced amount of the net loss or within such further time as the Commissioner may al- low, the amount by which the actual net loss determined by the Commissioner is less than the aggregate of the amounts offset by the proﬁt companies must be allo- cated to the respective proﬁt companies as a reduction in the amounts available to them for offset in the man- ner the loss company elects, but any election which pro- vides that the amount of the reduction allocated to a company which at the time of the election is no longer a member of the same group of companies as the loss company exceeds the amount of reduction which would arise under paragraph (d) is deemed not to have been made; and in any other case, the amount available to each of the proﬁt companies for offset against their net income must be reduced by the same proportion as the proportion by which the apparent net loss was reduced to equal the actual net loss,— and, where and to the extent that the reduction in an amount available for offset against the net income of any proﬁt com- pany results in any payment made under this section under an agreement for the
 proﬁt company to bear or share in the net loss of the loss company being treated as a dividend, that dividend is deemed to be reduced to the extent to which the payment is refunded by the loss company to the proﬁt company within the period of 6 months referred to in paragraph (c).
For the purposes of subsection (2)(c)(iii) and (iv), a company is treated as being a member of the same group of companies as another company in respect of the 1991-92 income year or any earlier income year if those 2 companies were, in respect of that income year, members of the same group of companies for the purposes of section 191(5) and (7) of the Income Tax Act 1976 as in force before its repeal by section 25 of the Income (8) 1678 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IG 3 (9) Tax Amendment Act (No 2) 1992 by virtue of the provisions of that section 191, as modiﬁed by section IG 3.
Sections CG 2 and DB 38 apply as if any deduction allowed under subsection (2) were relief afforded by section IE 1.
(10) For the purposes of this section, where adequate accounts are required to be prepared and furnished to the Commissioner in respect of part of the net loss or taxable income for any income year of any company which is reasonably and fairly attributable to a period which is part only of that income year of that company, those accounts must be prepared, to the extent to which reasonable and fair, by applying the provisions of this Act to that period as if it were an income year.
In this section, dual resident company means, in relation to any income year, any company which in that income year or any part of that income year is— (a) (b) resident in New Zealand; and either— (i) (11) (ii) treated, under a double tax agreement, as not be- ing resident in New Zealand for the purposes of the double tax agreement; or also, by the law of another country or territory, li- able to income tax in that country or territory by reason of domicile, residence, or place of incorp- oration.
Compare: 1994 No 164 s IG 2 Subsection (2)(a)(i) was substituted, as from 1 October 2005, by section 215 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Section IG 2(9): amended (with effect from 1 April 2005), on 19 December 2007, by section 128(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
IG 3 Special provisions in relation to group companies for 1991-92 tax year (1) Notwithstanding section 191(3A) of the Income Tax Act 1976 (as that provision was inserted by section 8 of the Income Tax Amendment Act (No 5) 1991 and as in force before the repeal of section 191 of that Act by section 25 of the Income Tax Amendment Act (No 2) 1992), where and to the extent that the Commissioner is satisﬁed that— 1679 Part I s IG 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (c) (b) a company (in this subsection referred to as the loss company) had a net loss for the 1991-92 tax year; and the loss company and another company would have been treated, under that section 191(3A), as a group of companies or a speciﬁed group to which section 191(4) of the Income Tax Act 1976 (as also in force before its repeal) applied, had the period speciﬁed in that section 191(3A)(c) and (d) been, instead of the period so speci- ﬁed, part only of the period so speciﬁed; and adequate accounts have been prepared by the loss com- pany and furnished to the Commissioner relating to that part of that period which detail sufﬁciently such part of the net loss for the 1991-92 tax year which was reason- ably and fairly attributable to that part of that period,— those 2 companies are treated, for the purposes of section 191(5) and (7) of the Income Tax Act 1976 (as so previously in force), but only with respect to that part of that net loss as those accounts indicate was reasonably and fairly attributable to that part of that period, as constituting a group of compan- ies, speciﬁed group, or both (as the case may be).
The references in section 191(7A) of the Income Tax Act 1976 (as in force before the repeal of section 191 by section 25 of the Income Tax Amendment Act (No 2) 1992) to section 188 of the Income Tax Act 1976 are references to section 188 (as in force before its repeal by section 22 of the Income Tax Amendment Act (No 2) 1992)— (a) as modiﬁed by section 188AA of the Income Tax Act 1976; and as if the continuity percentage referred to in that section 188(7) were always 40%.
(b) (2) Compare: 1994 No 164 s IG 3 IG 4 Group of companies attributed CFC net losses (1) Subject to this section, if a company (in this section referred to as the ﬁrst company) has an attributed CFC net loss for any income year or has carried forward to any income year an attributed CFC net loss under sections IE 1 and IF 1, and the loss may not be offset by the ﬁrst company in the income year 1680 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IG 4 in accordance with sections IE 1 and IE 3, sections GC 4 and IG 2 apply as if— (a) the attributed CFC net loss were a net loss arising on the last day of the income year in respect of which it was attributed; and each reference in those sections to a group of companies were a reference to a wholly-owned group of compan- ies; and section IG 2(4), (5), and (10) were omitted; and the reference in section IG 2(8) to “the same group of companies for the purposes of section 191(5) and (7) of the Income Tax Act 1976” were a reference to “the same speciﬁed group in accordance with section 191(4) of the Income Tax Act 1976”.
(b) (c) (d) (2) The maximum amount of the attributed CFC net loss that any other company may, under section IG 2 (as modiﬁed by this section), offset against its net income for that income year is an amount equal to the total of— (a) any attributed CFC income of the other company for that income year in respect of any controlled foreign company resident in the same country or territory (re- ferred to in this section as the relevant country) as that in which the ﬁrst-mentioned controlled foreign com- pany was resident in the accounting period in respect of which the attributed CFC net loss arose; and any FIF income of the other company that is calculated under the branch equivalent method and is derived in that income year in respect of an attributing interest in a foreign investment fund resident in the relevant country.
(3) An amount of attributed CFC income or FIF income of the other company may only be taken into account under sub- section (2) to the extent that the amount is not taken into ac- count— (a) (b) in determining under section DN 4 or DN 9 the deduc- tions that the other company is allowed under section DN 1 or DN 5; or (b) in determining the other company’s entitlement to an offset under section IE 3; or 1681 Part I s IG 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) (c) in determining the other company’s entitlement to an offset under section IG 2 in respect of any other attributed CFC net loss.
If the ﬁrst company is unable to offset any part of the maxi- mum amount of attributed CFC net loss calculated under sub- section (2) for the income year against net income of the other company for the income year because there is insufﬁcient net income, the excess is treated as if it were a net loss of the other company for the year determined under section BC 4 and ceases to be part of the attributed CFC net loss available to the ﬁrst company.
Compare: 1994 No 164 s IG 4 IG 5 Group of companies FIF net losses (1) Subject to this section, if a company (in this section referred to as the ﬁrst company) has a FIF net loss for an income year or has carried forward to an income year a FIF net loss under sections IE 1 and IF 1, and that loss may not be offset by the ﬁrst company in that income year in accordance with sections IE 1 and IE 4, sections IG 2 and GC 4 apply as if— (a) the FIF net loss were a net loss arising on the last day of the income year in respect of which it was attributed; and each reference in those sections to a group of companies were a reference to a wholly-owned group of compan- ies; and section IG 2(4), (5), and (10) were omitted; and the reference in section IG 2(8) to “the same group of companies for the purposes of section 191(5) and (7) of the Income Tax Act 1976” were a reference to “the same speciﬁed group in accordance with section 191(4) of the Income Tax Act 1976”.
(b) (c) (d) If the FIF net loss is calculated under the branch equivalent method, the maximum amount of the FIF net loss which may be offset against the net income of another company under section IG 2 (as modiﬁed by this section) is determined by applying section IG 4 as if— (2) (3) 1682 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IG 6 (4) (a) (b) (c) the interest in the fund were an income interest in a controlled foreign company; and the FIF net loss were an attributed CFC net loss; and references to the ﬁrst controlled foreign company re- ferred to were references to the fund.
If the ﬁrst company is unable to offset any part of the maximum amount of the FIF net loss calculated under subsection (3) for the income year against net income of the other company for the year because there is insufﬁcient net income, the excess is treated as if it were a net loss of the other company for the year determined under section BC 4 and ceases to be part of the FIF net loss available to the ﬁrst company.
Compare: 1994 No 164 s IG 5 Subsection (2) was repealed, as from 1 April 2007, by section 101(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

See section 101(3) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
Subsection (4) was amended, as from 1 April 2007, by section 101(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “subsection (3)” for “subsection (2) or (3)”.

See section 101(3) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
IG 6 Loss carry forward and grouping by consolidated group and consolidated group members (1A) Subject to this section, sections IE 1 to IE 4, IF 1, IF 2, IG 1, IG 2, and IH 1 apply, with any necessary modiﬁcations, in respect of a consolidated group as if the consolidated group were a single company and the taxable income of the consolidated group is determined accordingly.

(2) Nothing in this section applies to any consolidated group whose members are mining companies.
(3) Where any consolidated group has a net loss for an income year, no part of that net loss is treated for the purposes of this Act as a net loss of any individual member company of that consolidated group.
(4) Where a company that is in an income year a member of a consolidated group is allowed under sections IE 1 and IF 1 to claim to carry forward to that income year and offset to the extent of net income for that year (in this subsection referred 1683 Part I s IG 6 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) to as the speciﬁed year) any net loss of the company for any preceding income year,— (a) that net loss must, subject to subsections (5) to (7), be offset against the net income (if any) for the speciﬁed year of the consolidated group so far as that net income extends; and only so far as it has not been so offset, is eligible to be— offset in accordance with sections IE 1 and IF 1 or (i) this section against net income of the company or of any other consolidated group for the speciﬁed year; or carried forward by the company in accordance with sections IE 1 and IF 1 to any succeeding income year; or treated, for the purposes of section IG 2, as a net loss of the company carried forward to the speciﬁed year, in which event that net loss may be the subject of an election or agreement under section IG 2(2) in respect of the net income of any other company (other than the consolidated group).
(iii) (ii) (5) Where net losses of a consolidated group or of 1 or more mem- ber companies of the group are allowed under sections IE 1 and IF 1 or required under this section to be offset against the net income (if any) for an income year of a consolidated group, those net losses must— (a) if they arose in 2 or more income years, be offset in the same order as they arose; and if they arose in the same income year, be offset, so far as the net income extends,— (i) in the order elected by the consolidated group by notice to the Commissioner in such form as the Commissioner may allow; or if no such election is made, on a pro rata basis.
(ii) (b) In any case where— (a) subsection (4) would, except to the extent of the appli- cation of this subsection and subsection (7), require the whole or part of the net loss of any company for any income year (in this subsection referred to as the pre- (6) 1684 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IG 6 (b) ceding loss year) to be offset against the net income (if any) of a consolidated group for a subsequent year (in this subsection referred to as the subsequent year); and the company was not a member of the same group of companies, for the preceding loss year or any income year falling between the preceding loss year and the subsequent year, as any 1 or more companies which are members of the consolidated group in the subsequent year,— the amount of net loss offset under subsection (4) against the net income of the consolidated group for the subsequent year must not exceed the aggregate of— (c) (d) the amount of the net loss that could be offset by the company in the subsequent year under sections IE 1 and IF 1 against its own net income (that net income being nevertheless calculated in accordance with section HB 2(1)) were it not in that subsequent year a member of a consolidated group; and the aggregate amount that could be offset under section IG 2 against their own net income (that net income being nevertheless calculated in accordance with section HB 2(1)) by companies (other than the company) which are members of the consolidated group in the subsequent year if— (i) neither the company nor those other companies were members of the consolidated group in the subsequent year; and the company were to take all necessary steps under section IG 2 to permit that offset under that section by the other companies.
(ii) (7) In any case where— (a) subsection (4) would, except to the extent of the appli- cation of this subsection and subsection (6), require the whole or part of the net loss of any company for any income year (in this subsection referred to as the pre- ceding loss year) to be offset against the net income (if any) of a consolidated group of companies for a subse- quent year (in this subsection referred to as the subse- quent year); and 1685 Part I s IG 6 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) the company was a member of the consolidated group for part only of the subsequent year,— the amount of net loss offset under subsection (4) against the net income of the consolidated group for the subsequent year must not exceed the lesser of— (c) the excess (if any) of the net loss of the company for the preceding loss year and required, but for the appli- cation of this subsection and subsection (6), to be offset against the net income of the consolidated group for the subsequent year over the aggregate of— (i) (ii) any net income for the subsequent income year of the company attributable to any period prior to the company being a member of the consolidated group, calculated by applying the provisions of section FD 9(2); and any part of the net loss required, under subsec- tion (4), to be offset against the net income for the subsequent year of another consolidated group of companies of which the company was a member during the subsequent year and prior to the com- pany being a member of the consolidated group; and (d) the amount (if any), as shown in adequate and suf- ﬁciently detailed accounts furnished to the Commis- sioner with the consolidated group’s return of income for the income year, of the consolidated group’s net in- come for the income year as is reasonably and fairly attributable to the part of the income year during which the company was a member of the consolidated group.
(8) Where and to the extent that— (a) (b) a company is a member of a consolidated group for part only of an income year (in this subsection referred to as the speciﬁed year); and the company is entitled only by virtue of section IF 1(3) to claim to carry forward to the speciﬁed year and offset, to the extent of the amount of net income of the com- pany attributable to part only of the speciﬁed year (that part being referred to in this subsection as the continu- 1686 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IG 7 (c) (d) ity period) any net loss of the company for any preced- ing income year; and the company is a member of the consolidated group for the whole or part of the continuity period; and adequate and sufﬁciently detailed accounts have been prepared and furnished to the Commissioner with the consolidated group’s return of income for the speciﬁed year, relating to that part of the continuity period during which the company was a member of the consolidated group, which detail sufﬁciently such part of the net in- come of the consolidated group (that part being referred to in this subsection as the continuity period proﬁt) for the speciﬁed year as is reasonably and fairly attributable to that part of the continuity period; and the net loss of the company for the preceding income year, to the extent able to be carried forward under sec- tions IE 1 and IF 1 by virtue of this subsection, is, by virtue of this section, offset against the net income for the speciﬁed year of the consolidated group,— section IF 1(3) applies as if the company had an amount of net income attributable to the continuity period equal to the continuity period proﬁt.
Compare: 1994 No 164 s IG 6 (e) IG 7 Attributed CFC net losses and FIF net losses of consolidated group members (1) Where any consolidated group has in respect of an income an attributed CFC net loss; or a FIF net loss,— year— (a) (b) no part of that attributed CFC net loss or FIF net loss is treated for the purposes of this Act as an attributed CFC net loss or FIF net loss of any individual member company of that con- solidated group.
(2) Where— (a) any company is a member of a consolidated group in an income year (in this subsection referred to as the speciﬁed year); and the company is entitled— (b) 1687 Part I s IG 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) in accordance with sections IE 1 and IE 3 to claim to carry forward to the speciﬁed year and offset against net income for that year any attributed CFC net loss of that company for any preceding income year; or in accordance with sections IE 1 and IE 4 to claim to carry forward to the speciﬁed year and off- set against net income for that year any FIF net loss of that company for any preceding income year,— that loss must, subject to subsections (3) and (4), be— (c) in the case of such an attributed CFC net loss, offset against the net income of the consolidated group for the speciﬁed year, to the extent that it does not exceed the attributed CFC income (if any) derived in the speciﬁed year by the consolidated group in respect of any con- trolled foreign company or companies resident in the relevant country or territory; and in the case of such a FIF net loss, offset against the net income of the consolidated group for the speciﬁed year to the extent that it does not exceed the FIF income (if any) derived in the speciﬁed year by the consolidated group,— (d) and only so far as it cannot be so offset is eligible to be— (e) offset against the net income of the company or any other consolidated group in the speciﬁed year; or carried forward by the company in accordance with sec- tions IE 1 and IF 1 to any succeeding income year; or offset against the net income of any other company (other than the consolidated group) subject to and in ac- cordance with section IG 4 or IG 5.
(f) (g) (3) Where attributed CFC net losses or FIF net losses of a consoli- dated group or of 1 or more member companies of the group are allowed to be offset against net income of a consolidated group, those net losses must,— (a) if resulting from net losses arising in 2 or more income years, be offset in the same order as the net losses arose; and 1688 Reprinted as at 29 August 2011 (b) Income Tax Act 2004 Part I s IG 7 if resulting from net losses arising in the same income year, be offset, so far as the relevant net income ex- tends,— (i) in the order elected by the consolidated group by notice to the Commissioner in such form as the Commissioner may allow; or if no such election is made, on a pro rata basis.
(ii) (4) In any case where— (a) subsection (2) would, except to the extent of the applica- tion of this subsection, require the whole or part of any net loss of any company, arising in any income year (in this subsection referred to as the preceding loss year), to be offset against net income (if any) of a consolidated group of companies for a subsequent income year (in this subsection referred to as the subsequent year); and the company was not a member of the same group of companies, for the preceding loss year or any income year falling between the preceding loss year and the subsequent year, as any 1 or more companies which are members of the consolidated group in the subsequent year,— (b) the amount of net loss offset under subsection (2) against the net income of the consolidated group in the subsequent year must not exceed the aggregate of— (c) the amount of the attributed CFC net loss or FIF net loss which could be offset by the company in the subsequent year in accordance with sections IE 1 and IF 1, and IE 3 or IE 4 (as the case may be) against its own net in- come were it not in that subsequent year a member of a consolidated group of companies (that net income be- ing nevertheless calculated in accordance with section HB 2(1)); and the aggregate amount which could be offset against their own net income if that net income were nevertheless calculated in accordance with section HB 2(1) and in accordance with sections IG 2 and IG 4 or IG 5 by com- panies (other than the company) that are members of the consolidated group in the subsequent year if— (d) 1689 Part I s IG 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) neither the company nor those other companies were members of the consolidated group in the subsequent year; and the company were to take all necessary steps under sections IG 2 and IG 4 or IG 5 to permit that offset by the other companies under the rele- vant one of those sections.
In any case where— (a) subsection (2) would, except to the extent of application of this subsection and subsection (4), require the whole or part of any attributed CFC net loss or FIF net loss of any company for any income year (in this subsection referred to as the preceding year) to be offset against net income of a consolidated group of companies in a subsequent year (in this subsection referred to as the subsequent year); and the company was a member of the consolidated group for part only of the subsequent year,— (b) the amount of net loss offset under that subsection against net income of the consolidated group for the subsequent year must not exceed the lesser of— (c) the excess (if any) of the amount of net loss of the com- pany for the preceding year required, but for the appli- cation of this subsection and subsection (4), to be offset against net income of the consolidated group in respect of the subsequent year over the aggregate of— (i) any net income of the company in the subsequent year in any period prior to the company being a member of the consolidated group (calculated by applying the provisions of section FD 9(2)) against which net income that net loss would be able to be offset under this Act; and any part of the net loss required, under subsec- tion (2), to be offset against net income for the subsequent year of another consolidated group of companies of which the company was a member during the subsequent year prior to the company being a member of the consolidated group; and (ii) (5) 1690 Reprinted as at 29 August 2011 (d) Income Tax Act 2004 Part I s IG 9 the amount (if any), as shown in adequate and suf- ﬁciently detailed accounts furnished to the Commis- sioner with the consolidated group’s return of income for the income year, of the consolidated group’s net in- come for the income year (being net income against which that net loss could be offset under this Act) as is reasonably and fairly allocable to the part of the in- come year during which the company was a member of the consolidated group.
Compare: 1994 No 164 s IG 7 IG 8 Net losses, attributed CFC net losses, and FIF net losses of amalgamated company Where an amalgamated company is deemed under section IF 4 to have a net loss, attributed CFC net loss, or FIF net loss in respect of an amalgamating company that ceased to exist on the amalgamation, for the purposes of determining whether the net loss, attributed CFC net loss, or FIF net loss may be off- set, under sections IG 2, IG 4, and IG 5 against net income of another company, the relevant section of this Act applies as if, with respect to all times prior to the amalgamation, the amal- gamated company did not separately exist and was instead the amalgamating company with the same holders of shares and options over shares each holding the same number and class of shares and options over shares as they held at the time in the amalgamating company.
Compare: 1994 No 164 s IG 8 IG 9 Net losses, attributed CFC net losses, and FIF net losses offset against net income of amalgamated company Where a company (referred to in this subsection as the loss company) has a net loss, attributed CFC net loss, or FIF net loss in respect of a period that falls wholly or partly before an amalgamation, the net loss, attributed CFC net loss, or FIF net loss may be offset, under sections IG 2, IG 4, and IG 5 against net income of the amalgamated company if and only if the net loss, attributed CFC net loss, or FIF net loss can be so offset by applying the commonality of ownership and other tests contained in the relevant provisions of this Act severally 1691 Part I s IG 10 Income Tax Act 2004 Reprinted as at 29 August 2011 to the loss company and the amalgamated company in respect of each company that has in the course of or before the amal- gamation amalgamated with the amalgamated company, as if, with respect to all times prior to the amalgamation, the amalga- mated company did not separately exist and was instead that amalgamating company with the same holders of shares and options over shares each holding the same number and class of shares and options over shares as they held at the time in the amalgamating company.
Compare: 1994 No 164 s IG 9 IG 10 Net losses used to pay penalties (1) A taxpayer may elect to use a net loss of the taxpayer to pay a shortfall penalty assessed by the Commissioner in respect of an income tax liability, if— (a) the net loss is available to be offset against net income of the taxpayer in the tax year of the shortfall penalty; and the taxpayer notiﬁes the Commissioner of the election within the due date period for the payment of the short- fall penalty.
(b) (2) (1A) A wholly-owned group of companies may elect, in the man- ner provided in subsection (1), to apply a loss incurred by a company in the wholly-owned group in payment of a shortfall penalty imposed on any company in that group.

If a taxpayer makes an election under subsection (1) in relation to current tax year losses and the net losses are available to be offset in the current tax year, the time that the net losses are offset is the time of the election.
Each dollar of net loss that is used to pay a shortfall penalty— counts as an amount of payment equal to 1 dollar multi- (a) plied by the tax rate; and is, from the date the net loss is used, no longer available for use by a person.

(b) (3) For the purposes of subsection (3), the term tax rate means the rate of tax or lowest marginal rate of tax that would apply to the taxpayer during the return period to which the relevant tax shortfall relates, if the taxpayer had tax to pay.
(4) 1692 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IH 1 (5) In this section, tax year includes any part of a tax year that, by virtue of section IF 1 or IG 2, may be taken into account for loss continuity or group purposes.
Compare: 1994 No 164 s IG 10 Subpart IH—Losses: miners Contents IH 1 IH 2 IH 3 IH 4 IH 5 Losses of mining companies and petroleum miners Companies engaged in exploring for, searching for, or mining petroleum Loss carry back by petroleum miners Companies engaged in exploring for, searching for, or mining certain minerals Resident mining operators Page 1693 1697 1698 1699 1702 IH 1 Losses of mining companies and petroleum miners (1) Where the whole or a part of a net loss of a company (being a mining company or a resident mining operator or a non-resi- dent mining operator) for any income year (in this subsection referred to as the year of loss) arises as a result of mining ex- ploration expenditure or mining development expenditure or petroleum exploration expenditure or petroleum development expenditure relating to an area comprised in a mining licence or a mining privilege or to 2 or more such areas (any such area being referred to in this subsection as a licence area), the fol- lowing provisions apply: (a) the amount of that net loss which so arises in relation to that licence area or (as the case may be) to each of those licence areas is to be determined (and the amount in respect of any such licence area is referred to in this subsection as the speciﬁed sum in relation to that li- cence area); and (b) where, in relation to the speciﬁed sum in relation to a licence area,— (i) at the beginning of any income year, being an income year after the year of loss and being the 1693 Part I s IH 1 Income Tax Act 2004 Reprinted as at 29 August 2011 ﬁrst such income year in respect of which this subsection applies with respect to that speciﬁed sum, (that income year being referred to in this paragraph as the year of claim), there remains a balance of that speciﬁed sum after taking into account such amounts of that speciﬁed sum as have been offset against the net income of that company for any income year or years before the year of claim under this Act, and, where that company is a mining company, after taking into
 account any amounts by which that speciﬁed sum has been reduced in accordance with section IH 4(1)(a) or (c); and by reason only of section GC 2 or IF 1(1), that balance would, but for this paragraph, be pre- cluded from being, in whole or in part, offset against any net income of that company for the year of claim,— (ii) section GC 2 or IF 1(1) does not preclude that balance from being offset against the net income of that company to the ex- tent that it does not exceed the amount that would be the net income of the company if its sole source of assessable income for the year of claim was from that licence area and, so far as that balance cannot then be offset, from being offset against the net income of that company for the income year next fol- lowing the year of claim, to the extent that it does not exceed the amount that would be the net income of the company if its sole source of assessable income for that income year was from that licence area, and so on, and, in any such case, section IH 4(1)(e), with any necessary modiﬁcations, applies; and (d) for the purposes of this subsection, the reference in this subsection to petroleum exploration expenditure relat- ing to an area comprised in a mining licence or a min- ing privilege is taken as including a reference to expend- iture on exploring or searching in any area which is out- side but continuous, or geologically contiguous, with that ﬁrst-mentioned area, being exploring or searching which was included in the programme of exploring or 1694 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IH 1 searching as a consequence of which application was made for that mining licence or that mining privilege.
(2) Subject to section IH 2(1), where the Commissioner is satisﬁed that the whole or part of any net loss of a petroleum mining company for the 1990-91 income year or any earlier income year (that income year being referred to in this subsection as the year of loss) arises from the allowance of— (a) a deduction of the amount of any petroleum exploration expenditure incurred by that company on or before 30 September 1990 in exploring or searching for petroleum in an area that is or is subsequently comprised in a min- ing licence or in 2 or more such areas; or a deduction of an amount in respect of the amount of any petroleum development expenditure incurred by that company on or before 30 September 1990,— (b) the following provisions apply: (c) the amount of that net loss which so arises from the allowance of that deduction, in relation to that licence area or (as the case may be) to each of those licence areas (the amount so determined in respect of any such licence area being referred to in this subsection as the speciﬁed sum in relation to that licence area); and (d) where, in relation to that speciﬁed sum in relation to a licence area, at the beginning of any income year, be- ing an income year after the year of loss and being the ﬁrst such income year in respect of which this subsec- tion (or section 188C(2) of the Income Tax Act 1976) applies with respect to that speciﬁed sum (that income year being referred to in this paragraph as the year of claim), there remains a balance of that speciﬁed sum after taking into account— (i) such amounts of that speciﬁed sum that have been allowed as a deduction to that company, or offset against the net income of that company, in or for any income year or years before the year of claim under this Act or the Income Tax Act 1976 or have been allowed as a deduction to any other company in or for any such income year or years; and 1695 Part I s IH 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) where that 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, after taking into account any amounts by which, in the determination of the Commissioner, that speciﬁed sum has been re- duced in accordance with section 216(16)(a) or the ﬁrst proviso to section 216(16)(b) of that Act (as those provisions applied immediately before the commencement of section 214B of the In- come Tax Act 1976); and by reason only of section GC 2 or IF 1(1), that balance would, but for this paragraph, be pre- cluded from being, in whole or in part, offset against the net income of that company, in or for the year of claim,— (iii) section GC 2 or IF 1(1) does not preclude that balance from being offset against the net income of that company for the year of claim, to the extent that the amount offset does not ex- ceed the amount that would be the net income of the company for the year of claim if the company’s sole source of assess- able income was from that licence area, so far as that income or amount extends, and, so far as the balance cannot then be offset, from being offset against the net income of the com- pany for the income year next following the year of claim to the extent that the amount offset does not exceed the amount that would be the net income of the company for that income year if the company’s sole source of assessable income was from that licence area, and so on; and (f) for the purposes of this subsection,— (i) the reference in this subsection to exploration in exploring or searching for petroleum in an area which is or is subsequently comprised in a min- ing licence is taken as including a reference to expenditure in exploring or searching for petrol- eum in any area which is outside but continuous, or geologically contiguous, with that ﬁrst-men- tioned area, being exploring or searching that was included (whether originally or additionally) in 1696 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IH 2 the programme of exploring or
 searching as a consequence of which application was made for that mining licence; and the expression mining licence means a mining licence issued under the Petroleum Act 1937.
(ii) Compare: 1994 No 164 s IH 1 IH 2 Companies engaged in exploring for, searching for, or mining petroleum (1) Where in the 1990-91 or any earlier income year a net loss arises from the allowance in that income year to a petroleum mining company of a deduction or further deduction under any of section 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 Income Tax Act 1994)— (a) any company (referred to in this subsection as a share- holder company) that is a shareholder of that petrol- eum mining company and has made at any time (being a time at which that shareholder company was a share- holder of that petroleum mining company) any payment or payments to that petroleum mining company which was or were used for the purposes of the petroleum de- velopment expenditure of the kind referred to in sec- tion DZ 6(4) of the Income Tax Act 1994, in respect of which that deduction or further deduction is allowed in that income year, is allowed, if that shareholder com- pany has so elected by notice in accordance with section 214B(22)(d) of the Income Tax Act 1976 (or section DZ 6(12)(d) of the Income Tax Act 1994), a deduction of an amount that bears to that net loss the same proportion as that payment, or the aggregate of those payments, bears to that petroleum development expenditure; and no other deduction and no offset is allowed under this Act in respect of— (i) that net loss, except to the extent that it exceeds the aggregate of all amounts deducted, under paragraph (a) in the income year in which that net loss arises: (b) 1697 Part I s IH 3 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) any amount allowed as a deduction under para- graph (a) to any such shareholder company: provided that where that net loss arises from the allowance of a further deduction under the second proviso to section 214B(6) of the Income Tax Act 1976 (or section DZ 6(4) of the Income Tax Act 1994) that net loss is, for the purposes of this sub- section, deemed to be a net
 loss arising in the year which, in section DZ 6(4), is referred to as the year of cessation: pro- vided also that in no case may the aggregate of the amounts deducted by any shareholder company under paragraph (a) ex- ceed the aggregate of the payments of the kind referred to in that paragraph made by that shareholder company to the pet- roleum mining company.
(2) Where, in relation to the 1990-91 or any earlier income year, any taxpayer (being a company) is a petroleum mining com- pany, sections CV 1 and IG 1 do not apply, in relation to that company, in respect of— (a) any net loss, arising in that company, of the kind referred to in section IH 2(1) except to the extent (if any) that, in relation to that net loss, there is an excess of the kind referred to in section IH 2(1); and any net loss of that taxpayer for the 1978-79 or any earlier tax year.
(b) Compare: 1994 No 164 s IH 2 IH 3 Loss carry back by petroleum miners (1) If a petroleum miner would, in the absence of this section, have a net loss for any income year in which— (a) expenditure for removal or restoration operations is in- curred; or a permit is relinquished and the petroleum miner is al- lowed a deduction for deferred deductions under section EJ 12,— (b) the deductions of the petroleum miner for that income year are reduced by the amount that would otherwise be a net loss, and that amount is allowed as a deduction in the income years pre- ceding the loss year, beginning with the income year imme- diately preceding the loss year, and the petroleum miner has 1698 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IH 4 (2) the right to amend its returns for those income years notwith- standing the time bar.
This section applies with any necessary modiﬁcations to a pet- roleum miner who undertakes petroleum mining operations that are— (a) outside New Zealand and undertaken through a branch or a controlled foreign company; and substantially the same as the petroleum mining activ- ities governed by this Act.
Compare: 1994 No 164 ss DM 7(1), IH 3 (b) IH 4 Companies engaged in exploring for, searching for, or mining certain minerals (1) Where, in accordance with sections IE 1 and IF 1 or IH 1, a mining company is entitled to claim that a net mining loss for any income year (that income year being referred to in this subsection as the year of loss) be carried forward and offset against the net income of that company for subsequent income years, that section applies subject to the following provisions: the amount that may be carried forward in respect of the (a) net mining loss from the income year in which the net mining loss arose for offset against the net income of that company in subsequent income years must not ex- ceed an amount calculated in accordance with the fol- lowing formula: a – b where— a is the amount of the mining outgoing excess in the year of loss b is 150% of so much of the amount of that mining outgoing excess as is deducted, in accordance with section DU 7, in calculating the net income of that company for the year of loss: the maximum amount of net mining losses that a min- ing company may offset against its net income for an income year is an amount equal to the lesser of the com- pany’s net income for the income year and the amount calculated in accordance with the following formula: (b) 1699 Part I s IH 4 Income Tax Act 2004 Reprinted as at 29 August 2011 where— c is the net mining losses carried forward to that income year d is the amount that would be the company’s net income for the year if its only source of assess- able income for the income year were from min- ing: if the mining company offsets net mining losses against its net income for an income year, the amount of net mining losses that the company may otherwise carry forward to the subsequent income year under sections IE 1 and IF 1 must be reduced by an amount equal to the larger of zero and the amount calculated in accordance with the following formula: where— e is the amount of net mining losses offset by the mining company in
 that income year has the same meaning as in paragraph (b): d paragraphs (b) and (c) do not apply to any balance of a net loss, being a balance to which section IH 1(1)(b) applies: where— (i) that company is entitled, in accordance with the preceding provisions of this subsection, to carry forward any amount and offset it against the net income of that company for any income year; and that company has ceased to be a mining company at or before the end of that income year,— (ii) (c) (d) (e) it is treated, for the purposes of those provisions, as if it had not so ceased to be a mining company.
(2) Where, in relation to any income year, a company is a mining company,— (a) none of the provisions of section IG 2 apply with respect to that company in relation to that income year; and 1700 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IH 4 (b) that company is not included in a group of companies for the purposes of that section in relation to that income year.
(3) Where— (a) (b) (c) but for subsection (2), a mining company and a hold- ing company (not being a mining company) would be included in a wholly-owned group of companies in re- lation to an income year; and that mining company has net income for that income year in excess of any net loss carried forward by that mining company to that income year under sections IE 1 and IF 1; and that holding company has a net loss for that income year, being a net loss which has been calculated without tak- ing into account any deduction that that holding com- pany is allowed under section DU 12 in respect of the amount written off from any loan made by that holding company to that mining company,— the amount of that net loss (as so calculated) may, to the extent that it cannot be offset under section IG 2(2) from the net in- come for that income year of any other company or companies (being a company or companies which together with that hold- ing company are included in a wholly-owned group of com- panies in relation to that income year), be deducted from the amount by which the net income of that mining company for that income year exceeds any net loss carried forward by that mining company to that income year under sections IE 1 and IF 1, and the amount so deducted from that excess must not be carried forward under sections IE 1 and IF 1: provided that where, by reason of an amount being, in accord- ance with the preceding provisions of this subsection, offset against the net income of that mining company for that income year, instead of being offset against the net income of that hold- ing company for an income year after that income year, the Commissioner is of the opinion that adjustment is warranted for the purposes of this subsection, the Commissioner may, on application made by that holding company within 8 years after the end of that ﬁrst-mentioned income year, or within such extended period as the Commissioner may allow, and 1701 Part I s IH 5 Income Tax Act 2004 Reprinted as at 29 August 2011 notwithstanding the
 time bar, make such adjustments for the purposes of this subsection, in relation to that holding com- pany and that mining company, in respect of that ﬁrst-men- tioned income year and any 1 or more of the 8 income years immediately succeeding that ﬁrst-mentioned income year, as the Commissioner considers equitable to meet the special cir- cumstances of the case.
Compare: 1994 No 164 s IH 4 IH 5 Resident mining operators Notwithstanding anything in this Act, where a resident mining operator has a net mining loss for a tax year (that tax year being referred to in this subsection as the year of loss), sections IE 1, IF 1, and IH 1 apply subject to the following provisions: (a) where the net mining loss is not a balance to which section IH 1(1)(b) applies, the amount of the loss that the resident mining operator is allowed to offset against net income in the ﬁrst tax year after the year of loss must not exceed the sum of— (i) the amount that would be the resident mining op- erator’s net income for that tax year if the op- erator’s sole source of assessable income in that year was income from mining; and an amount equal to the greater of zero and an amount calculated in accordance with the follow- ing formula: (ii) a – b where— a is the prescribed amount of the resident mining operator for that tax year b is the mining outgoing excess of the resi- dent mining operator for that tax year: any net mining loss that cannot be offset under para- graph (a) may be offset against the resident mining op- erator’s net income for the tax year immediately suc- ceeding the tax year to which paragraph (a) refers, to the extent it does not exceed the amount that could be offset under paragraph (a) if that paragraph referred to the immediately succeeding tax year, and so on: (b) 1702 Reprinted as at 29 August 2011 (c) Income Tax Act 2004 Part I s II 2 section IH 4(1)(e), with any necessary modiﬁcations, applies for the purposes of this section as if every refer- ence to a mining company or company were a reference to a resident mining operator and as if the reference to section IH 4(1) were a reference to this subsection.
Compare: 1994 No 164 s IH 5 Subpart II—Losses: life insurers Contents II 1 II 2 II 3 Policyholder net losses Policyholder net loss for tax year preceding 1990-91 Carry forward of policyholder net loss Page 1703 1703 1704 II 1 Policyholder net losses (1) (2) (3) (4) Subject to this section, section IE 1 applies to any policyholder net loss as if it were a net loss.

Sections IF 1(1) and IG 2(2) do not apply in respect of a pol- icyholder net loss.
Subject to section II 2, in calculating a policyholder base in- come tax liability for a tax year, a life insurer may offset an available net loss by an amount no greater than the life in- surer’s policyholder net loss.

To the extent that an available net loss consists of a policy- holder net loss, the policyholder net loss may be offset only in calculating a life insurer’s policyholder base income tax li- ability.
Compare: 1994 No 164 s II 1 II 2 Policyholder net loss for tax year preceding 1990-91 Where any company to which section 204 of the Income Tax Act 1976 (as that provision was in force before its repeal and substitution by section 13(1) of the Income Tax Amendment Act (No 2) 1990) applied— (a) incurred any loss in carrying on its business of life in- surance in the 1989-90 tax year; or 1703 Part I s II 3 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) carried forward any loss (incurred in any earlier tax year) to the 1989-90 tax year in accordance with sec- tion 188 of the Income Tax Act 1976 as then in force,— that loss is (except to the extent to which it was in the 1989-90 tax year deducted from or offset against any income of any person otherwise than in accordance with section 205C of the Income Tax Act 1976) deemed to be a policyholder net loss of that company.
Compare: 1994 No 164 s II 2 II 3 Carry forward of policyholder net loss Where— (a) (b) a life insurer transfers its life insurance business to an- other company; and the transfer meets the requirements set out in section EY 44(1),— the transferor life insurer may, by notiﬁcation to the Commis- sioner in such form as the Commissioner may approve, elect that any policyholder net loss calculated by it for the tax year of transfer, or carried forward by it to that tax year, be treated as a policyholder net loss calculated for or carried forward to that tax year by the transferee company and not by the trans- feror life insurer, and the provisions of this Act apply to any such loss accordingly.
Compare: 1994 No 164 s II 3 Subpart IZ—Withdrawal tax Contents Application of this subpart Rate of withdrawal tax IZ 1 IZ 2 IZ 3 Withdrawal income IZ 4 IZ 5 IZ 6 IZ 7 Payment of withdrawal tax Evidence of liability in proceedings for recovery Relief in certain cases Application of other provisions to withdrawal tax Page 1705 1705 1705 1706 1707 1708 1708 1704 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IZ 3 IZ 1 Application of this subpart This subpart applies to every person who is deemed to derive withdrawal income.
Compare: 1994 No 164 s IZ 1 IZ 2 Rate of withdrawal tax The rate of tax (referred to as withdrawal tax) in respect of withdrawal income derived by any person is 45% of the gross amount of that withdrawal income.
Compare: 1994 No 164 s IZ 2 IZ 3 Withdrawal income (1) Where any special account is closed in any tax year, any amount withdrawn on that closure, not being an amount withdrawn under a withdrawal certiﬁcate, is deemed to be withdrawal income derived in that tax year by the person who operated that account: provided that in no case must the withdrawal income of any person under this subsection exceed,— (a) in the case of a person operating a special farm owner- ship account or a special ﬁshing vessel ownership ac- count, $60,000 less the aggregate amount withdrawn from that account under withdrawal certiﬁcates: in the case of a person operating a special home owner- ship account, $10,250 less the aggregate amount with- drawn from that account under withdrawal certiﬁcates.
(2) Where in any tax year any special farm ownership account or special ﬁshing vessel ownership account is converted into a special home ownership account, the amount (if any) by which the amount standing to the credit of the special farm ownership account or special ﬁshing vessel ownership account at the end of the 31 March immediately preceding the date of that conver- sion of that account exceeded the amount of $10,250 is deemed to be withdrawal income derived in that tax year by the person who operated that account so converted.
(b) (3) Where any amount is withdrawn from a special account under a withdrawal certiﬁcate, and the farm ownership requirements or the home ownership requirements or the ﬁshing vessel own- ership requirements (as the case may be) are not fulﬁlled in re- 1705 Part I s IZ 4 Income Tax Act 2004 Reprinted as at 29 August 2011 lation to that amount, that amount is deemed to be withdrawal income derived by the person who operated the account in the tax year in which the Commissioner is notiﬁed under the Farm Ownership Savings Act 1974 or the Home Ownership Savings Act 1974 that those requirements were not fulﬁlled: provided that in no case must the withdrawal income of any person under this subsection exceed,— (a) in the case of a person who operated a special farm ownership account or a special ﬁshing vessel owner- ship account, $60,000 less the aggregate of any amounts deemed to be withdrawal income derived by that person under subsection (1): in the case of a person who operated a special home ownership account, $10,250 less the aggregate of any amounts deemed to be withdrawal income derived by that person under subsection (1).
(b) (4) Any amount that is withdrawal income derived by any person in any tax year under this section is excluded income of that person in that tax year or any other tax year.
Compare: 1994 No 164 s IZ 3 IZ 4 Payment of withdrawal tax (1) Where, in respect of any withdrawal from any special account, any withdrawal income is derived by any person under section IZ 3(1), the authorised savings institution with which that ac- count is operated must withhold from the proceeds payable in respect of that withdrawal the amount of the withdrawal tax payable in respect of that withdrawal income.
(2) Where, in respect of the conversion of any special farm own- ership account or special ﬁshing vessel ownership account to a special home ownership account, any amount standing to the credit of that account is withdrawal income derived by any person under section IZ 3(2), the authorised savings institu- tion with which that account is operated must deduct from the amount of that withdrawal income the amount of the with- drawal tax payable in respect of that withdrawal income.
(3) Any authorised savings institution that is liable to withhold or deduct, under subsection (1) or (2), the amount of any with- drawal tax payable by any person, must, not later than the 20th 1706 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IZ 5 of the month immediately following the month in which it be- came so liable, pay that amount to the Commissioner, and de- liver to the Commissioner a certiﬁcate in the prescribed form giving such details in relation to that tax and to the person in respect of whom it is payable as are mentioned in that form, and that payment is deemed to be a payment of that tax by that person.
(4) Notwithstanding anything in this or any other Act, the amount of any withdrawal tax that any authorised savings is liable to withhold or deduct under subsection (1) or (2) must in all cases be so withheld or deducted and is payable by that authorised savings institution only to the Commissioner in respect of that tax.
(5) Where any authorised savings institution has failed to withhold or deduct the amount of any withdrawal tax payable by any person, under subsection (1) or (2), and has paid an amount equal to the amount of that tax to the Commissioner under subsection (3), it may recover the amount so paid from that person.
(6) Any person who derives any withdrawal income under section IZ 3(3) must pay to the Commissioner, within such time as the Commissioner may allow, the withdrawal tax payable in respect of that income.
Compare: 1994 No 164 s IZ 4 IZ 5 Evidence of liability in proceedings for recovery Any amount that is payable to the Commissioner as or in re- spect of withdrawal tax under section IZ 4(3) or (6) is recover- able by the Commissioner in the same manner as if it were in- come tax imposed under section BB 1 and, in any proceedings against any person relating to the recovery of such an amount, a certiﬁcate signed by the Commissioner certifying that that amount is payable by that person under this section is, in the absence of proof to the contrary, conclusive evidence that that amount is payable to the Commissioner by that person.
Ju- dicial notice must be taken of the signature to any certiﬁcate given under this section.
Compare: 1994 No 164 s IZ 5 1707 Part I s IZ 6 Income Tax Act 2004 Reprinted as at 29 August 2011 IZ 6 Relief in certain cases In any case where it is shown to the satisfaction of the Com- missioner that the amount of withdrawal tax payable by any person in respect of any withdrawal income deemed to be de- rived by the person in relation to any special account operated by the person exceeds the aggregate of the amounts of rebate of income tax allowed in relation to that account under sec- tion KG 1, the Commissioner must make such reduction in the amount of that withdrawal tax as the Commissioner considers to be just and equitable in the circumstances of that particular case.
Compare: 1994 No 164 s IZ 6 IZ 7 Application of other provisions to withdrawal tax Subject to this subpart, the other provisions of this Act and of the Tax Administration Act 1994, as far as they are applicable and with any necessary modiﬁcations, apply with respect to withdrawal tax as if it were income tax imposed under section BB 1; but nothing in this subpart is to be so construed as to include withdrawal tax in the terms income tax or tax for the purposes of— (a) (b) the provisions listed in section OB 6(3); or sections 120KB to 120KE of the Tax Administration Act 1994.
Compare: 1994 No 164 s IZ 7 Section IZ 7(b): amended, on 1 October 2007, by section 118(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Part K Rebates Contents KB 2 Subpart KB—General Proportionate adjustment to rebates on change of return date KB 3 Calculations of rebates producing negative amounts Page 1711 1711 1708 Reprinted as at 29 August 2011 Income Tax Act 2004 Part I s IZ 7 Subpart KC—Individual rebates KC 1 Low income rebate KC 2 Rebate in certain cases for children KC 3 Transitional tax allowance KC 4 Rebate in certain cases for housekeeper KC 5 Rebate in respect of gifts of money KC 6 Rebate in respect of redundancy payment Subpart KD—Tax credits for families KD A1 Calculation of tax credits under this subpart KD 1 Determination of net income KD 1A Working for Families tax credits KD 2 Calculation of subpart KD credit KD 2AAA In-work tax credit KD 2AAAB Continuation of child tax credit payments KD 2AA Rules for subpart KD credit KD 2AB Parental tax credit KD 2A Calculating net contributions to family tax credit, in-work tax credit child tax credit, and parental tax credit KD 3 Calculation of minimum family tax credit KD 3A Rules for minimum family tax credit KD 3B Applications for guaranteed minimum family tax credit KD 4 Allowance of credit of tax in end of year assessment KD 5 Credit of tax by instalments KD 5B Rates for interim instalments for period beginning on or after 1 July 1998 [Repealed] KD 5C Adjustment of family tax credit amounts, abatement threshold amounts, amounts of in-work tax credit and parental tax credit, and amount of minimum family tax credit KD 6 Chief executive to deliver credit of tax KD 7 Commissioner to deliver credit of tax by instalments KD 7A Effect of extra interim instalment on entitlement to tax credit KD 8 Credit of tax deemed to be excluded income KD 9 Advice KE 1 Rebate for interest on home vendor mortgages Subpart KE—Housing rebates Subpart KF—Rebates for non-residents KF 3 Rebates for absentees Income Tax Act 2004 Reprinted as at 29 August 2011
 Subpart KG—Industry-speciﬁc rebates KG 1 Rebate for savings in special farm, ﬁshing vessel, and 1783 home ownership accounts 1785 1786 1788 1790 1790 1791 1792 1793 1795 1796 1796 1797 1798 1799 1800 1800 1801 1802 KI 1 KJ 1 KJ 2 KJ 3 KJ 4 KJ 5 KJ 6 Subpart KH—Conduit tax relief KH 1 Conduit tax relief KH 2 Calculation of percentage of shareholders not resident Subpart KI—Rebates for portfolio tax rate entities Rebate for portfolio tax rate entity relating to certain investors Subpart KJ—KiwiSaver scheme and complying superannuation fund tax credits Tax credits relating to KiwiSaver scheme and complying superannuation fund members Person’s requirements Tax credit amount Payment Rules Tax credits relating to employers contributing to KiwiSaver schemes and complying superannuation funds Employer requirements Tax credit amount KJ 7 KJ 8 KJ 9 Using the tax credit KJ 10 Treatment when short payment and unpaid amount of compulsory employer contributions found after tax credit used KJ 11 Employees who opt out KJ 12 Group of persons 1 employer Subpart KZ—Terminating provisions KZ 1 Rebate from tax payable by persons receiving war pension KZ 2 Rebate in respect of loss not carried forward KZ 3 Continuation of rebates in respect of certain speciﬁed development projects 1710 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KB 3 Subpart KB—General Contents KB 2 Proportionate adjustment to rebates on change of return date KB 3 Calculations of rebates producing negative amounts Page 1711 1711 KB 2 Proportionate adjustment to rebates on change of return for section 39 of the purposes of date the Tax Where, Administration Act 1994, an assessment in respect of a taxpayer is made for a period of less than a year, the taxpayer is entitled, by way of rebates allowed under sections KC 1 to KC 4, only to an amount bearing to the total of such rebates to which the taxpayer would be entitled for a full year, the same proportion as the number of days in that period bears to the
 number of days in a year; and where an assessment is made for a period of more than a year, the total of such rebates to which the taxpayer is entitled is proportionately increased.
Compare: 1994 No 164 s KB 2 KB 3 Calculations of rebates producing negative amounts If a calculation prescribed by this Part produces a result of less than zero for the amount of a rebate or the amount of a component of a rebate, then the amount of that rebate or component is zero.

Compare: 1994 No 164 s KB 3 Section KB 3 was amended, as from 1 October 2005, by section 216 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the word “Part” for “subpart”.
Subpart KC—Individual rebates Contents KC 1 Low income rebate KC 2 Rebate in certain cases for children KC 3 Transitional tax allowance Page 1712 1713 1715 1711 Part K s KC 1 Income Tax Act 2004 KC 4 Rebate in certain cases for housekeeper KC 5 Rebate in respect of gifts of money KC 6 Rebate in respect of redundancy payment Reprinted as at 29 August 2011 1718 1721 1726 KC 1 Low income rebate (1) A taxpayer, who is a natural person but who is not an absentee, is allowed as a rebate of income tax,— (a) where the net income derived in the tax year by that tax- payer, being a New Zealand superannuitant or a person in receipt of a veteran’s pension, is less than $9,500, a rebate of an amount equal to 4.5 cents for each complete dollar of that net income: (b) where the net income of that taxpayer (not being a tax- payer to whom paragraph (a) applies) is less than $9,500 for the tax year, a rebate of 4.5 cents for each complete dollar of the amount determined under the formula in subsection (4): where the net income of that taxpayer amounts to, or exceeds, $9,500 for the tax year, an amount calculated in accordance with the following formula: (c) x – y where— x is— (i) (ii) $427.50, where the taxpayer is a New Zealand superannuitant or a person in re- ceipt of a veteran’s pension: the lesser of $427.50 and an amount equal to 4.5 cents for each complete dollar of the amount determined under the formula in subsection (4), in all other cases y is an amount equal to 1.5 cents for each com- income that exceeds plete dollar of the net $9,500.
In a tax year in which a taxpayer is a non-resident for a period, the amount of rebate under subsection (1) is calculated by— increasing the net income of the taxpayer in the propor- (a) tion that the number of days for which the taxpayer is a resident bears to the number of days in the tax year; and (2) 1712 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KC 2 (3) (4) (b) reducing the rebate in the proportion that the number of days for which the taxpayer is a resident bears to the number of days in the tax year.
For the purposes of subsection (1) and notwithstanding sub- section (2), where the taxpayer derives assessable income from New Zealand in the period (in the tax year) that precedes the taxpayer’s arrival in, or, as the case may be, succeeds the tax- payer’s departure from New Zealand (being the period in re- spect of which the taxpayer is deemed not to be resident in New Zealand), the Commissioner may determine the amount of the net income of the taxpayer for the tax year in such man- ner and in such amount as in all the circumstances of the case appear equitable having regard to the class or classes of the assessable income so derived by the taxpayer and to the cir- cumstances of the derivation of that assessable income and to the tenor of this section.
The amount on which a rebate calculated under subsection (1)(b) or (c) is determined is calculated in accordance with the following formula: a – (b – c) where— a b is the net income of the taxpayer for the tax year is the aggregate amount of assessable income of the taxpayer that is interest, dividends, royalties, rents, beneﬁciary income, taxable distributions under section HH 3, and taxable Maori authority distributions allo- cated to that year in accordance with Part B c is the aggregate amount of deductions allowed in de- riving the assessable income referred to in item “b” of this formula allocated to that year in accordance with Part B to the extent it does not exceed the amount cal- culated in item “b” of this formula.
Compare: 1994 No 164 s KC 1 KC 2 Rebate in certain cases for children A taxpayer (other than an absentee) who at any time during any tax year— (a) (b) is under the age of 15 years; or is under the age of 18 years and is attending— 1713 Part K s KC 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) (iii) a private primary school or a state primary school or a private secondary school or a state secondary school or department (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) for the deaf, the dumb, the blind, the mentally handicapped, the crippled, or the otherwise disabled, afﬂicted, or handicapped; or (c) is a person under the age of 19 years who— (i) during the preceding tax year was a person to whom paragraph (b) applied; and attained the age of 18 years on or after 1 January in that preceding tax year; and continues to attend a school of any of the kinds referred to in paragraph (b)— (ii) (iii) is allowed a rebate of income tax for that tax year of the lesser of— (d) an amount calculated in accordance with the following formula: where— x y is the net income of the taxpayer for that tax year is the resident withholding income derived by the taxpayer in that tax year: $351: (e) provided that in no case is a taxpayer allowed a rebate under this section in respect of any tax year in respect of which the taxpayer has been allowed a rebate under section KC 3.
Compare: 1994 No 164 s KC 2 Paragraph (e) was substituted, as from 1 October 2006, by section 119(1) Taxa- tion (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3) with application as from the income year corres- ponding to the 2006–07 tax year.
1714 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KC 3 KC 3 Transitional tax allowance (1) A taxpayer who in any tax year is a qualifying person is al- lowed as a rebate of income tax an amount calculated in ac- cordance with the following formula: (2) where— y is,— (i) where the net income of the taxpayer for the tax year is less than $6,241, $728: (ii) where the net income of the taxpayer for the tax year amounts to or exceeds $6,241, $728 dimin- ished by 20 cents for each complete dollar of the net income that exceeds $6,240 is the number (if any) of periods of 1 week, in the tax year, in relation to each of which the taxpayer is a fulltime earner.
z For the purposes of subsection (1), in any case where a quali- fying person has, during the tax year, either arrived in or de- parted from New Zealand and in respect of that part of the tax year (being the tax year in which the qualifying person so ar- rives or departs) that precedes the qualifying person’s arrival in or, as the case may be, succeeds the qualifying person’s de- parture from New Zealand, the qualifying person is deemed, under section OE 1, not to be resident in New Zealand, the net income of the qualifying person for the tax year is deemed to be an amount equal to the net income of the qualifying per- son for the period during which (in the tax year) the qualify- ing person is personally present in New Zealand, increased in the proportion that the number of days in the tax year bears to the number of days in that period: provided that, in any case where the qualifying person derives assessable income from New Zealand in the period (in the tax year) that precedes the qualifying person’s arrival in or, as the case may be, succeeds the qualifying person’s departure from New Zealand (being the period in respect of which the qualifying person is deemed not to be resident in New Zealand), the Commissioner may de- termine the amount of the net income of the qualifying person 1715 Part K s KC 3 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) for the tax year in such manner and in such amount as in all the circumstances of the case appear equitable having regard to the class or classes of the assessable income so derived by the qualifying person and to the circumstances of the deriv- ation of that income and to the tenor of this subsection.
In this section,— full-time earner, in relation to any week, means any person who, in the week, is engaged in remunerative work for not less than 20 hours, and includes any person who has not been so engaged by reason of— (a) that person having suffered incapacity due to personal injury by acci- injury by accident (being personal dent within the meaning of section 2 of the Accident Compensation Act 1982 or personal injury within the meaning of section 4 of the Accident Rehabilitation and Compensation Insurance Act 1992) in respect of which earnings related compensation (under section 2 of the Accident Compensation Act 1982), any compensation for loss of earnings payable under sections 38, 39, and 43 of the Accident Rehabilitation and Compensation Insurance Act 1992, or any vocational rehabilitation allowance payable under section 25 of that Act, or any compensation for loss of potential earning capacity payable under section 45 or 46 of that Act, or any weekly compensation payable under section 58, 59, or 60 of that Act, or any continued compensation payable under section 138 of that Act has been, is being, or will be paid where, were it not for the suffering of that incapacity, that person would have been so engaged: that person having suffered incapacity due to personal injury (within the meaning of section 13 of the Accident Insurance Act 1998) in respect of which— (i) weekly compensation is payable under section 428(2) or 429(2) or schedule 1, part 2 of that Act; or compensation payable under section 445, 446, or 447 or schedule 1, clauses 67, 70, and 71 of that Act has been, is being, or will be paid where, (aa) (ii) 1716 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KC 3 were it not for the death of another person, that person would have been so engaged: (ab) (ac) (b) that person having suffered incapacity due to personal injury (within the meaning of section 6 of the Injury Prevention, Rehabilitation, and Compensation Act 2001) in respect of which— (i) weekly compensation (within the meaning
 of sections 6 and 365 and schedule 1, part 2 of that Act) is payable; or compensation payable under sections 383, 384, and 385 and schedule 1, clauses 66, 70, and 71 of that Act has been, is being, or will be paid where, if not for the death of another person, that person would have been so engaged: (ii) that person being on parental leave during a week in respect of which a parental leave payment is payable under Part 7A of the Parental Leave and Employment Protection Act 1987: that person having been temporarily, or for an indeﬁnite period, incapacitated for work through sickness or ac- cident in respect of which a sickness beneﬁt has been, is being, or will be paid under the Social Security Act 1964 where, were it not for that person having been so incapacitated for work, that person would have been so engaged: and for the purposes of this deﬁnition, in any case where re- munerative work is performed, by any person, in a pay period that consists of a period that is longer than 1 week, the per- son is deemed to have been engaged in remunerative work to a uniform daily extent throughout the said period qualifying person, in relation to a tax year, means any fulltime earner, not being a person— (a) who is a child under the age of 18 years (other than a child over the age of 15 years who has ceased attending a school of any of the kinds referred to in section KC 2(b)): who is deemed, under section OE 1, not to be resident in New Zealand throughout the tax year: (c) 1717 Part K s KC 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) who is entitled to any credit of tax in respect of the tax (e) year under subpart KD: who is, throughout the tax year, the spouse, civil union partner, or de facto partner of any person who, in respect of the tax year, is entitled to any credit of tax under subpart KD qualifying person: paragraph (e) of this deﬁnition was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse,
 civil union partner, or de facto partner” for “spouse”.
remunerative work, in relation to any person, means work from, by, or through the performing of which by the person assessable income (within the meaning of this Act) is derived by the person.
Compare: 1994 No 164 s KC 3 KC 4 Rebate in certain cases for housekeeper (1) A taxpayer (other than an absentee) speciﬁed in paragraph (a) or (b) or (c) of the deﬁnition of housekeeper in subsection (2) who makes qualifying payments during any tax year is allowed as a rebate of income tax for that tax year the smaller of— (a) a sum equal to 33 cents for every complete dollar of those qualifying payments: $310.
(b) (2) (1A) A refund may be made under this section only if section 41A of the Tax Administration Act 1994 is complied with.
In this section,— child means any child who is under the age of 18 years or who is suffering from any mental or physical inﬁrmity or disability affecting his or her ability to earn his or her living communal home means a motel, hotel, boardinghouse, guest house, convalescent home, nursing home, rest home, hospital, hospice, or other similar establishment; but does not include any part of such an establishment that is occupied by any per- son regularly engaged in carrying on the activity of operating the establishment or by the spouse, civil union partner or de facto partner of the person communal home: this deﬁnition was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner” for “spouse”.
1718 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KC 4 communal home: this deﬁnition was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner” for “spouse or civil union partner”.
home, in relation to a taxpayer and to any tax year, means the dwelling that is the residence of the taxpayer in which the taxpayer resides during the tax year; but does not include a communal home housekeeper, means,— (a) in relation to a taxpayer and a tax year, where the taxpayer is a widow, a widower, a surviving civil union partner, a surviving de facto partner, a di- vorced person, a person whose civil union has been dis- solved, a person who is not in a marriage, civil union or de facto relationship, or a separated person,— (i) (ii) a person who, or an institution which, has the care and control, either in the home of the taxpayer or elsewhere, of any child; or a person who tends the home of the taxpayer, where the Commissioner is satisﬁed that the ser- vices of the person are necessary by reason of any mental or physical inﬁrmity or disability of the taxpayer; or (b) where the taxpayer is living with the taxpayer’s spouse, civil union partner or de facto partner,— (i) a person who, or an institution which, has the care and control, either in the home of the taxpayer or elsewhere, of any child; or (ii) a person who tends the home of the taxpayer,— where, in either case, the Commissioner is satisﬁed that the services of the person or the institution are necessary by reason of any mental or physical inﬁrmity or disabil- ity of the taxpayer or his or her spouse, civil union part- ner or de facto partner; or where the taxpayer is living with the taxpayer’s spouse, civil union partner or de facto partner, a person who, or an institution which, has the care and control, either in the home of the taxpayer or elsewhere, of any child, where the Commissioner is satisﬁed that the services of the person or the institution are necessary by reason of the employment or business activities of both the tax- 1719 (c) Part K s KC 4 Income Tax Act 2004 Reprinted as at 29 August 2011 payer and his or her spouse, civil union partner or de facto partner: provided that where, in respect of any tax year and by reason of this
 paragraph, both spouses, civil union partners or de facto partners are entitled to a rebate under this section, the Commissioner may apportion such amounts of rebate not exceeding in the aggregate $310 in such manner as the Commissioner considers fair and equitable housekeeper: paragraph (a) of this deﬁnition was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by sub- stituting “a surviving civil union partner, a divorced person, a person whose civil union has been dissolved, a person who is not in a marriage or civil union,” for “a divorced person, an unmarried person,”.
housekeeper: paragraph (a) before subparagraph (i) of this deﬁnition was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “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,” for “a surviving civil union partner, a divorced person, a person whose civil union has been dissolved, a person who is not in a marriage or civil union,”.
housekeeper: paragraph (b) of this deﬁnition was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by sub- stituting “living with the taxpayer’s spouse or civil union partner” for “a mar- ried person (other than a separated person)”.

housekeeper: paragraph (b) of this deﬁnition was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by sub- stituting “spouse or civil union partner” for “spouse”.
housekeeper: paragraph (b) (i) of this deﬁnition was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by sub- stituting “spouse, civil union partner or de facto partner” for “spouse or civil union partner” in both places it occurs.
housekeeper: paragraph (c) of this deﬁnition was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by sub- stituting “living with the taxpayer’s spouse or civil union partner” for “a mar- ried person (other than a separated person”.

housekeeper: paragraph (c) of this deﬁnition was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by sub- stituting “spouse or civil union partner” for “spouse”.
housekeeper: paragraph (c) of this deﬁnition was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by sub- stituting “spouses or civil union partners” for “spouses”.

housekeeper: paragraph (c) of this deﬁnition was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by sub- stituting “spouse, civil union partner or de facto partner” for “spouse or civil union partner” in both places it occurs.
1720 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KC 5 housekeeper: paragraph (c) of this deﬁnition was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by sub- stituting “spouses, civil union partners or de facto partners” for “spouses or civil union partners”.
institution means any creche, day nursery, play centre, kinder- garten, or similar body; but does not, in relation to the care and control of a child who is 5 years of age or over, include any in- stitution which is, in any way, concerned with the education of the child qualifying payments, in relation to a taxpayer and to any tax year, means payments made by the taxpayer during the tax year for the services of a housekeeper or housekeepers, being payments in respect of which no rebate of income tax under any other provision of this Act has been, or will be, allowed to the taxpayer or to any other taxpayer separated person means a person in a marriage or civil union who is in fact separated and living separate and apart from his or her spouse or civil union partner, whether in accordance with a decree, order, or judgment of any court, or under an agreement for separation, or by reason of the desertion of one of the parties by the other of them, or otherwise.
separated person: this deﬁnition was amended, as from 26 April 2005, by sec- tion 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “a person in a marriage or civil union” for “a married person”.

separated person: this deﬁnition was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner” for “spouse”.
Compare: 1994 No 164 s KC 4 KC 5 Rebate in respect of gifts of money (1) A taxpayer, other than an absentee, or a company, or a pub- lic authority, or a Maori authority, or an unincorporated body, or a trustee liable for income tax under sections HH 3 to HH 6 and HZ 2, is allowed as a rebate of income tax the amount of any gift (not being a testamentary gift) of money of $5 or more made by the taxpayer in the tax year to any of the follow- ing societies, institutions, associations, organisations, trusts, or funds (being in each case a society, an institution, an asso- ciation, an organisation, a trust, or a fund in New Zealand), namely: 1721 Part K s KC 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (aa) (ab) (ac) (ad) (ae) (af) (ag) (ah) (ai) (aj) (ak) (al) (am) a society, institution, association, organisation, or trust which is not carried on for the private pecuniary proﬁt of any individual and the funds of which are, in the opin- ion of the Commissioner, applied wholly or principally to any 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 speciﬁed in paragraph (aa): a fund established and maintained exclusively for the purpose of providing money for any 1 or more of the purposes within New Zealand speciﬁed in paragraph (aa), by a society, institution, association, organisation, or trust which is not carried on for the private pecuniary proﬁt of any 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 speciﬁed in paragraph (aa): the Red Cross Society Incorporated: the Paciﬁc Leprosy Foundation: the Leprosy Mission New Zealand Incorporated: the Volunteer Service Abroad (Incorporated): the Commonwealth Foundation: the Sir Walter Nash Vietnam Appeal: the Food Bank of New Zealand: the Norman Kirk Memorial Trust Fund: the United Nations International Children’s Emergency Fund
 (UNICEF): (an) World Vision of New Zealand (Incorporated): (ao) Save the Children New Zealand (and its branches): (ap) Sport and Recreation New Zealand: (aq) Christian World Service: (ar) Caritas Aotearoa-New Zealand: (as) “Raphael” (The Ryder-Cheshire Foundations of New Zealand): (at) New Zealand Sports Foundation (Incorporated): (au) the New Zealand Society for the Intellectually Handi- capped (Incorporated): 1722 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KC 5 the New Zealand Rotary Clubs Charitable Trust: the Evangelical Alliance Relief Fund (TEAR Fund): (av) Amnesty International: (aw) (ax) CORSO (Incorporated): (ay) Operation Hope (Aid Ship to Africa): (az) (ba) Alhay Buhay Foundation Trust: (bb) Cyclone Ofa Relief Fund: (bc) Water for Survival: (bd) International Christian Aid (ICA): (be) Childfund New Zealand Limited: (bf) Cyclone Val Relief Fund: (bg) Channel 2 Cyclone Aid for Samoa: (bh) Community Action Overseas (Oxfam NZ): (bi) (bj) (bk) Christian Blind Mission International (New Zealand): (bl) (bm) Adventist Development and Relief Agency: (bn) Mobility Equipment for the Needs of Disabled Trust: (bo) (bp) Valehead Community Health Centre Trust: (bq) Nelson Mandela Trust (New Zealand): (br) African Enterprise (New Zealand) Aid and Develop- the Winston Churchill Memorial Trust: the Fred Hollows Foundation (NZ): the Serious Road Trip Charitable Trust: Four Sherpa Trust: ment Fund: (bs) New Zealand Viet Nam Health Trust: (bt) Mission Without Borders (NZ), Humanitarian Aid Ac- count: (bu) Bangladesh Flood Appeal Trust: (bv) Karunai Illam Trust: (bw) Cry for the World Foundation New Zealand Humanitar- ian Aid Fund: the Hillary Himalayan Foundation: (bx) Akha Rescue Ministry Charitable Trust: (by) Register of Engineers for Disaster Relief New Zealand: (bz) (ca) Together for Uganda: (cb) Open Home Foundation International Trust: (cc) Books for Africa: (cd) Bright Hope International Trust: (ce) Help a Child Foundation New Zealand: 1723 Part K s
 KC 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (cf) Greater Mekong Subregion Tertiary Education Consor- tium Trust: St Stanislas Charitable Trust of New Zealand: Sampoerna Foundation Limited: Surf Aid International Incorporated: (cg) The Sir Edmund Hillary Trust: (ch) Cheboche Area Trust Inc: (ci) (cj) (ck) Plan New Zealand: (cl) (cm) Medicine Mondiale: (cn) New Zealand Jesuits in India Trust: (co) Operation Vanuatu Charitable Trust: (cp) Habitat for Humanity New Zealand Limited: (cq) Children on the Edge (NZ) Trust: (cr) DIPS’N Charitable Trust (International): (cs) The New Zealand Council of the Ramabai Mukti Mis- sion Trust Board: (ct) Waterharvest Trust: (cu) Zonta International District 16 (New Zealand) Charit- able Trust: (cv) Hamlin Charitable Fistula Hospitals Trust: (cw) Hope Foundation Development Trust: (cx) Hope International Charitable Trust: (cy) Limbs 4 All Charitable Trust: (cz) New Zealand Disaster Assistance Response Team Trust: (da) Operation Restore Hope Charitable Trust: (db) The World Swim for Malaria Foundation (New Zealand).
(2) The rebates provided for in this section must not, in the case of any taxpayer, in any tax year exceed in the aggregate the smaller of— (a) 331/3% of the aggregate of all gifts described in sub- section (1): $630.

(b) (3) No rebate is allowed under this section in respect of any gift unless the taxpayer furnishes to the Commissioner in support of the taxpayer’s claim for the rebate a receipt evidencing to the satisfaction of the Commissioner the making of the gift by the taxpayer.
1724 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KC 5 (3AA) Despite subsection (3), a rebate is allowed under this section if a tax agent makes an application for a refund under section 41A of the Tax Administration Act 1994 on behalf of a person and— (a) the tax agent sights the receipt evidencing the making of the gift for which a claim is being made; and the person retains the receipt for 4 tax years after the tax year to which the claim relates.
(b) (4) (3A) A refund may be made under this section only if section 41A of the Tax Administration Act 1994 is complied with.

In this section, gift includes a subscription paid to a society, institution, association, organisation, trust, or fund, only if the Commissioner is satisﬁed that the subscription does not confer any rights arising from membership in that or any other society, institution, association, organisation, trust, or fund.
Compare: 1994 No 164 s KC 5 Section KC 5(1)(be): substituted (with effect from 1 July 2005), on 19 Decem- ber 2007, by section 129(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsection (1)(cl) was amended, as from 1 October 2005, by section 217 Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the word “Zealand:” for “Zealand.” with application as from the 2005–06 income year.
Subsection (1)(cm) to (co) were inserted, as from 1 October 2005, by section 217 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from the 2005–06 income year.

Subsection (1)(co) was amended, as from 21 June 2005, by section 67 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “Trust:” for the expression “Trust.” with application as from the 2005–06 income year.
Subsection (1)(co) was to be amended, as from 1 October 2005, by section 120(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscel- laneous Provisions) Act 2006 (2006 No 3) by substituting “Trust:” for the ex- pression “Trust.” with application as from the income year corresponding to the 2005–06 tax year.

However, this amendment appears to be redundant as this amendment had already been made with application as from the 2005–06 income year, see above.
Subsection (1)(cp) was inserted, as from 21 June 2005, by section 67 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.

Subsection (1)(cp) was to be inserted, as from 1 October 2005, by section 120(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
However, this amendment appears to 1725 Part K s KC 6 Income Tax Act 2004 Reprinted as at 29 August 2011 be redundant as this amendment had already been made with application as from the 2005–06 income year, see above.

Subsection (1)(cp) was amended, as from 1 October 2005, by section 102(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “Limited:” for “Limited.” with application as from the 2006–07 income year.
Subsection (1)(cq) to (cu) was inserted, as from 1 October 2005, by section 102(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2006–07 income year.

Section KC 5(1)(cu): amended, on 19 December 2007, by section 129(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section KC 5(1)(cv): added, on 19 December 2007, by section 129(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section KC 5(1)(cw): added, on 19 December 2007, by section 129(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section KC 5(1)(cx): added, on 19 December 2007, by section 129(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section KC 5(1)(cy): added, on 19 December 2007, by section 129(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section KC 5(1)(cz): added, on 19 December 2007, by section 129(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section KC 5(1)(da): added, on 19 December 2007, by section 129(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section KC 5(1)(db): added, on 19 December 2007, by section 129(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
KC 6 Rebate in respect of redundancy payment (1) A person who derives a redundancy payment relating to a loss of employment is allowed as a rebate of income tax relating to the loss of employment the smaller of— (a) (b) $3,600: a sum equal to 6 cents for every complete dollar of the total amount derived by the person of redundancy pay- ments, each of which— (i) (ii) relates to the loss of employment; and is not a payment referred to in subsection (3).
(2) The Commissioner must not make a refund under this section before the person makes an application complying with section 41B of the Tax Administration Act 1994.
(3) A rebate is not allowed for a redundancy payment— (a) relating to retirement from employment: 1726 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KC 6 (b) (c) (d) (e) (f) (g) relating to loss of seasonal employment if the loss arises from the normal seasonal work cycle: relating to a contract of employment for a ﬁxed term or for the duration of a project: relating to employment for a period following notice of termination of employment: paid to a director of a company by the company or by a person associated with the company under section OD 8(3): paid to a person by another person associated with the person under section OD 8(3): paid by a person to an employee who has been paid a redundancy payment by another person associated with the person under section OD 8(3).
Section KC 6: added (with effect from 1 December 2006), on 19 December 2007, by section 130(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).

Subpart KD—Tax credits for families Subpart KD heading: substituted (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Contents KD A1 Calculation of tax credits under this subpart KD 1 Determination of net income KD 1A Working for Families tax credits KD 2 Calculation of subpart KD credit KD 2AAA In-work tax credit KD 2AAAB Continuation of child tax credit payments KD 2AA Rules for subpart KD credit KD 2AB Parental tax credit KD 2A Calculating net contributions to family tax credit, in-work tax credit child tax credit, and parental tax credit KD 3 Calculation of minimum family tax credit KD 3A Rules for minimum family tax credit KD 3B Applications for guaranteed minimum family tax credit KD 4 Allowance of credit of tax in end of year assessment KD 5 Credit of tax by instalments Page 1728 1728 1735 1736 1744 1749 1749 1752 1753 1755 1758 1759 1760 1762 1727 Part K s KD A1 Income Tax Act 2004 Reprinted as at 29 August 2011 KD 5B Rates for interim instalments for period beginning on or 1771 after 1 July 1998 [Repealed] KD 5C Adjustment of family tax credit amounts, abatement threshold amounts, amounts of in-work tax credit and parental tax credit, and amount of minimum family tax credit KD 6 Chief executive to deliver credit of tax KD 7 Commissioner to deliver credit of tax by instalments KD 7A Effect of extra interim instalment on entitlement to tax credit KD 8 Credit of tax deemed to be excluded income KD 9 Advice 1772 1773 1776 1779 1781 1781 KD A1 Calculation of tax credits under this subpart Despite section 92 of the Tax Administration Act 1994, a re- bate of income tax under this subpart is calculated by the Com- missioner.
Compare: 1994 No 164 s KD A1 KD 1 Determination of net income (1) Notwithstanding any other provision of this Act, for the pur- poses of this subpart, in calculating under this Act the net in- come or net loss of any person in any income year,— (a) amounts referred to in sections CW 23(1)(e) and CW 26, derived by the person in the income year, are deemed not to be exempt income; and the person is allowed a deduction for— (i) the amount of any payment, made by the person during the tax year, of the kind referred to in section CW 26; and the amount of any payment made by the per- son during the tax year under section 27K of the Social Security Act 1964; and (ii) there is not included— (i) any amount of main deposit made in relation to the 2002-03 or an earlier income year (not being interest payable under section EH 6) that is re- funded to the person in the 2003-04 income year (b) (e) 1728 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 1 (v) (ii) (vi) or a later income year under any of sections EH 10, EH 13, EH 15, EH 17, and EH 23; and any amount of assessable income that, under any of sections CB 26, CF 2, EE 37 to EE 44, EI 1, EI 3, and EI 7, and EJ 1, is deemed to be, or to have been, derived by the person in the 2002-03 or an earlier income year and that, were it not so deemed, would not be or have been assessable income derived by the person in the 2002-03 or an earlier income year; and any amount derived from the sale of a building that, under sections EE 37 to EE 44, is assessable income of the person in the income year, exclud- ing a deduction allowed by way of a depreciation loss in the 2003-04 or a later income year; and any amount of adverse event deposit made under section EH 39 in relation to the 2002-03 or an ear- lier income year (not being interest payable under section EH 41) that is refunded to the person in the 2003-04 or a later income year under any of sections EH 46, EH 48, and EH 54; and (vii) any amount of a net loss of a qualifying company that is attributed to the person
 as a shareholder of that company under section HG 16; and (viii) any amount of portfolio investor allocated in- come that is not excluded income of the person and would be excluded income of the person in the absence of section CX 44D(1)(b) and (c); and any amount of retirement scheme contribution that is not excluded income of the person and would be excluded income of the person in the absence of section CX 42B(2); and (ix) (f) where, in the income year, a business or more than 1 business is carried on by the person, there must, in re- lation to that business, or each such business, be calcu- lated under this Act, including this subpart (that calcula- tion being referred to in this paragraph and in subsection (2) as the speciﬁed calculation), the amount that would be the net income or the net loss of the person for that in- 1729 Part K s KD 1 Income Tax Act 2004 Reprinted as at 29 August 2011 come year if the person derived assessable income only from carrying on the business and, where that amount so calculated is a net loss, that business is deemed, for the purposes of this subpart (except for the purpose of making the speciﬁed calculation), not to have been car- ried on by the person during the income year; and (g) where, on the day that, in relation to a company that is a close company, is the last day of the year or other period ending with the date of the annual balance of the accounts of the company for the purpose of furnish- ing its return of income under this Act for the tax year (that period being referred to in this paragraph as the accounting year of the company), the person is, or would be if that day was the last day of any quarter, in relation to that company, a major shareholder, there is included,— (i) for the purposes of this Act, other than the def- inition of net speciﬁed income, an amount equal to the amount (if any) by which the amount of any dividend, or the aggregate of the amounts of all dividends, paid by the company to the person in the tax
 year is less than an amount equal to so much of the net income of the company for the tax year to which, under and for the purposes of this Act, the accounting year of the company cor- responds, as bears to that amount the same pro- portion as the total of the issued shares of the company (other than shares which bear a ﬁxed rate of dividend only) so held by the person bears to the total of the issued shares of the company (other than shares which bear a ﬁxed rate of divi- dend only) on the last day of that accounting year of the company: for the purposes of the deﬁnition of net speciﬁed income, an amount equal to the amount (if any) by which the amount of any dividend, or the ag- gregate of the amounts of all dividends, paid by the company to the person in the tax year is less (ii) 1730 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 1 than the amount calculated in accordance with the following formula: where— a is the number of issued shares of the com- pany (other than shares which bear a ﬁxed rate of dividend only) held by the person on the last day of the accounting year of the company b c is the number of issued shares of the com- pany (other than shares which bear a ﬁxed rate of dividend only) on the last day of the accounting year of the company iis the net income of the company for the tax year to which, under and for the purposes of this Act, the accounting year of the company corresponds; and d (h) where any person receives any distribution from a superannuation scheme, and an employer of that person (being an employer by whom the person continues to be employed 1 month after the date of receipt of the distri- bution) has made contributions to that superannuation scheme in the income year in which the distribution was received or in the immediately preceding 2 income years, that distribution is, unless the Commissioner in the Commissioner’s discretion determines otherwise, assessable income of the person and is deemed to be derived in the
 income year or years determined by the Commissioner as being the income year or years for which the contributions were appropriate, less an amount that the Commissioner determines is attributable to the member’s contributions for any such year: provided that this paragraph does not apply to any person who receives any distribution from a superannu- ation scheme as a result of and on or after the person’s retirement from employment with an employer who was a contributor to the scheme; and 1731 Part K s KD 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (hb) where the person receives a distribution from a retire- ment savings scheme of a retirement scheme contribu- tion, the distribution is treated as assessable income de- rived by the person in the income year of the distribu- tion if retirement scheme contribution withholding tax has been deducted from the contribution and, at the time of the distribution, the person is— (i) not eligible to receive New Zealand superannu- ation; and eligible to receive a retirement scheme contribu- tion from a retirement scheme contributor; and (ii) (i) the Commissioner must have regard to the gross amounts of all income 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.
For the purposes of subsection (1)(f),— (a) where, in the income year, any asset of the person is used in the carrying on by the person of a business and another business or other businesses, there is allowed, in the making, in relation to that ﬁrst-mentioned busi- ness, of the speciﬁed calculation, a deduction of such part (and no other part) of the expenditure incurred and of an amount (if any) of depreciation loss (being the expenditure and being the amount of depreciation loss that, apart from subsection (1)(f), would for the pur- poses of this subpart, in the income year, be allowed as a deduction in respect of or in relation to the asset), as the Commissioner thinks ﬁt; and (b) where, the Commissioner is satisﬁed, 2 or more busi- nesses that are carried on by the person in the income year are businesses of the kind that are normally carried on in association with each other or, as the case may be, one another, the Commissioner may determine that the carrying on of those businesses is deemed to constitute the carrying on by the person of a single business in the income year.
(2) 1732 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 1 (3) For the purpose of determining the amount that is equal to so much of the net income of any person for any income year as, for the purposes of this subpart, is deemed to be the net income for any period contained in the income year, that is, in relation to the person, a speciﬁed period,— (a) (b) (c) the assessable income derived by the person in the in- come year is, to the extent that it was derived by the person from employment during the whole or any part of the income year, deemed to have been derived at a uniform daily rate throughout the period of that employ- ment: the assessable income derived by the person in the in- come year is, to the extent that it was derived by the person by way of a beneﬁt that was an income-tested beneﬁt, deemed to have been derived at a uniform daily rate throughout the period, in the income year, in respect of which the beneﬁt was paid to the person: notwithstanding Administration Act 1994,— (i) section 38(1) the Tax of the assessable income derived by the person in the income year is, to the extent that it was de- rived by the person otherwise than from employ- ment, and otherwise than by way of a beneﬁt that was an income-tested beneﬁt, deemed to have been derived at a uniform daily rate throughout the income year; and any expenditure incurred in deriving the assess- able income to which subparagraph (i) applies that is allowed as a deduction is deemed to have been incurred at a uniform daily rate throughout the income year.
(ii) (4) For the purposes of this subpart, the speciﬁed income in rela- tion to a person and to any speciﬁed period is an amount cal- culated in accordance with the following formula: 1733 Part K s KD 1 Income Tax Act 2004 Reprinted as at 29 August 2011 where— a is so much of the net income of the person for the in- come year that contains the speciﬁed period as, in the opinion of the Commissioner, is attributable to the spe- ciﬁed period b is the number of days in the speciﬁed period.
(5) Where the net income calculated under this Act (except this subpart) in relation to any person and to any income year is calculated in respect of a period (referred to in this subsec- tion as the greater period) that is greater than a period of 12 consecutive months, the net income (referred to in this sub- section as the adjusted net income) of the person calculated under this Act (including this subpart), for the purposes of this subpart, in relation to that income year, must, subject to such adjustments (if any) as the Commissioner considers fair and equitable, be reduced (for the purposes of this subpart) to an amount equal to such amount as bears to the adjusted net in- come the proportion that 365 bears to the number of days in the greater period.
(6) Where, by reason of an alteration to the date of the annual balance of the accounts of any person for the purpose of the furnishing by the person of returns of income under the Tax Administration Act 1994, the net income (referred to in this subsection as the adjusted income) calculated under this Act (except this subpart) in relation to the person and to an income year is calculated in respect of a period (referred to in this subsection as the lesser period) that is less than a period of 12 consecutive months, the net income of the person calculated under this Act (including this subpart), for the purposes of this subpart, in relation to that income year, must, subject to such adjustments (if any) as the Commissioner considers fair and equitable, be increased (for the purposes of this subpart) to an amount equal to such amount as bears to the adjusted income the proportion that 365 bears to the number of days in the lesser period.
Compare: 1994 No 164 s KD 1 Subsection (1)(e)(ii) was amended, as from 1 October 2005, by section 218(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “EI 1, EI 3, and EI 7” for “EI 3, EI 7, and EJ 1”.

1734 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 1A Section KD 1(1)(e)(viii): inserted, on 1 October 2007, by section 103(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section KD 1(1)(e)(viii): amended (with effect from 1 April 2007), on 19 De- cember 2007, by section 132(1) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).

Section KD 1(1)(e)(ix): added (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 132(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (1)(g)(ii) formula was amended, as from 18 December 2006, by section 103(2)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “c” for “(c Subsection (1)(g)(ii) the deﬁnition of item “c” was amended, as from 18 De- cember 2006, by section 103(2)(b) Taxation (Savings Investment and Miscel- laneous Provisions) Act 2006 (2006 No 81) by substituting “corresponds; and” for “corresponds”.
Subsection (1)(g)(ii) the deﬁnition of item “d” was repealed, as from 18 Decem- ber 2006, by section 103(2)(c) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

d)”.

 Section KD 1(1)(hb): added (with effect from 1 April 2007), on 19 December 2007, by section 132(3) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Subsection (3)(c)(ii) was amended, as from 1 October 2005, by section 218(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “assessable income” for “counted income”.
KD 1A Working for Families tax credits (1) Under this subpart, a person and their spouse, civil union part- ner, or de facto partner (if any) may be entitled to a Working for Families tax credit, consisting of the family tax credit, the in-work tax credit, or the child tax credit continued under sec- tion KD 2AAAB, the parental tax credit, and the minimum family tax credit, after abatement (if any).
[Repealed] Compare: 1994 No 164 s KD 1A (2) Section KD 1A heading: substituted (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section KD 1A(1): amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Subsection (1) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.

1735 Part K s KD 2 Income Tax Act 2004 Reprinted as at 29 August 2011 Section KD 1A(2): repealed (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Subsection (2) was substituted, as from 1 April 2006, by section 12(1) Income Tax Act 2004 (2004 No 52).

KD 2 Calculation of subpart KD credit (1) A person is allowed a credit of tax (known as the subpart KD credit) for a tax year containing an eligible period of an amount calculated under the formula in subsection (2), subject to sec- tion KD 7A.
The formula is— (2) FTC + IWTCorCTC + PTC FCA where— FTC is the amount of the family tax credit for the eligible period calculated under subsection (3) IWTCorCTC is the amount of— (a) (b) the in-work tax credit for the eligible period cal- culated under section KD 2AAA, if the person is entitled to the in-work tax credit for the eligible period; or the child tax credit for the eligible period calcu- lated under subsection (4), if the person— (i) is not entitled to the in-work tax credit for the eligible period; and is entitled to the child tax credit for the eligible period under section KD 2AAAB PTC is the amount of the parental tax credit for the eligible (ii) period calculated under subsection (5) FCA is the amount of the family credit abatement for the eligible period calculated under subsection (6).
The amount of the family tax credit for an eligible period is given by the following formula: (3) 1736 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 2 where amount is the sum,— (a) (ii) for the eldest dependent child for whom the person is a principal caregiver during the period, 1 of the following: $4,264, or such greater amount as may be pre- (i) scribed by the Governor-General by Order in Council under section KD 5C, if the child is under 16 years of age: $4,940, or such greater amount as may be pre- scribed by the Governor-General by Order in Council under section KD 5C, if the child is 16 years of age 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 years of age dur- ing the period; and (iii) (b) for each dependent child for whom the person is a prin- cipal caregiver during the period, other than the eldest dependent child, 1 of the following: (i) $2,964, or such greater amount as may be pre- scribed by the Governor-General by Order in Council under section KD 5C, if the child is under 13 years of age: $3,380, or such greater amount as may be pre- scribed by the Governor-General by Order in Council under section KD 5C, if the child is 13, 14, or 15 years of age: $4,420, or such greater amount as may be pre- scribed by the Governor-General by Order in Council under section KD 5C, if the child is 16 years of age 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 years of age dur- ing the period: a weighted average of the amounts in subpara- graphs (ii) and (iii) that reﬂects the proportion of (ii) (iii) (iv) (v) 1737 Part K s KD 2 Income Tax Act 2004 Reprinted as at 29 August 2011 the period for which those subparagraphs apply to the child, if the child turns 16 years of age dur- ing the period (4) days is the number
 of days in the eligible period.
The amount of the child tax credit for an eligible period is calculated using the formula— where— dependent children is the number of dependent children for whom the person is a principal caregiver during the eli- gible period eligible period is the number of days in the eligible period for which the person and their spouse, civil union partner, or de facto partner do not receive a speciﬁed payment and do not have a suspended entitlement to an income- tested beneﬁt.
(5) For each dependent child born on or after 1 October 1999, the amount of the parental tax credit for an eligible period is calculated using the formula— where— amount is $1,200 or such greater amount as may be pre- scribed by the Governor-General by Order in Council under section KD 5C per dependent child days is the number of days in the eligible period, up to a maximum of 56 days, for which the person and their spouse, civil union partner, or de facto partner do not receive a speciﬁed payment and do not have a suspended entitlement to an income-tested beneﬁt.
(6) The amount of the family credit abatement for an eligible period is calculated by the following formula: full-year abatement × NRFFTC 365 1738 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 2 (b) (b) where— full-year abatement is,— (a) if the person has no spouse, civil union partner, or de facto partner during the eligible period and the person’s speciﬁed income for a speciﬁed period containing the eligible period is more than $35,000 or such greater amount as may be prescribed by the Governor-General by Order in Council under section KD 5C, 20 cents for each complete dollar of the excess: if the person has a spouse, civil union partner, or de facto partner during the eligible period and the person’s speciﬁed income, the speciﬁed income of the person’s spouse, civil union partner, or de facto partner, or the sum of those speciﬁed incomes, as the case may be, for a speciﬁed period containing the eligible period is more than $35,000 or such greater amount as may be pre- scribed by the Governor-General by Order in Council under section KD 5C, 20 cents for each complete dollar of the excess: NRFFTC is the number of days in the eligible period, not including calendar months in which the person is a ring-fenced family tax credit recipient.
(6B) For the purpose of subsection (6), a ring-fenced family tax credit recipient for a calendar month in an eligible period is a person who, in the calendar month,— (a) has no spouse, civil union partner, or de facto part- ner, receives an income-tested beneﬁt and derives an- nualised speciﬁed income that is less than the amount speciﬁed in section KD 2(6)(a): has a spouse, civil union partner, or de facto partner, re- ceives an income-tested beneﬁt and derives annualised speciﬁed income that together with the annualised spe- ciﬁed income of the person’s spouse, civil union part- ner, or de facto partner is less in total than the amount speciﬁed in section KD 2(6)(b).
(6C) In calculating the annualised speciﬁed income under subsec- tion (6B),— (a) section KD 1(3)(a) and (b) does not apply; and 1739 Part K s KD 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) no regard may be had to income from employment that is derived in the calendar month as a result of an extra pay period that occurs in that month; and for a person who derives, for part of an income year, in- come to which section OB 2(2) applies, or income from a business, the assessable income and any expenditure incurred in deriving that income that is allowed as a de- duction are to be treated as derived and incurred, re- spectively, at a uniform daily rate throughout that part of the income year.
If a qualifying person receives interim fortnightly instalments of the parental tax credit in an 8 week period that includes 31 March, the family credit abatement formula in subsection (6) is to be applied so that— (a) instalments of the parental tax credit received in the ﬁrst tax year are abated against the person’s speciﬁed in- come, the speciﬁed income of their spouse, civil union partner, or de facto partner, or the sum of those speciﬁed incomes for that tax year; and instalments of the parental tax credit received in the sec- ond tax year are abated against the person’s speciﬁed in- come, the speciﬁed income of their spouse, civil union partner, or de facto partner, or the sum of those speciﬁed incomes for that tax year.
(b) Compare: 1994 No 164 s KD 2 Section KD 2(2) formula: substituted (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Subsection (2) formula was substituted, as from 4 June 2004, by section 13(1) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2006–07 income year.
Section KD 2(2) item FSC: amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Subsection (2) item CTC was repealed, as from 4 June 2004, by section 13(2) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2006–07 income year.
Subsection (2) item “IWP or CTC” was inserted, as from 4 June 2004, by sec- tion 13(2) Taxation (Working for Families) Act 2004 (2004 No 52) with appli- cation as from the 2006–07 income year.

(7) 1740 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 2 Section KD 2(2) item IWTCorCTC: amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section KD 2(2) item IWTCorCTC paragraph (a): amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsection (2) the deﬁnition of item “IWP or CTC” paragraph (a) was amended, as from 18 December 2006, by section 104(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substi- tuting “; or” for “:” with application as from the 2006–07 income year.
Section KD 2(2) item IWTCorCTC paragraph (b)(i): amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section KD 2(3): substituted (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Subsection (3) was substituted, as from 4 June 2004, by section 4(1) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2005–06 income year.
Subsection (3) paragraphs (a)(i) and (ii) and (b)(i) to (iii) of the item amount were amended, as from 4 June 2004, by section 13(3) Taxation (Working for Families) Act 2004 (2004 No 52) by inserting the words “or such greater amount as may be prescribed by the Governor-General by Order in Council under sec- tion KD 5C” after the amount provided in each paragraph with application as from the 2006–07 income year.
Subsection (3) was substituted, as from 4 June 2004, by section 21(1) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2007–08 income year.

Subsection (4) the item eligible period was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
Subsection (5) the item amount was amended, as from 4 June 2004, by section 13(4) Taxation (Working for Families) Act 2004 (2004 No 52) by inserting the words “or such greater amount as may be prescribed by the Governor-General by Order in Council under section KD 5C” after “$1,200” with application as from the 2006–07 income year.
Subsection (5) the item days was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.

Subsection (6) was substituted by section 4(2) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2005–06 income year.
Section KD 2(6) formula: amended (with effect from 1 April 2007), on 19 De- cember 2007, by section 131(1) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).

Subsection (6) paragraph (a) of the item abatement rate was to be amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
However, this amendment appears to be in error as the item “full- 1741 Part K s KD 2 Income Tax Act 2004 Reprinted as at 29 August 2011 year abatement” was substituted for “abatement rate” by section 4(2) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2005–06 income year, see above.
Subsection (6) paragraph (b) of the item abatement rate was to be amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.

However, this amendment appears to be in error as the item “full- year abatement” was substituted for “abatement rate” by section 4(2) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2005–06 income year, see above.
Subsection (6) paragraph (b) of the item abatement rate was to be amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “the speciﬁed income of their spouse, civil union partner, or de facto partner” for “their spouse’s speciﬁed income” wherever it occurs.
However, this amendment appears to be in error as the item “full-year abate- ment” was substituted for “abatement rate” by section 4(2) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2005–06 in- come year, see above.
Subsection (6) paragraph (a) of the item full-year abatement was amended, as from 4 June 2004, by section 121(1)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by sub- stituting “spouse, civil union partner, or de facto partner” for “spouse” with application for the income year corresponding to the 2005–06 tax year.
Subsection (6) paragraph (b) of the item full-year abatement was amended, as from 4 June 2004, by section 121(1)(b)(i) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “spouse, civil union partner, or de facto partner” for “spouse” with application for the income year corresponding to the 2005–06 tax year.
Subsection (6) paragraph (b)(i) of the item full-year abatement was amended, as from 4 June 2004, by section 121(1)(b)(ii) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “the speciﬁed income of the person’s spouse, civil union partner, or de facto partner” for “their spouse’s speciﬁed income” with application for the income year corresponding to the 2005–06 tax year.
Subsection (6) paragraph (b)(ii) of the item full-year abatement was amended, as from 4 June 2004, by section 121(1)(b)(iii) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “the speciﬁed income of the person’s spouse, civil union partner, or de facto partner” for “their spouse’s speciﬁed income” with application for the income year corresponding to the 2005–06 tax year.
Subsection (6) paragraph (b)(iii) of the item full-year abatement was amended, as from 4 June 2004, by section 121(1)(b)(iv) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “the speciﬁed income of the person’s spouse, civil union partner, or de facto partner” for “their spouse’s speciﬁed income” with application for the income year corresponding to the 2005–06 tax year.
Subsection (6) paragraphs (a) and (b) of the item full-year abatement were sub- stituted, as from 4 June 2004, by section 13(5) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2006–07 income year.
1742 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 2 Subsection (6) paragraph (a) of the item full-year abatement was amended, as from 21 December 2005, by section 5(1)(a)(i) Taxation (Urgent Measures) Act 2005 (2005 No 121) by substituting “$35,000” for the expression “$27,500” with application as from the 2006-07 tax year.
Subsection (6) paragraph (a) of the item full-year abatement was amended, as from 21 December 2005, by section 5(1)(a)(ii) Taxation (Urgent Measures) Act 2005 (2005 No 121) by substituting “20 cents” for the expression “30 cents” with application as from the 2006-07 tax year.
Subsection (6) paragraph (a) of the item full-year abatement was amended, as from 4 June 2004, by section 121(2)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by sub- stituting “spouse, civil union partner, or de facto partner” for “spouse” with application as from the income year corresponding to the 2006–07 tax year.
Section KD 2(6) item full year abatement paragraph (b): amended (with effect from 4 June 2004), on 19 December 2007, by section 133(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsection (6) paragraph (b) of the item full-year abatement was amended, as from 21 December 2005, by section 5(1)(b)(i) Taxation (Urgent Measures) Act 2005 (2005 No 121) by substituting “$35,000” for the expression “$27,500” with application as from the 2006-07 tax year.
Subsection (6) paragraph (b) of the item full-year abatement was amended, as from 21 December 2005, by section 5(1)(b)(ii) Taxation (Urgent Measures) Act 2005 (2005 No 121) by substituting “20 cents” for the expression “30 cents” with application as from the 2006-07 tax year.
Subsection (6) paragraph (b) of the item full-year abatement was amended, as from 4 June 2004, by section 121(2)(b)(i) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “spouse, civil union partner, or de facto partner” for “spouse” with application as from the income year corresponding to the 2006–07 tax year.
Subsection (6) paragraph (b) of the item full-year abatement was amended, as from 4 June 2004, by section 121(2)(b)(ii) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “the speciﬁed income of the person’s spouse, civil union partner, or de facto partner” for “their spouse’s speciﬁed income” with application as from the income year corresponding to the 2006–07 tax year.
Section KD 2(6) item NRFFTC: amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsections (6B) and (6C) were inserted by section 4(2) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2005–06 income year.
Section KD 2(6B): amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Subsection (6B)(a) full-year abatement: this deﬁnition was to be amended, as from 4 June 2004, by section 121(3)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by sub- stituting “spouse, civil union partner, or de facto partner” for “spouse” with application for the income year corresponding to the 2005–06 tax year.
How- 1743 Part K s KD 2AAA Income Tax Act 2004 Reprinted as at 29 August 2011 ever, the deﬁnition of the term full-year abatement does not appear in subsection (6B), so the amendment has been editorially made to subsection (6B)(a).

Subsection (6B)(a) was amended, as from 4 June 2004, by section 13(6) Taxa- tion (Working for Families) Act 2004 (2004 No 52) by substituting “section KD 2(6)(a)” for the expression “section KD 2(6)(a)(i)” with application as from the 2006–07 income year.
Subsection (6B)(a) full-year abatement: this deﬁnition was to be amended, as from 4 June 2004, by section 121(4)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by sub- stituting “spouse, civil union partner, or de facto partner” for “spouse” with application as from the income year corresponding to the 2006–07 tax year.
However, the deﬁnition of the term full-year abatement does not appear in sub- section (6B), so the amendment has been editorially made to subsection (6B)(a).
Subsection (6B)(b) full-year abatement: this deﬁnition was to be amended, as from 4 June 2004, by section 121(3)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by sub- stituting “spouse, civil union partner, or de facto partner” for “spouse” in both places it appears with application for the income year corresponding to the 2005–06 tax year.
However, the deﬁnition of the term full-year abatement does not appear in subsection (6B), so the amendment has been editorially made to subsection (6B)(b).

Subsection (6B)(b) was amended, as from 4 June 2004, by section 13(6) Taxa- tion (Working for Families) Act 2004 (2004 No 52) by substituting “section KD 2(6)(b)” for the expression “section KD 2(6)(b)(i)” with application as from the 2006–07 income year.
Subsection (6B)(b) full-year abatement: this deﬁnition was to be amended, as from 4 June 2004, by section 121(4)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by sub- stituting “spouse, civil union partner, or de facto partner” for “spouse” in both places it appears with application as from the income year corresponding to the 2006–07 tax year.
However, the deﬁnition of the term full-year abatement does not appear in subsection (6B), so the amendment has been editorially made to subsection (6B)(b).

Subsection (7)(a) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “the speciﬁed income of their spouse, civil union partner, or de facto partner” for “their spouse’s speciﬁed income” in both places that it occurs.
KD 2AAA In-work tax credit (1) A principal caregiver is entitled to the in-work tax credit for an eligible period in relation to a child if, for the eligible period,— (a) (b) the principal caregiver is aged 16 years or over; and the principal caregiver cares for the child— (i) whose care is primarily the responsibility of the principal caregiver; and (ii) who is being maintained as a member of the prin- cipal caregiver’s family; and 1744 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 2AAA (iii) who is ﬁnancially dependent on the princi- pal caregiver and includes 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; and either the principal caregiver satisﬁes the residence re- quirements of subsection (3) or the child satisﬁes the residence requirements of subsection (4); and either or both of the principal caregiver and the princi- pal caregiver’s spouse, civil union partner, or de facto partner is a person to whom subsection (8) refers, or— has, from an activity, income that satisﬁes the (i) requirements of subsection (5) for 1 or more periods of a week in the eligible period, subject to subsection (6) or (7) or paragraphs (c), (d), (e), (f), or (g) of the deﬁnition full-time earner; and is a full-time earner, or would normally be a full- time earner, engaged in employment if the in- come referred to in subparagraph (i) were treated as satisfying the requirements of paragraph (d) of the deﬁnition of employment ; and (ii) neither the principal caregiver nor the principal care- giver’s spouse, civil union partner, or de facto partner receives an income-tested beneﬁt, or a payment of the kind described in paragraph (xi) of the deﬁnition of salary or wages, or a parent’s allowance under section 32(2) of the War Pensions Act 1954.
(c) (d) (e) (2) The amount of the in-work tax credit for a principal caregiver for an eligible period is calculated using the formula: where— amount A is $3,120 or such greater amount as may be pre- scribed by the Governor-General by Order in Council under section KD 5C 1745 Part K s KD 2AAA Income Tax Act 2004 Reprinted as at 29 August 2011 amount B is $780 or such greater amount as may be prescribed by the Governor-General by Order in Council under section KD 5C weeks,— (a) for 2 or more eligible periods forming 1 continuous period, is the number of whole 1-week periods in the continuous period for which the principal caregiver or the principal caregiver’s spouse, civil union partner, or de facto partner has, from the activity, income to which subsection (1)(d)(i) and (ii) refer: for an eligible period to which paragraph (a) does not apply, is the number of whole 1-week periods in the eligible period for which the principal caregiver or the principal caregiver’s spouse, civil union partner, or de facto partner has, from the activity, income to which subsection (1)(d)(i) and (ii) refer (b) children is the greater of— (a) (b) 3: the number of children in relation to whom the principal caregiver is entitled to the in-work tax credit.
(3) A principal caregiver satisﬁes subsection (1)(c) if— (a) (b) the principal caregiver has been both resident and pre-sent in New Zealand for a continuous period of 12 months at any time; and on the date on which a credit of tax is claimed under section KD 2, the principal caregiver is a tax resident and resident in New Zealand.

(4) A child satisﬁes subsection (1)(c) if the child is both resident and present in New Zealand for the eligible period.
Income from an activity satisﬁes this subsection if the income is— (a) a source deduction payment that is not— (i) described in paragraph (b)(v), (viii), (ix), (xi), (xii), (xiii), (xiv), and (xv) of the deﬁnition of salary or wages: a withholding payment of the kind speciﬁed in Part E of the Schedule of the Income Tax (Withholding Payments) Regulations 1979: (ii) (5) 1746 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 2AAA (iii) paid as a result of an incapacity, suffered before 1 January 2006, due to personal injury by accident within the meaning of section 26 of the Injury Prevention, Rehabilitation, and Compensation Act 2001: (b) (c) income to which section OB 2(2) applies: income from a business carried on for proﬁt.
(6) A person who satisﬁes the requirements of subsection (1)(d)(ii) but who in a 1 week period is not engaged in an activity related to their employment and who is on leave from that employment because of the birth of a child and who is eligible to receive the parental tax credit in respect of the child is treated for the purpose of subsection (1)(d)(ii), and for the period for which the parental tax credit is paid to the person, as being engaged in the week in the activity for the number of hours in respect of which the Commissioner is satisﬁed that the person would have been engaged but for the birth of the child.
(7) A person who satisﬁes the requirements of subsection (1)(d)(ii) but who in a 1 week period is engaged in employ- ment for less than the number of hours required to satisfy subsection (1)(d)(ii) because of the birth of a child and who is eligible to receive the parental tax credit in respect of the child is treated for the purpose of subsection (1)(d)(ii), and for the period for which the parental tax credit is paid to the person, as being engaged in the week in the activity for the number of hours in respect of which the Commissioner is satisﬁed that the person would have been engaged but for the birth of the child.
(8) A person is treated as satisfying subsection (1)(d) if— (a) (b) (c) the person is receiving a child tax credit for an eligible period ending on 31 March 2006; and the person or the person’s spouse, on or after 1 Janu- ary 2006, suffered 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 1747 Part K s KD 2AAA Income Tax Act 2004 Reprinted as at 29 August 2011 (d) Compensation Act 2001, is being paid in respect of the incapacity or will be paid in respect of the incapacity; and the person or their spouse, civil union partner, or de facto partner would have satisﬁed the requirements of subsection (1)(d)(i) and (ii) and been eligible for the credit of tax calculated under this section at the time of the incapacity if this section had come into force before the date of the incapacity.
Sections KD 2AAA and KD 2AAAB were inserted, as from 4 June 2004, by section 14(1) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2006–07 income year.

Section KD 2AAA heading: substituted (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section KD 2AAA(1): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsection (1)(d) and (e) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
Subsection (1)(d) was amended, as from 18 December 2006, by section 105(1)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “subsection (8)” for “subsection (7)” with application as from the 2006–07 income year.

Section KD 2AAA(2): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section KD 2AAA(2) item children paragraph (b): amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsection (2) the deﬁnition of weeks was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
Subsection (2) the deﬁnition of weeks was substituted, as from 18 December 2006, by section 105(1)(b) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2006–07 in- come year.
Subsection (5)(a)(i) was amended, as from 18 December 2006, by section 105(1)(c)(i) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “(xi), (xii), (xiii), (xiv), and (xv)” for “(x), (xi), (xii), (xiii), (xiv), (xv), and (xvi)” with application as from the 2006–07 income year.
Subsection (5)(a)(ii) was amended, as from 4 June 2004, by section 122 Taxa- tion (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- 1748 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 2AA sions) Act 2006 (2006 No 3) by inserting the words “of the Schedule” after the expression “Part E”.
Subsection (5)(a)(iii) was inserted, as from 18 December 2006, by section 105(1)(c)(ii) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2006–07 income year.

Subsection (8)(d) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
KD 2AAAB Continuation of child tax credit payments A person is entitled to continue to receive a child tax credit calculated under section KD 2(4) for an eligible period if— (a) the person is eligible for a child tax credit in relation to a child for an eligible period ending on 31 March 2006; and the person is not eligible for an in-work tax credit under section KD 2AAA; and the person continues to be eligible for a child tax credit in relation to a child at all times after 31 March 2006.
(b) (c) Sections KD 2AAA and KD 2AAAB were inserted, as from 4 June 2004, by section 14(1) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2006–07 income year.

Section KD 2AAAB(b): amended (with effect from 1 April 2007), on 19 De- cember 2007, by section 131(1) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).

KD 2AA Rules for subpart KD credit (1) This section applies for the purposes of sections KD 2, KD 2AAA, and KD 2AAAB.
Principal caregiver (2) A person (person A) is a principal caregiver of a child if person A lives apart from another qualifying person for that dependent child, and person A has the dependent child in their exclusive care for periods totalling at least one-third of— (a) (b) (c) a 4-month period: the tax year: the entitlement period, in the case of the parental tax credit.
1749 Part K s KD 2AA Income Tax Act 2004 Reprinted as at 29 August 2011 Principal caregiver for eligible period for purposes of inwork payment (2B) A person (person A) is a principal caregiver of a child for an eligible period under section KD 2AAA(1) if person A lives apart from another qualifying person for that dependent child, and person A has the dependent child in their exclusive care for periods totalling at least one-third of a 4-month period or the tax year, whether or not those periods coincide with the eligible period.
(2C) When subsection (2B) applies, section KD 2AAA(1)(b) is to be read as applying to the periods during which the principal caregiver has exclusive care of the child.

(2D) A person who is a principal caregiver under subsection (2) or (2B) must inform the Commissioner forthwith upon the occur- rence of a change in the arrangements for the care of the child which has, or will have, the effect of ending the person’s status as a principal caregiver.
(3A) (3) A family tax credit or a parental tax credit must be reduced in proportion to the amount of time a dependent child spends in the exclusive care of another qualifying person during the eligible period.

If 2 persons are eligible for a child tax credit or an in-work tax credit in relation to a child for an eligible period, the amount of the credit of tax to which each is entitled is not affected by the eligibility of the other person for a credit of tax.
Subsection (5) applies if a person has a spouse, civil union partner, or de facto partner throughout an eligible period and during the eligible period— (a) (4) (b) (c) the person is a qualifying person for a dependent child or more than 1 dependent child; and the spouse, civil union partner, or de facto partner is a qualifying person for a dependent child or more than 1 dependent child; 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).
(5) Section KD 2 and this section, apart from this subsection and subsection (6), apply as if either the person or the spouse, civil 1750 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 2AA union partner, or de facto partner were the qualifying person for all those children and the other person were not a qualifying person for any of the children.

The Commissioner must determine which of the persons re- ferred to in subsection (5) is the qualifying person under that subsection.
(6) (7) A credit of tax is allowed under section KD 2 to a qualifying (8) (9) (10) (11) person for a person aged 18 years who— is not ﬁnancially independent; and (a) is attending school or a tertiary educational establish- (b) ment,— as if the person had not attained the age of 18 years.

The Commissioner must determine the period for which a credit is allowed to a qualifying person for a person aged 18 years.
The period determined by the Commissioner under subsection (8) expires on or before the ﬁrst day ﬁxed by the Commissioner for payments of interim instalments of credits of tax under section KD 7 in the calendar year following the calendar year in which the person turns 18.

If a day is part of more than 1 eligible period, for the purposes of this section, the day is part only of the particular eligible period that the Commissioner thinks just, having regard to the tenor of this section and section KD 2.
If a day is part of more than 1 speciﬁed period, for the purposes of this section, the day is part only of the particular speciﬁed period that the Commissioner thinks just, having regard to the tenor of this section and section KD 2.

Compare: 1994 No 164 s KD 2AA Subsection (1) was substituted, as from 4 June 2004, by section 15(1) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2006–07 income year.
Subsection (2) was substituted, as from 18 December 2006, by section 106(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2006–07 income year.

Subsection (2B) was inserted, as from 4 June 2004, by section 15(2) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2006–07 income year.
1751 Part K s KD 2AB Income Tax Act 2004 Reprinted as at 29 August 2011 Subsection (2B) was substituted, as from 18 December 2006, by section 106(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2006–07 income year.

Subsections (2C) and (2D) were inserted, as from 4 June 2004, by section 15(2) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2006–07 income year.
Section KD 2AA(3): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsection (3) was amended, as from 4 June 2004, by section 15(3) Taxation (Working for Families) Act 2004 (2004 No 52) by substituting “A family sup- port credit or a parental tax credit” for “A subpart KD credit” with application as from the 2006–07 income year.
Subsection (3A) was inserted, as from 4 June 2004, by section 15(4) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2006–07 income year.

Section KD 2AA(3A): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (5) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
KD 2AB Parental tax credit (1) The qualifying person for a dependent child that is born on or after 1 October 1999 is allowed a credit of tax, called the parental tax credit, for up to the ﬁrst 56 days after the date of the dependent child’s birth if— (a) neither the person nor his or her spouse, civil union part- ner, or de facto partner receives a speciﬁed payment or has a suspended entitlement to an income-tested beneﬁt at any time during that period (in this subpart called the entitlement period): neither the person nor his or her spouse, civil union partner, or de facto partner (within the meaning of the Parental Leave and Employment Protection Act 1987) receives a parental leave payment under Part 7A of that Act at any time in respect of the child.
(b) (1A) Section 2B of the Parental Leave and Employment Protection Act 1987 applies for the purposes of subsection (1)(b) if a per- son gives birth to 2 or more children as a result of 1 pregnancy or assumes the care of 2 or more children with a view to adop- tion.
1752 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 2A (3) (2) A qualifying person continues to be entitled to the parental tax credit if the dependent child dies during the entitlement period and the person and their spouse, civil union partner, or de facto partner (if any) would otherwise meet the requirements of sub- section (1).
The parental tax credit is to be paid to a qualifying person either— (a) (b) in accordance with section KD 4; or in the 56 days after the date an application is made if the person applies to receive the credit by way of interim instalments and at any time during that period (in this subpart called the payment period) the person and their spouse, civil union partner, or de facto partner do not receive a speciﬁed payment and do not have a suspended entitlement to an income-tested beneﬁt.
Compare: 1994 No 164 s KD 2AB Subsection (1)(a) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.

Subsection (1)(b) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
Subsection (2) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.

Subsection (3)(b) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
Subsection (3)b) was amended, as from 1 October 2005, by section 219 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting the word “fortnightly”.
KD 2A Calculating net contributions to family tax credit, in-work tax credit child tax credit, and parental tax credit 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 corresponding to a period under this subpart, the Commissioner must— (a) treat the family tax credit, the in-work tax credit the child tax credit, and the parental tax credit as credits corresponding to the period; and 1753 Part K s KD 2A Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) 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 secondly, to reduce the amount of the in-work tax credit or, as the case may be, the child tax credit corresponding to the period; and thirdly, to reduce the amount of the parental tax credit corresponding to the period.
(ii) (iii) Compare: 1994 No 164 s KD 2A Section KD 2A heading: amended (with effect from 1 April 2007), on 19 De- cember 2007, by section 131(1) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).

The heading to section KD 2A was amended, as from 4 June 2004, by section 16(1) Taxation (Working for Families) Act 2004 (2004 No 52) by inserting the words “in-work payment,” after the words “family support credit” with appli- cation as from the 2006–07 income year.
Section KD 2A: amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).

Section KD 2A (the part before paragraph (a)) was amended, as from 4 June 2004, by section 16(2)(a) Taxation (Working for Families) Act 2004 (2004 No 52) by inserting the words “in-work payment,” after the words “family support credit” with application as from the 2006–07 income year.
Section KD 2A(a): amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).

Paragraph (a) was amended, as from 4 June 2004, by section 16(2)(b) Taxation (Working for Families) Act 2004 (2004 No 52) by inserting the words “in-work payment,” after the words “family support credit” with application as from the 2006–07 income year.
Section KD 2A(c)(i): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Paragraph (c)(ii) was substituted, as from 4 June 2004, by section 16(2)(c) Tax- ation (Working for Families) Act 2004 (2004 No 52) with application as from the 2006–07 income year.
Section KD 2A(c)(ii): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1754 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 3 KD 3 Calculation of minimum family tax credit In this section and section KD 3A,— (1) employment means the activity a person performs that gives rise, or will give rise, to an entitlement to a source deduction payment other than— (a) (b) (c) (d) (e) a payment of any of the kinds referred to in paragraph (b)(iii), (ix), and (xi) of the deﬁnition of salary or wages: a withholding payment of the kind speciﬁed in part E of the schedule of the Income Tax (Withholding Payments) Regulations 1979: 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 employment: paragraphs (d) and (e) of this deﬁnition were amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
qualifying person, for a speciﬁed period, means a person, if throughout the speciﬁed period— (a) (b) the person is 16 years or older; and the person is the principal caregiver in respect of 1 or more dependent children; and the person is not a spouse, civil union partner, or de facto partner of a person who is eligible to be a transitional resident and who has not made an election under section FC 24(3) (Transitional resident); and (bc) either— (i) (bb) (c) the person has been both resident and present in New Zealand for a continuous period of 12 months at any time and is tax resident, being resi- dent in New Zealand, on the date on which a credit of tax is claimed under this section; or 1755 Part K s KD 3 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) each of the dependent children referred to in para- graph (b) is both resident and present in New Zealand;— but does not include a person who, during the speciﬁed period, receives an income-tested beneﬁt, a veteran’s pension, or a war widows mother’s allowance.
qualifying person: paragraphs (bb) and (bc) of this deﬁnition were inserted, as from 1 October 2005, by section 123(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.

See section 123(2) and (3) of that Act as to the application of this amendment.
qualifying person: paragraph (bb) of this deﬁnition was substituted, as from 18 December 2006, by section 107(2) Taxation (Savings Investment and Miscel- laneous Provisions) Act 2006 (2006 No 81).

qualifying person: paragraph (bc) of this deﬁnition was repealed, as from 18 December 2006, by section 107(2) Taxation (Savings Investment and Miscel- laneous Provisions) Act 2006 (2006 No 81).
(2) A person who does not have a spouse, civil union partner, or de facto partner during an eligible period is allowed a credit of tax for the tax year containing the eligible period of an amount calculated using the formula in subsection (3), subject to sec- tion KD 7A.
The formula is— (3) where— amount is $18,460 or a greater amount prescribed by the Governor-General by Order in Council under section KD 5C NSI is the person’s net speciﬁed income for the speciﬁed period containing the eligible period 1WPs is the number of 1 week periods in the eligible period for which the person is a full-time earner.
If a person has a spouse, civil union partner, or de facto partner and is the principal caregiver during an eligible period, that person is allowed a credit of tax for the tax year containing the eligible period of an amount calculated using the formula in subsection (5).
The formula is— (4) (5) 1756 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 3 where— amount is $18,460 or a greater amount prescribed by the Governor-General by Order in Council under section KD 5C NSI is the net speciﬁed income, for a speciﬁed period contain- ing the eligible period, of the person, or of the person’s spouse, civil union partner, or de facto partner, or of the person and the person’s spouse, civil union partner, or de facto partner 1WPs is the number of 1 week periods in the eligible period for which the person is a full-time earner.
Compare: 1994 No 164 s KD 3 Section KD 3 heading: amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsection (1) was amended, as from 18 December 2006, by section 107(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “In this section and section KD 3A” for “In this section”.
Subsection (2) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.

Subsection (3) the item “amount” was substituted, as from 1 April 2005, by section 5(1) Taxation (Working for Families) Act 2004 (2004 No 52).

Section KD 3(3) item amount: amended, on 1 April 2008, by clause 3(1) of the Income Tax (Family Tax Credit) Order 2007 (SR 2007/349).
Subsection (3) the item amount was amended, as from 1 April 2006, by clause 3(1) Income Tax (Family Tax Credit) Order 2005 (SR 2005/264) by substituting “$17,680” for “$15,080” with application as from the 2006–07 tax year.

Subsection (3) the item amount was amended, as from 1 April 2007, by clause 3(1) Income Tax (Family Tax Credit) Order 2006 (2006/344) by substituting “$18,044” for “$17,680” with application as from the 2007–08 tax year.
Subsection (4) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11), by substituting “spouse, civil union partner, or de facto partner” for “spouse”.

Subsection (5) the item amount was substituted, as from 1 April 2005, by section 5(2) Taxation (Working for Families) Act 2004 (2004 No 52).

Section KD 3(5) item amount: amended, on 1 April 2008, by clause 3(1) of the Income Tax (Family Tax Credit) Order 2007 (SR 2007/349).
Subsection (5) the item amount was amended, as from 1 April 2006, by clause 3(1) Income Tax (Family Tax Credit) Order 2005 (SR 2005/264) by substituting “$17,680” for the expression “$15,080” with application as from the 2006–07 tax year.
1757 Part K s KD 3A Income Tax Act 2004 Reprinted as at 29 August 2011 Subsection (5) the item amount was amended, as from 1 April 2007, by clause 3(1) Income Tax (Family Tax Credit) Order 2006 (2006/344) by substituting the ﬁgure “$18,044” for the ﬁgure “$17,680” with application as from the 2007–08 tax year.

Subsection (5) the item NSI was substituted, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11).
KD 3A Rules for minimum family tax credit (1) (2) This section applies for the purposes of section KD 3.
Subsection (3) applies if a person has a spouse, civil union partner, or de facto partner throughout an eligible period and during the eligible period— (a) the person is a qualifying person for a dependent child or more than 1 dependent child; and the spouse is a qualifying person for a dependent child or more than 1 dependent child; 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) (3) (4) Section KD 3 and this section, apart from this subsection and subsection (4), apply as if either the person or the spouse, civil union partner, or de facto partner were the qualifying person for all those children and the other person was not a qualifying person for any of the children.

The Commissioner must determine which of the persons re- ferred to in subsection (3) is the qualifying person under that subsection.
(5) A credit of tax is allowed under section KD 3 to a qualifying person for a person aged 18 years who— is not ﬁnancially independent; and (a) is attending school or a tertiary educational establish- (b) ment,— as if the person had not attained the age of 18 years.

The Commissioner must determine the period for which a credit is allowed to a qualifying person who is a person aged 18 years.
The period determined by the Commissioner under subsection (6) expires on or before the ﬁrst day ﬁxed by the Commissioner for payments of interim instalments of credits of tax under (6) (7) 1758 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 3B (8) (9) section KD 7 in the calendar year following the calendar year in which the person turns 18.
If a day is part of more than 1 eligible period, for the purposes of this section, the day is part only of the particular eligible period that the Commissioner thinks just, having regard to the tenor of this section and section KD 3.

If a day is part of more than 1 speciﬁed period, for the purposes of this section, the day is part only of the particular speciﬁed period that the Commissioner thinks just, having regard to the tenor of this section and section KD 3.
(10) For the purposes of this section, if a person receives a source deduction payment and on the date of receipt does not perform any employment or performs an activity to an extent less than would give rise to an entitlement to the source deduction pay- ment, the person is treated as having performed such employ- ment as the Commissioner determines, having regard to the date of receipt, to the pay period in which it occurs, to the cir- cumstances giving rise to the source deduction payment, and to any other circumstances that the Commissioner considers relevant.
Compare: 1994 No 164 s KD 3A Section KD 3A heading: amended (with effect from 1 April 2007), on 19 De- cember 2007, by section 131(1) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).

Subsection (2) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse” in both places that it occurs.
Subsection (3) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
KD 3B Applications for guaranteed minimum family tax credit A person who wishes to apply for a credit of tax, known as the guaranteed minimum family tax credit, under section KD 3 as it was before or after its enactment by section 21 of the Income Tax Act 1994 Amendment Act 1996, must apply either section KD 3 as if the deﬁnition of qualifying person read— qualifying person, in relation to any speciﬁed period, means any person where, throughout the speciﬁed period,— the person is aged 16 years or over; and (a) 1759 Part K s KD 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) the person is the principal caregiver in respect of 1 or more dependent children; and either— (i) the person has been both resident and present in New Zealand for a continuous period of 12 months at any time and is tax resident, being resi- dent in New Zealand, on the date on which a credit of tax is claimed under this section; or each of the dependent children referred to in para- graph (b) is both resident and present in New Zealand;— (ii) but does not include any person who, during the speciﬁed period, receives an income-tested beneﬁt, a veteran’s pension, or a war widows mother’s allowance.
Compare: 1994 No 164 s KD 3B KD 4 Allowance of credit of tax in end of year assessment (2) Where, in relation to any tax year, a credit of tax is allowed under section KD 2 or KD 3, the Commissioner— (a) issues a person with a certiﬁcate of entitlement for the tax year because an interim instalment of estimated en- titlement to a credit of tax was paid to the person during the tax year; or ﬁnds out, otherwise than by way of a certiﬁcate of en- titlement, that an interim instalment of estimated entitle- ment to a credit of tax has been paid to, or for the beneﬁt of, or dealt with in the interest of, the person for the tax year,— (b) then,— (c) where any such instalment of estimated entitlement to a credit of tax, or the aggregate of all such instalments of estimated entitlement to a credit of tax, exceeds any credit of tax, or the aggregate of all credits of tax, to which, under this subpart, the person is entitled for the tax year, an amount equal to that excess is added to the tax payable by the person for the tax year; or (d) where any credit of tax, or the aggregate of all credits of tax, to which, under this subpart, the person is entitled for the tax year exceeds the credit ﬁrst mentioned or, 1760 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 4 as the case may be, the aggregate ﬁrst mentioned in paragraph (c), an amount equal to that excess is credited in payment of any tax payable by the person for the tax year, so far as that tax extends,— and,— (e) (f) in any case where paragraph (c) applies, the amount added under that paragraph is recoverable by the Com- missioner in the same manner, with any necessary modi- ﬁcations, as if it were tax payable by the person for the tax year: in any case where paragraph (d) applies, and where, after the crediting in payment of any tax payable under that paragraph, there remains a balance of the excess referred to in that paragraph, that balance is deemed to be tax paid by the person in respect of the tax year and is refundable by the Commissioner to the
 person as if it were tax paid in excess.
(2A) A credit of tax in respect of a child is not allowed under sub- section (2)(c) or (d) if the person does not provide the Com- missioner with— (a) the tax ﬁle number of the child for whom the credit is claimed; or the birth certiﬁcate or other evidence acceptable to the Commissioner verifying the birth or existence of the child for whom the credit is claimed.
(b) (4) Where the Commissioner is satisﬁed that the amount of any credit of tax under section KD 2 or KD 3 set off or refunded to the person in relation to any tax year is in excess of the proper amount, the Commissioner may recover the excess in the same manner, with any necessary modiﬁcations, as if it were income tax payable by the person in that tax year: provided that, where any person is a qualifying person in relation to whom, through- out the tax year, any other person is a spouse, civil union part- ner, or de facto partner, that person and that spouse, civil union partner, or de facto partner are jointly and severally liable for payment of the excess and the Commissioner may recover the excess in the same manner, with any necessary modiﬁcations, as if it were income tax payable by the person or, as the case 1761 Part K s KD 5 Income Tax Act 2004 Reprinted as at 29 August 2011 may be, the spouse, civil union partner, or de facto partner in that tax year.
(4B) A 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 is entitled to recover under this section if the setoff or refund was in excess of the proper amount because— the person applied under section 41 of the Tax (a) Administration Act 1994 and before 1 April 2007 for a credit of tax; and at the time of the application, the person was eligible to be a transitional resident; and before 1 June 2007, the person gave notice to the Com- missioner that they did not wish the application to be treated under section FC 24(4) (Transitional resident) as an election under section FC 24(3).
(b) (c) (5) Every person to whom the Commissioner has issued a certiﬁ- cate of entitlement in relation to any tax year must, within the time within which the person is required to furnish a return of his or her income for the tax year, furnish to the Commis- sioner a statement in the prescribed form setting forth a com- plete statement of the net income of the person together with a complete statement of the net income for the tax year of every other person who at any time during that tax year was a spouse, civil union partner, or de facto partner in relation to that per- son, signed by that person, that statement setting forth such other particulars as may be required in the statement.
Compare: 1994 No 164 s KD 4 Subsection (4) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse” in each place that it occurs.

Subsection (4B) was inserted, as from 18 December 2006, by section 108 Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Subsection (5) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
KD 5 Credit of tax by instalments (1) Any person who, before the commencement of any speciﬁed period that, for the purposes of this section, is elected by the 1762 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 5 person (that speciﬁed period being referred to in this subpart as the elected period), expects to be entitled, in relation to and throughout the elected period, to a credit of tax under section KD 2 or, as the case may be, sections KD 2 and KD 3, may, subject to this section, by application made in accordance with subsection (2), require that, in advance of the expiry of the tax year that contains the elected period, payment to the person, or to the spouse, civil union partner, or de facto partner of the person on behalf of the person, be made of that credit of tax by way of interim instalments.
If a person is entitled to receive the parental tax credit for up to the ﬁrst 56 days of a dependent child’s life (referred to in this subpart as the elected period), the person may apply, in ac- cordance with subsection (2), to receive the parental tax credit under section KD 2 by way of interim instalments in advance of the end of the tax year containing the elected period.

(1B) The application must be made no later than 3 months after the (1A) date of the dependent child’s birth.
(1BA) If the 3 month period in which a person may apply to receive the parental tax credit spans 2 tax years and all of the elected period falls in the ﬁrst tax year, for the purposes of this subpart, the elected period is treated as falling in the second tax year if all interim instalments are paid to the person in the second tax year.
If a person applies more than 3 months after the date of the dependent child’s birth, the person may receive the parental tax credit only in accordance with section KD 4 in the tax year in which the birth occurs.
(1C) (a) (b) (2) An application under subsection (1) or (1A) must— be in the prescribed form; and be signed by the person and any other person who, at the time at which the application is made, expects to be, in the elected period, a spouse, civil union partner, or de facto partner in relation to the person; and give, for each signatory to the application, a complete statement of— (i) (c) the net income that is expected to be attributable to the tax year referred to in subsection (1) or (1A); and 1763 Part K s KD 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) the net income that is expected to be attributable to the elected period; and elect whether the interim instalments should be paid weekly or fortnightly; and contain such other information as the Commissioner may require; and be accompanied by the information required by subsec- tion (2AAA).
(d) (e) (f) (2AAA) An application under subsection (1) or (1A) must be ac- companied by the following: (a) for a signatory who expects to derive income from em- ployment, evidence of the amount of income from em- ployment (if any) derived by the signatory in the period of one month immediately preceding the date on which the application is made: for a signatory who expects to derive income from a business,— (i) a copy of the annual accounts of the business for the tax year (or the accounting year that, under this Act, corresponds with the tax year) imme- diately preceding the tax year that contains the elected period; or if the Commissioner is satisﬁed that the annual accounts referred to in subparagraph (i) have not been completed, a copy of the annual accounts for the business for the tax year (or the account- ing year that, under this Act, corresponds with the tax year) that precedes the year immediately preceding the tax year that contains the elected period; or a set of budgeted accounts of the business for the tax year (or the accounting year that, under this Act, corresponds with the tax year) that contains the elected period; or other evidence that is acceptable to the Com- missioner in relation to the business for the tax year (or the accounting year that, under this Act, corresponds with the tax year) that contains the elected period: (ii) (iii) (iv) (b) 1764 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 5 (c) (d) unless paragraph (d) applies, the tax ﬁle number of each child in relation to whom a credit of tax is claimed: in the case of a child that has died or is given up for adoption, a birth certiﬁcate or other evidence acceptable to the Commissioner verifying the birth or existence of the child for whom a credit of tax is claimed.
(2AA) subsection (2AAA)(a) does not apply if the Commissioner considers that the Commissioner has sufﬁcient evidence of a signatory’s income from employment.

(2AB) subsection (2AAA)(d) does not apply to an application made by a person who is an adoptive parent, as that term is deﬁned in the Adoption Act 1955.
(3) (2A) A person continues to be entitled to a credit of tax under sec- tion KD 2 or KD 2 and KD 3 for speciﬁed periods after the speciﬁed period for which an application was made until the Commissioner withdraws the certiﬁcate of entitlement under either subsection (10) or (12).
If an application is not accompanied by the tax ﬁle number of each child for whom a credit of tax is claimed and if the Com- missioner is otherwise satisﬁed of the person’s entitlement, the Commissioner must— (a) (b) issue the person with a certiﬁcate of entitlement; and pay to the person interim instalments of a credit of tax under section KD 2 or KD 2 and KD 3 for a period of 8 weeks.
(3A) If the person or their spouse, civil union partner, or de facto partner does not provide the tax ﬁle number of a child for whom a credit of tax is claimed within the 8 week period, the Commissioner must stop paying the credit of tax for the child until the tax ﬁle number is provided.
(4) On receipt by the Commissioner of an application made by any person in accordance with subsection (2), the Commissioner must, subject to this section,— (a) determine under this subpart the amount (if any) of the estimated entitlement to a credit of tax (calculated on the basis of that application and the statement and the other information furnished with the application and any other information available to the Commissioner) 1765 Part K s KD 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) to which the person would be entitled in relation to the elected period; and calculate the amount that, if the Commissioner issued to the person a certiﬁcate of entitlement in relation to the whole of the elected period, would be the interim instal- ment by way of credit of tax that would be speciﬁed in the certiﬁcate of entitlement; and in relation to the whole or such part (if any) of the elected period as the Commissioner sees ﬁt, issue to the person a certiﬁcate specifying— (i) the amount of the interim instalment by way of credits of tax (as calculated under paragraph (b)) to which the person is entitled: the amount (if any) after abatement contributed by the family tax credit to the interim instalment: the amount of credit (if any) after abatement con- tributed by the in-work tax credit to the interim instalment: the amount (if any) after abatement contributed by the child tax credit to the interim instalment: (iiia) the amount (if any) after abatement contributed by the parental tax credit to the instalment: the amount (if any) contributed by the minimum family tax credit to the interim instalment.
(iib) (iii) (iv) (ii) (5) Where a certiﬁcate of entitlement has been issued to a person under this section,— (a) (b) the Commissioner must retain a copy of the certiﬁcate; and the Commissioner must make payments to the person of interim instalments by way of credit of tax in accord- ance with section KD 7.
In determining for the purpose of subsection (4) the amount of the subpart KD credit relating to the whole or any part of an elected period, the Commissioner must— (a) calculate an amount (referred to in paragraph (b) and in schedule 12 as the annual amount) in accordance with the following formula: (6) 1766 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 5 where— x is equal to such amount of the net income re- ferred to in subsection (2) expected to be at- tributable to the part of the tax year that is the part (referred to in this subsection as the calcu- lation period) in relation to which the Commis- sioner determines that a credit of tax is allowable to the person y y is the number of days in the calculation period; and (b) (c) that, ascertain the amount in schedule 12, second column, is deemed to be the equivalent of the annual amount, as that annual amount is represented in sched- ule 12, ﬁrst column; and calculate the subpart KD credit that would be allowed to the person, for the tax year of which the calculation period is part, if the speciﬁed income of the person in re- lation to the calculation period were equal to the amount ﬁrst mentioned in paragraph (b).
(6A) The amount of an interim instalment by way of credit of tax under section KD 2 or, as the case may be, sections KD 2 and KD 3, must be calculated by the Commissioner— (a) (b) as if the calculation period were a speciﬁed period; and using— (i) (ii) a value for speciﬁed income as directed by sub- section (6)(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 given by sections KD 2, KD 2AAA, and KD 3.
The amount of any interim instalment by way of credit of tax under section KD 2 or, as the case may be, sections KD 2 and KD 3, in relation to any part of any elected period, that is shown in any certiﬁcate of entitlement issued to any person under subsection (4) is the amount that, but for this subsection, (7) 1767 Part K s KD 5 Income Tax Act 2004 Reprinted as at 29 August 2011 would be shown in that certiﬁcate of entitlement as the whole dollars comprised in that last-mentioned amount.
(8) Where— (a) a person— (i) (ii) expects that in any speciﬁed period the person will be entitled to receive an income-tested bene- ﬁt; or has applied to the chief executive of the depart- ment currently responsible for administering the Social Security Act 1964 under section KD 6(1B) for a credit of tax to be paid for a period after an income-tested beneﬁt has ceased; and (b) (i) the chief executive of that department— is authorised, by section KD 6(1), to make payments of a subpart KD credit to the person; and (ii) does not request the Commissioner, under sec- tion KD 6(1C), to accept from the person an ap- plication for a certiﬁcate of entitlement,— the person is not entitled to make an application under subsec- tion (2) in relation to that period and section KD 6 applies in relation to the person and the period.
(9) Any person to whom a certiﬁcate of entitlement has been is- sued under this section must notify the Commissioner imme- diately upon the occurrence (within the period commencing with the issuing of that certiﬁcate of entitlement and ending with the last day of the part, of the elected period, to which that certiﬁcate of entitlement relates) of any of the following: the cessation, by the person or by another person who in (a) relation to the person is a spouse, civil union partner, or de facto partner, of the role of being principal caregiver of any child, where the person expects that he or she will not resume the role of principal caregiver for a period of more than 56 consecutive days: the commencing or the ceasing of the person to be a spouse, civil union partner, or de facto partner in rela- tion to another person: any other event of a kind speciﬁed, by the Commis- sioner, in the certiﬁcate of entitlement, for the purposes of this subsection,— (b) (c) 1768 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 5 and may so notify the Commissioner upon the person, or an- other person who in relation to the person is a spouse, civil union partner, or de facto partner, becoming the principal care- giver of any child, or upon the occurrence of any other event that, the person considers, may affect his or her entitlement to the credit of tax speciﬁed in that certiﬁcate of entitlement, or upon the loss or destruction of that certiﬁcate of entitlement.
(10) Where the Commissioner— (a) (c) (b) receives any notiﬁcation given by any person in accord- ance with subsection (9) that affects any certiﬁcate of entitlement; or is otherwise satisﬁed that a certiﬁcate of entitlement is- sued to any person is incorrect; or is advised by the chief executive of the department currently responsible for administering the Social Security Act 1964, under sections 84 or 85G of the Tax Administration Act 1994, that the person is also receiving a credit of tax from the chief executive or will receive a credit of tax from the chief executive,— the Commissioner may require the return of the certiﬁcate of entitlement and, whether or not the Commissioner requires the certiﬁcate to be returned, may— (d) withdraw the certiﬁcate of entitlement; or (e) withdraw the certiﬁcate of entitlement and issue to the person, in its place, such other certiﬁcate of entitlement, in relation to the speciﬁed period to which that with- drawn certiﬁcate of entitlement related or in relation to such other speciﬁed period as the Commissioner con- siders appropriate, as, having regard to any information in the Commissioner’s possession, the Commissioner considers should be issued to the person for the purpose of giving effect to this subpart; or in relation to the certiﬁcate of entitlement, issue to the person such supplement as, in the circumstances of the case, the Commissioner considers appropriate; and, for the purposes of this Act, that supplement so issued is deemed to constitute part of, and to amend accordingly, that certiﬁcate of entitlement.
(f) 1769 Part K s KD 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (11) A certiﬁcate of entitlement issued to any person under this section (that person being referred to in this subsection and in subsection (12) as the claimant) is— (a) not transferable (whether or not for valuable consider- ation) by the claimant to any other person: on alteration, in any manner by any person, invalid: subject to all terms and conditions stipulated in the cer- tiﬁcate by the Commissioner.
(b) (c) (12) The Commissioner may, by notice to the claimant, withdraw the certiﬁcate of entitlement where, in the opinion of the Com- missioner, the certiﬁcate of entitlement should cease to have effect and the claimant must, within the period of 7 days im- mediately succeeding the giving of that notice, return the cer- tiﬁcate of entitlement to the Commissioner for cancellation by the Commissioner.
Compare: 1994 No 164 s KD 5 Subsection (1) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.

Subsection (2) was substituted by section 6(1) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2005-06 income year.
Subsection (2)(b) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.

Subsection (2AAA) was inserted by section 6(1) Taxation (Working for Fami- lies) Act 2004 (2004 No 52) with application as from the 2005-06 income year.
Subsection (2AA) was amended by section 6(2) Taxation (Working for Fami- lies) Act 2004 (2004 No 52) by substituting “Subsection (2AAA)(a)” for the expression “Subsection (2)(a)” with application as from the 2005-06 income year.

Subsection (2AB) was amended by section 6(3) Taxation (Working for Fami- lies) Act 2004 (2004 No 52) by substituting “Subsection (2AAA)(d)” for the expression “Subsection (2)(d)” with application as from the 2005-06 income year.
Subsection (3A) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.

Subsection (4)(b) and (c)(i) to (iv) was amended by section 6(4) Taxation (Work- ing for Families) Act 2004 (2004 No 52) by omitting the word “fortnightly” with application as from the 2005-06 income year.
Section KD 5(4)(c)(ii): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

1770 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 5B Subsection (4)(c)(iib) was inserted, as from 4 June 2004, by section 17(1) Tax- ation (Working for Families) Act 2004 (2004 No 52) with application as from the 2006–07 income year.
Section KD 5(4)(c)(iib): amended (with effect from 1 April 2007), on 19 De- cember 2007, by section 131(1) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).

Section KD 5(4)(c)(iv): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (6) was amended by section 6(5) Taxation (Working for Families) Act 2004 (2004 No 52) by substituting “for the purpose of subsection (4)” for “under subsection (4)” with application as from the 2005-06 income year.

Section KD 5(6A)(b)(ii): amended (with effect from 1 April 2007), on 19 De- cember 2007, by section 131(1) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).
Subsection (6A)(b)(ii) was amended by section 6(6) Taxation (Working for Families) Act 2004 (2004 No 52) by substituting “sections KD 2 and KD 3” for the expression “section KD 5B” with application as from the 2005-06 income year.
Subsection (6A)(b)(ii) was amended, as from 18 December 2006, by section 109(1)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “amounts of family support credit, in-work payment” for “rates of family support credit” with application as from the 2006–07 income year.
Subsection (6A)(b)(ii) was amended, as from 18 December 2006, by section 109(1)(b) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “KD 2, KD 2AAA,” for “KD 2” with application as from the 2006–07 income year.

Subsection (9) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse” in each place that it occurs.
Subsection (10)(c) was substituted by section 6(7) Taxation (Working for Fam- ilies) Act 2004 (2004 No 52) with application as from the 2005-06 income year.

KD 5B Rates for interim instalments for period beginning on or after 1 July 1998 [Repealed] Section KD 5B was repealed, as from 1 April 2005, by section 7(1) Taxation (Working for Families) Act 2004 (2004 No 52).
1771 Part K s KD 5C Income Tax Act 2004 Reprinted as at 29 August 2011 KD 5C Adjustment of family tax credit amounts, abatement threshold amounts, amounts of in-work tax credit and parental tax credit, and amount of minimum family tax credit The Governor-General may from time to time, by Order in Council,— (a) (1) increase the amount of the family tax credits speciﬁed in section KD 2(3) and the speciﬁed income threshold in section KD 2(6) 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) (b) (c) (d) (e) increase the amount of the parental tax credit speciﬁed in section KD 2(5): increase the amount of the in-work tax credit speciﬁed in section KD 2AAA: increase the ﬁgure in the deﬁnition of the item amount in sections KD 3(3) and KD 3(5): replace Schedule 12.
(2) An Order in Council under subsection (1)(a),— (a) (b) 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 April 2007 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.
(3) 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.
1772 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 6 (4) 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 this subpart.
(5) A review undertaken under subsection (4) must occur,— (a) (b) 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.

Section KD 5C was inserted, as from 1 April 2005, by section 8(1) Taxation (Working for Families) Act 2004 (2004 No 52).

Section KD 5C was substituted, as from 1 April 2006, by section 18(1) Taxation (Working for Families) Act 2004 (2004 No 52).
Section KD 5C heading: amended (with effect from 1 April 2007), on 19 De- cember 2007, by section 131(1) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).

Section KD 5C(1)(a): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section KD 5C(1)(c): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsection (1)(d) was amended, as from 1 April 2006, by section 110 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “the ﬁgure in the deﬁnition of the item amount” for “the amount of the family tax credit”.
Section KD 5C(4): amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
KD 6 Chief executive to deliver credit of tax (1) Where in any tax year the chief executive of the department currently responsible for administering the Social Security Act 1964 pays to any person an income-tested beneﬁt, and the chief executive is satisﬁed that— (a) the person is entitled to receive a subpart KD credit for which the amount of the family credit abatement is nil; or the chief executive is authorised by an Order in Council made under section 225A of the Tax Administration Act (b) 1773 Part K s KD 6 Income Tax Act 2004 Reprinted as at 29 August 2011 1994 to pay the person under this section an amount of subpart KD credit for which the amount of family credit abatement is greater than nil,— (1A) the chief executive must, when paying the income-tested bene- ﬁt, in addition pay to the person so much of the amount of the subpart KD credit as, in the opinion of the chief executive, the person is entitled to at the time of the payment.
In determining under subsection (1) the amount of any subpart KD credit to be paid to a person for a period, the chief execu- tive of the department currently responsible for administering the Social Security Act 1964 must— (a) (b) use the method set out in section KD 5(6), if required to calculate the amount of the family credit abatement; and take into account the rates of family tax credit and fam- ily credit abatement given by section KD 2.
(1B) Where the chief executive of the department currently respon- sible for administering the Social Security Act 1964 ceases to pay to any person an income-tested beneﬁt, the chief execu- tive must, if the person applies, continue to pay to the person, for a period determined by the chief executive in consultation with the Commissioner, an amount of subpart KD credit deter- mined as if the person were still being paid an income-tested beneﬁt during the period.
(1C) The chief executive of the department currently responsible for administering the Social Security Act 1964 may request the Commissioner to accept from a person an application for a certiﬁcate of entitlement if the chief executive is satisﬁed that the person is entitled to a subpart KD credit under section KD 2 but is not satisﬁed that the chief executive is authorised by subsection (1) to pay the person an amount of subpart KD credit.
(1D) The chief executive of the department currently responsible for administering the Social Security Act 1964 may, any time after making a request under subsection (1C) in relation to a person, request the Commissioner to cease making payments to the person under a certiﬁcate of entitlement if the chief executive is satisﬁed that subsection (1) authorises the chief executive to pay the person an amount of subpart KD credit.
1774 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 6 (2) Notwithstanding subsection (1) or (1B), any person entitled to payment of a credit of tax under either of those subsections may notify the chief executive of the department currently re- sponsible for administering the Social Security Act 1964 not to pay the credit of tax to that person and the chief executive must as soon as practicable cease to pay the credit of tax ac- cordingly.
(4) (3) Any notiﬁcation given under subsection (2) by any person may be cancelled by that person at any time and the chief executive must then recommence payment of the credit of tax as soon as practicable.
If, in relation to a tax year, the chief executive of the de- partment currently responsible for administering the Social Security Act 1964 makes a payment under this section to a person or to the spouse, civil union partner, or de facto part- ner of a person on behalf of the person, the chief executive must for each month in which a payment is made deliver to the Commissioner particulars of the payment in an employer monthly schedule and,— (a) not later than the 20 April next succeeding the last day of the tax year in which any such payment is so made, deliver to that person a certiﬁcate, signed by the chief executive, in a form authorised by the Commissioner and showing the total of all of the amounts of the credits of tax paid under any certiﬁcate of entitlement, together with such other information as the Commissioner may prescribe: not later than 31 May in the tax year next succeeding the tax year in which any such payment is so made, de- liver to the Commissioner a copy of every certiﬁcate de- livered by the chief executive in accordance with para- graph (a), together with such other information as the Commissioner may prescribe.
(b) Compare: 1994 No 164 s KD 6 Section KD 6(1A)(b): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsection (1A)(b) was amended, as from 1 April 2005, by section 9(1) Tax- ation (Working for Families) Act 2004 (2004 No 52) by substituting “section KD 2” for the expression “section KD 5B”.
1775 Part K s KD 7 Income Tax Act 2004 Reprinted as at 29 August 2011 Subsection (4) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
KD 7 Commissioner to deliver credit of tax by instalments (1) Where a certiﬁcate of entitlement has been issued to any person under section KD 5, the Commissioner must, in such period as— (a) commences on the day speciﬁed in the certiﬁcate of en- titlement; and ends with the earlier of— (i) the day on which the certiﬁcate of entitlement is withdrawn by the Commissioner; or the termination date speciﬁed in the certiﬁcate of entitlement,— (ii) (b) (2) pay to the person, on such days as the Commissioner may ﬁx, the interim instalments of the credit of tax shown in the cer- tiﬁcate of entitlement.
If the Commissioner makes a payment in accordance with this section to a person or to their spouse, civil union partner, or de facto partner on their behalf during a tax year, the Com- missioner must deliver to the person a certiﬁcate in the pre- scribed form showing the total of all the credits of tax paid by instalments under a certiﬁcate of entitlement for that tax year, together with such other information the Commissioner may prescribe.
(2A) The Commissioner must deliver the certiﬁcate— (a) (b) on or before 20 May next following the last day of the tax year in which the payment is made for persons to whom section 33A(5) of the Tax Administration Act 1994 does not apply; and on the same date that the Commissioner issues the person with an income statement for the tax year in which the payment is made for persons to whom section 33A(5) of the Tax Administration Act 1994 applies.
(2B) If the Commissioner considers, on the basis of information provided under section 85G of the Tax Administration Act 1994 by the chief executive of the department currently re- sponsible for administering the Social Security Act 1964, that 1776 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 7 a person is entitled to a family tax credit, the Commissioner must make payments by way of interim instalments without abatement of the credit to the person for the period that— (a) commences on the day following the day that the chief executive speciﬁes as being the last day for which the person is entitled to the speciﬁed beneﬁt, or as the case may be, a subpart KD credit paid under section KD 6(1); and ends on the earlier of— (i) the day preceding the ﬁrst day speciﬁed in a cer- tiﬁcate of entitlement subsequently issued under section KD 5: a period of not more than 8 weeks, commencing on the ﬁrst day referred to in paragraph (a).
(ii) (b) (2C) If under section KD 6(1B) a credit payable under subsection (2B) is paid for part of the 8 week period referred to in subsec- tion (2B)(b)(ii) by the chief executive of the department cur- rently responsible for administering the Social Security Act 1964, the 8 week period is reduced by the period in respect of which payments were made by the chief executive of that de- partment.
(3) Where, following receipt by the Commissioner of an applica- tion for a certiﬁcate of entitlement under section KD 5(2), the issue of a certiﬁcate of entitlement has in the opinion of the Commissioner been unduly delayed, the Commissioner may pay such amounts by way of interim instalments of credit of tax as, having regard to the circumstances of the case, the Com- missioner determines should be so paid.
(3A) Where in any tax year the chief executive of the department currently responsible for administering the Social Security Act 1964 ceases to pay to any person a credit of tax with an income- tested beneﬁt, the Commissioner may, on application by the person, pay to the person the amount of the credit of tax that the Commissioner determines the person would be entitled to under section KD 2(2) for the period that— commences on the later of— (a) (i) the ﬁrst day of the tax year; and 1777 Part K s KD 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) the day following that on which the chief execu- tive ceases payment of any credit of tax to the person; and ends on the day preceding the ﬁrst day speciﬁed in a cer- tiﬁcate of entitlement subsequently issued to the person under section KD 5.
(b) (3B) Where in any tax year the chief executive of the department currently responsible for administering the Social Security Act 1964 ceases to pay to any person an income-tested beneﬁt, the Commissioner may, on application by the person, pay to the person the amount of the credit of tax that the Commissioner determines the person would be entitled to under section KD 3 for the period that— (a) commences on the later of— (i) (ii) the ﬁrst day of the tax year; and the day following that on which the chief execu- tive ceases payment of the income-tested beneﬁt to the person; and (b) ends on the day preceding the ﬁrst day speciﬁed in a cer- tiﬁcate of entitlement subsequently issued to the person under section KD 5.
(3C) (4) Unless the Commissioner in any particular case otherwise de- termines, it is a condition of the receipt of credits of tax paid by instalments under this section that the qualifying person, or the qualifying person and his or her spouse, civil union part- ner, or de facto partner, supply the Commissioner with particu- lars of an existing account held by the person (whether alone or jointly with the person’s spouse, civil union partner, or de facto partner), or open such an account if one is not held, and supply the Commissioner with particulars of the account, be- ing an account held with— (a) any registered bank within the meaning of that term in section 2 of the Reserve Bank of New Zealand Act 1989; or any private savings bank carried on under the Private Savings Banks Act 1983; or any building society, in respect of any deposits with the building society; or (b) (c) 1778 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KD 7A (d) (e) the Public Service Investment Society Limited; or any person that is a bank within the meaning of the Banking Act 1982,— and every credit of tax by interim instalment must be paid by the Commissioner into such an account.
Compare: 1994 No 164 s KD 7 Subsection (1) was amended by section 10(1) Taxation (Working for Families) Act 2004 (2004 No 52) by omitting the word “fortnightly” with application as from the 2005-06 income year.

Subsection (2) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse”.
Subsections (2B) and (2C) were inserted by section 10(2) Taxation (Working for Families) Act 2004 (2004 No 52) with application as from the 2005-06 income year.

Section KD 7(2B): amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Subsection (3A) was amended, as from 18 December 2006, by section 111(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “any person a credit of tax with an income-tested bene- ﬁt” for “any person a credit of tax”.

Subsection (3C) was repealed, as from 18 December 2006, by section 111(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Subsection (4) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, or de facto partner” for “spouse” in both places that it occurs.
KD 7A Effect of extra interim instalment on entitlement to tax (1) credit This section applies to a person who— (a) (b) is entitled to a subpart KD credit or minimum family tax credit for the whole or part of a tax year; and receives in the tax year— (i) a payment under section KD 7 of an interim in- stalment of the credit for each period of a fort- night in the tax year; or payments under section KD 6 of interim instal- ments of the credit for periods of a week in the tax year and no payment under section KD 7 in the tax year; and (ii) 1779 Part K s KD 7A Income Tax Act 2004 Reprinted as at 29 August 2011 (c) as a consequence of the year not being divided into an exact number of fortnights or weeks,— (i) receives in the tax year 27 interim instalments corresponding to a period of a fortnight; or (ii) may have received in the tax year 53 interim in- stalments corresponding to a period of a week.
(2) For the purposes of section KD 4(2)(c), a person who has re- ceived payments under section KD 7 for the whole of a tax year is entitled to a credit of tax for the tax year of the amount given by the following formula: where— a is the amount of the credit of tax for the tax year cal- culated for the person under— (a) section KD 2, if the person is entitled to a subpart KD credit of tax: section KD 3, if the person is entitled to the min- imum family tax credit (b) b c is the amount of the ﬁnal interim instalment received by the person in the tax year is the amount of any parental tax credit that is included in the ﬁnal interim instalment received by the person in the tax year.
(3) For the purposes of section KD 4(2)(c), a person who has re- ceived payments under section KD 6 for the whole of a tax year and no payment under section KD 7 for the tax year is entitled to a credit of tax for the tax year of the amount given by the following formula: where— a is the amount of the credit of tax for the tax year cal- culated for the person under— (a) section KD 2, if the person is entitled to a subpart KD credit of tax: 1780 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KE 1 (b) section KD 3, if the person is entitled to the min- imum family tax credit b is the total amount of the interim instalments received by the person in the tax year.
Compare: 1994 No 164 s KD 7B Section KD 7A(1)(a): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 131(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section KD 7A(2) item a paragraph (b): amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Tax- ation and Remedial Matters) Act 2007 (2007 No 109).
Section KD 7A(3) item a paragraph (b): amended (with effect from 1 April 2007), on 19 December 2007, by section 131(1) of the Taxation (Business Tax- ation and Remedial Matters) Act 2007 (2007 No 109).

KD 8 Credit of tax deemed to be excluded income Every credit of tax allowed to any person under this subpart is, for the purposes of this Act, deemed to be excluded income derived by the person to whom the credit of tax is allowed.
Compare: 1994 No 164 s KD 8 KD 9 Advice In determining the entitlement of a person to any credit of tax under this subpart, the Commissioner may, if the Commis- sioner considers it necessary, obtain the advice of the chief executive of the department currently responsible for admin- istering the Social Security Act 1964 or, as the case may be, the Secretary for War Pensions.
Compare: 1994 No 164 s KD 9 Subpart KE—Housing rebates Contents KE 1 Rebate for interest on home vendor mortgages Page 1781 KE 1 Rebate for interest on home vendor mortgages (1) A taxpayer (not being an absentee, or a company, or a public authority, or a Maori authority, or an unincorporated body, or a 1781 Part K s KE 1 Income Tax Act 2004 Reprinted as at 29 August 2011 trustee liable for income tax under sections HH 3 to HH 6 and HZ 2) who in any tax year has derived interest in respect of a home vendor mortgage is allowed as a rebate of income tax for that tax year an amount equal to 20 cents for each complete dollar of the interest so derived: provided that the rebate under this section in any tax year must not exceed $500: provided also that where in any tax year there are 2 or more taxpayers who have provided the loan secured by any home vendor mortgage, the rebate allowed to each such taxpayer must not exceed an amount calculated in accordance with the following formula: where— a is the amount of the loan provided by the tax- payer b is the total amount of the loan secured by the home vendor mortgage.
In this section,— Corporation means Housing New Zealand Corporation home vendor mortgage means a mortgage— (a) which secures a loan provided by the vendor or vendors of a house; and (b) which is guaranteed by the Corporation under its hous- (c) (d) ing mortgage guarantee scheme; and which has been approved by the Corporation, on or be- fore 5 August 1982, for the purpose of the rebate to which this section applies; and in respect of which notice of such guarantee and ap- proval and of any variation has been delivered by the Corporation to the Commissioner.
Compare: 1994 No 164 s KE 1 (3) 1782 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KG 1 Subpart KF—Rebates for non-residents Contents KF 3 Rebates for absentees KF 3 Rebates for absentees Page 1783 Every absentee who has derived assessable income from that absentee’s personal services (being services performed for or on behalf of any other person) while personally present in New Zealand in a tax year is entitled to a rebate of income tax in that absentee’s assessment for that tax year of the same proportion of every rebate to which the absentee would have been entitled under any of the provisions of sections KC 1 to KC 4 if the absentee were not an absentee, as the proportion that,— (a) if the absentee was paid for regular pay periods in re- spect of those services, the number of weeks for which the absentee was so paid in the tax year bears to 52: in every other case, the number of days for which the absentee was paid for those services in the tax year bears to the number of days in the tax year.
(b) Compare: 1994 No 164 s KF 3 Subpart KG—Industry-speciﬁc rebates Contents KG 1 Rebate for savings in special farm, ﬁshing vessel, and home ownership accounts Page 1783 KG 1 Rebate for savings in special farm, ﬁshing vessel, and home ownership accounts (1) A taxpayer who in any tax year operates a special account is allowed as a rebate of income tax for that tax year an amount equal to 45 cents for every complete dollar of any increase in savings in that account in relation to that tax year: provided that in no case is a rebate allowed under this section for any tax 1783 (2) (3) (4) Income Tax Act 2004 Reprinted as at 29 August 2011 year in respect of any increase in savings in any special account to the extent that the increase in relation to that year exceeds $5,000 in the case of a special farm ownership account, or a special ﬁshing vessel ownership account, or $3,000 in the case of a special home ownership account.
For the purposes of this section, the aggregate of the amounts of the increase in savings in any special account in relation to every tax year must not exceed $60,000 in the case of a special farm ownership account, or a special ﬁshing vessel ownership account, or $10,250 in the case of a special home ownership account.
In this section, increase in savings, in relation to any special account of any taxpayer and to any tax year, means the aggre- gate of— (a) the amount by which the amount standing to the credit of that special account at the end of that tax year or the date of the closure of that account, whichever is the earlier, exceeds the amount standing to the credit of that account, if any, at the end of the tax year immediately preceding that tax year; and the amount of resident withholding tax deducted dur- ing that tax year from interest paid in respect of that account.
(b) For the purposes of the deﬁnition of increase in savings in subsection (3),— (a) any amount withdrawn from a special account in ac- cordance with a withdrawal certiﬁcate is deemed not to have been withdrawn: any amount withdrawn from a special account in accordance with a withdrawal certiﬁcate, and subse- quently redeposited in the account, is deemed not to have been redeposited.
(b) Compare: 1994 No 164 s KG 1 Subpart KH—Conduit tax relief Contents KH 1 Conduit tax relief 1784 Page 1785 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KH 1 KH 2 Calculation of percentage of shareholders not resident 1786 KH 1 Conduit tax relief (1) A company is allowed an income tax rebate as calculated under subsection (2), for a tax year corresponding with an imputation year for which it is a conduit tax relief company, if it is still a conduit tax relief company at the time it ﬁles its return of income for the tax year.
The rebate amount is— (2) NRS x ((TR x (FAI – FALO – EIA)) – FAC - BC) where— NRS is the percentage of the company’s shareholders who are not resident in New Zealand calculated under sec- tion KH 2 TR is the rate of income tax stated in schedule 1, part A, clause 5, that applies to the tax year FAI is the company’s foreign attributed income for the tax year FALO is the company’s foreign attributed loss offsets for the tax year EIA is the excess interest allocation, if any, for the tax year calculated under section FH 7 FAC is all tax credits that would be allowed against the com- pany’s income tax liability for the tax year under section LC 4 or LC 5, determined as if the amount of rebate cal- culated under this section were nil BC is the total of— (a) (b) the amount able to be credited by the company against its income tax liability for the tax year under section MF 5(4); and the amount credited by another company in the same group of companies against the company’s income tax liability for the tax year under section MF 5(4); and both amounts are determined as if the amount of rebate calculated under this section were nil.
1785 Part K s KH 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) Notwithstanding subsection (2), the rebate amount cannot be— (a) (b) less than nil; or greater than the amount calculated as follows: NRS x (terminal tax + refundable credits) where— NRS terminal tax refund- able is the percentage of the company’s shareholders who are not resident in New Zealand calculated under section KH 2 is the company’s terminal tax (including a nil amount and calculated as if the rebate calculated under this section were nil) for the tax year are the company’s refundable credits credits for the tax year.
Compare: 1994 No 164 s KH 1 KH 2 Calculation of percentage of shareholders not resident (1) The percentage of shareholders of a conduit tax relief company not resident in New Zealand is calculated— (a) on the last date the company pays a dividend to all share- holders during the tax year; or at the end of the tax year if the company does not pay a dividend to all shareholders during the year.
(b) (2) If a company to which subsection (1) applies is a listed com- pany, the company may use— (a) the record date (the date on which entitlement to a divi- dend is determined) for a dividend instead of the date on which the dividend is paid; or any date in the tax year on which the company, for what- ever commercial reason, calculates the percentage of non-resident shareholders.
(b) (2A) If, in respect of a company, there is a conduit tax relief group member, subsection (1) (as modiﬁed, if applicable, by subsec- 1786 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KH 2 tion (2)) applies as if the company referred to in that subsection were the company— (a) in which 1 or more non-residents have a direct voting interest; and that has a 100% voting interest (calculated as if section OD 3(3)(d) did not apply to deem the company’s inter- ests to be held by others) in the company ﬁrst mentioned in this subsection.
(b) (3) (4) (5) The percentage of shareholders not resident in New Zealand is the lowest of— (a) the percentage of direct voting interests held in the com- pany by non-residents at the relevant time; and the percentage of direct market value interests (if a di- rect market value circumstance exists) held in the com- pany by non-residents at the relevant time; and the percentage of total dividends payable by the com- pany (if the shares in the company are not all shares of the same class) that would be derived by non-residents, if the company were liquidated at the relevant time.
(b) (c) For the purposes of subsection (1)(a), a company with more than 1 class of shares that pays a dividend to all shareholders of each class of shares in a tax year is treated as if a dividend had been paid to all shareholders on the latest date on which it paid a dividend to all holders of shares of 1 of the classes.
For the purposes of determining direct voting interests under subsection (3)(a) or direct market value interests under sub- section (3)(b),— (a) the relevant time is the date on which the company is treated as having paid a dividend to all shareholders under subsection (4); and in relation to each class of shares, the company is treated as having the same shareholders on the relevant date in relation to that class that it had on the last date in the tax year on which a dividend was paid to all shareholders of that class.
(b) (6) For the purposes of this section, treasury stock is to be disre- garded.

1787 Income Tax Act 2004 Reprinted as at 29 August 2011 (7) The rules for determining residence in sections OE 7 and OE 8 apply for the purposes of this section.

Compare: 1994 No 164 s KH 2 Subpart KI—Rebates for portfolio tax rate entities Subpart KI: inserted, on 1 October 2007, by section 112 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Contents KI 1 Rebate for portfolio tax rate entity relating to certain investors Page 1788 KI 1 Rebate for portfolio tax rate entity relating to certain investors Rebate of income tax (1) A portfolio tax rate entity is allowed a rebate of income tax for a tax year of an amount given by subsection (2) for a portfolio calculation 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 portfolio investor; and the entity does not make payments of tax under sec- tion HL 22 (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 21 (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 rebate The amount of the rebate of income tax is— (a) the amount of a tax credit allocated to the investor and the portfolio calculation period under section HL 27 (Credits received by portfolio tax rate entity or portfolio investor proxy) from an imputation credit or a credit for tax paid or withheld: (2) 1788 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KI 1 (3) KJ 1 KJ 2 KJ 3 KJ 4 KJ 5 KJ 6 (b) the amount of a rebate under section HL 20(2) (Portfolio entity tax liability and rebates of portfolio tax rate entity for period) arising from portfolio investor allocated loss of the investor for the portfolio calculation period.
Reduction of rebate [Repealed] [Repealed] Deﬁned in this Act: imputation credit, , income tax, , investor, , portfolio class net income, , portfolio investor allocated loss, , portfolio investor exit period, , portfolio tax rate entity, , tax year, , zero-rated portfolio investor Section KI 1: inserted, on 1 October 2007, by section 112 of the Taxation (Sav- ings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section KI 1(1): amended, on 1 October 2007, by section 38(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section KI 1(3) heading: repealed, on 1 October 2007, pursuant to section 38(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section KI 1(3): repealed, on 1 October 2007, by section 38(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Subpart KJ—KiwiSaver scheme and complying superannuation fund tax credits Subpart KJ (sections KJ 1 to KJ 5) was inserted, as from 1 July 2007, by section 39 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Contents Tax credits relating to KiwiSaver scheme and complying superannuation fund members Person’s requirements Tax credit amount Payment Rules Tax credits relating to employers contributing to KiwiSaver schemes and complying superannuation funds Employer requirements Tax credit amount KJ 7 KJ 8 KJ 9 Using the tax credit KJ 10 Treatment when short payment and unpaid amount of compulsory employer contributions found after tax credit used Page 1790 1790 1791 1792 1793 1795 1796 1796 1797 1798 1789 Part K s KJ 1 Income Tax Act 2004 KJ 11 Employees who opt out KJ 12 Group of persons 1 employer Reprinted as at 29 August 2011 1799 1800 KJ 1 Tax credits relating to KiwiSaver scheme and complying superannuation fund members (1) (2) Tax credit The Commissioner must pay, in accordance with section KJ 4, the amount of a tax credit calculated under section KJ 3 for a member credit year to a person’s fund provider, to the extent to which the person meets the requirements in section KJ 2 in the member credit year.
Rules Section KJ 5 provides some rules for the tax credit.

Deﬁned in this Act: amount, Commissioner, complying superannuation fund, KiwiSaver scheme, member credit year Subpart KJ (sections KJ 1 to KJ 5) was inserted, as from 1 July 2007, by section 39 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
KJ 2 Person’s requirements For the purposes of section KJ 1(1), the requirements are that the person— (a) has creditable membership of a complying superannu- ation fund or a KiwiSaver scheme; and is 18 years or older; and is not entitled to withdraw an amount from a fund or scheme under schedule 1, clause 4(3) of the KiwiSaver Act 2006 or a rule the same as that clause; and has their principal place of residence in New Zealand, unless they meet the requirement in paragraph (e); and if paragraph (d) does not apply, is an employee of the State services within the meaning of the State Sector Act 1988 who is serving outside New Zealand, or is a person who works overseas as a volunteer or for token payment and— (i) the person works for a charitable organisation named in regulations made under the Student Loan Scheme Act 1992; and (b) (c) (d) (e) 1790 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KJ 3 (ii) the work meets 1 or more of the requirements in sections 38AEA(a)(i) to (iii) of the Student Loan Scheme Act 1992; and (f) where they meet the requirements of paragraph (e), they give the relevant fund provider evidence, in writing, of why and for what period in a member credit year they meet the relevant requirements of paragraph (e).
Deﬁned in this Act: amount, , complying superannuation fund, , creditable membership, fund provider, , KiwiSaver scheme, , member credit contributions, , member credit year Subpart KJ (sections KJ 1 to KJ 5) was inserted, as from 1 July 2007, by section 39 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section KJ 2(a): substituted (with effect from 1 July 2007), on 19 December 2007, by section 6(1) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
Section KJ 2 list of deﬁned terms creditable membership: inserted (with ef- fect from 1 July 2007), on 19 December 2007, by section 6(2) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
KJ 3 Tax credit amount (1) Tax credit amount The amount of the tax credit for the member credit year is— equal to the total amount of a person’s member credit (a) contributions for all of the person’s complying super- annuation funds and KiwiSaver schemes for the mem- ber credit year, if the ﬁrst formula in subsection (2) cal- culates an amount that is less than $1042.86 / 365: equal to the amount calculated using the second for- mula in subsection (3), if the ﬁrst formula in subsection (2) calculates an amount that is equal to or greater than $1042.86 / 365.
(b) (2) First formula For the purposes of subsection (1), an amount is calculated using the following formula: member credit contributions included days.

1791 Part K s KJ 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) (4) Second formula For the purposes of subsection (1)(b), the amount of the tax credit for the member credit year is calculated using the fol- lowing formula: $1042.86 × included days 365.
Deﬁnition of items in formulas In the formulas,— (a) member credit contributions is the total amount of a person’s member credit contributions for all of the per- son’s complying superannuation funds and KiwiSaver schemes for the member credit year: included days are the number of days in the member credit year on which the person meets the requirements in section KJ 2.
(b) Deﬁned in this Act: amount, , complying superannuation fund, , KiwiSaver scheme, , member credit contributions, , member credit year, , salary or wages Section KJ 3: substituted (with effect from 1 July 2007), on 19 December 2007, by section 7 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Subpart KJ (sections KJ 1 to KJ 5) was inserted, as from 1 July 2007, by section 39 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
KJ 4 Payment Payment to fund provider by direct credit without deduction or set-off (1) Unless subsection (3) applies, the Commissioner must pay the amount of tax credit under section KJ 1 to a person’s fund provider who complies with section 68C of the Tax Administration Act 1994— (a) without deduction or set-off for any other amount that the person or the person’s fund provider may be obliged to pay the Commissioner; and by direct credit; and in accordance with subsection (2).
(b) (c) Timing The Commissioner must pay the amount of tax credit to the fund provider within 30 working days of the provider furnish- (2) 1792 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KJ 5 ing a member credit claim form under section 68C(3) or (4) of the Tax Administration Act 1994.
Exception: payment to the person or another provider (3) Despite subsection (1), the Commissioner may pay the amount of tax credit under section KJ 1 to— (a) the person, if it would be impracticable to pay it to the person’s fund provider because the person has no fund provider or because of the person’s death or serious illness as that term is deﬁned in schedule 1, clause 12(3) of the KiwiSaver Act 2006; or a fund provider (provider B) who is not described in subsection (1), if the fund provider described in subsec- tion (1) requests the payment to provider B because the person is transferring or has transferred to provider B.
(b) Deﬁned in this Act: amount, , Commissioner, , complying superannuation fund, , KiwiSaver scheme, , member credit contributions, , member credit year Subpart KJ (sections KJ 1 to KJ 5) was inserted, as from 1 July 2007, by section 39 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section KJ 4(1) heading: substituted (with effect from 1 July 2007), on 19 De- cember 2007, by section 8(1) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
Section KJ 4(1): amended (with effect from 1 July 2007), on 19 December 2007, by section 8(2) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section KJ 4(2) heading: substituted (with effect from 1 July 2007), on 19 De- cember 2007, by section 8(3) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section KJ 4(2): substituted (with effect from 1 July 2007), on 19 December 2007, by section 8(3) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
Section KJ 4(3) heading: added (with effect from 1 July 2007), on 19 December 2007, by section 8(4) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section KJ 4(3): added (with effect from 1 July 2007), on 19 December 2007, by section 8(4) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

KJ 5 Rules (1) Credit: amount The fund provider is treated as being credited with the tax credit for the purposes of recovering any amount of tax credit paid in excess of that properly payable under section KJ 1.
1793 Part K s KJ 5 Income Tax Act 2004 Reprinted as at 29 August 2011 Treatment as contribution (2) Despite subsection (1), the amount of the tax credit paid to a person’s fund provider is treated, for the purposes of this Act and the KiwiSaver Act 2006, as a Crown contribution for the person, and the amount is subject to the relevant KiwiSaver scheme rules and complying fund rules.
(3) (4) Treatment of tax credit The fund provider must use the contribution allocation for a member to credit the amount of tax credit across the invest- ment products to which the person has subscribed or has been allocated as a member of the relevant KiwiSaver scheme or complying superannuation fund.

Vesting of tax credit The tax credit must vest in the person immediately after it is paid to the fund provider, despite any provision to the contrary.
Override of other rules: tax credit paid in excess (5) Despite the relevant KiwiSaver scheme rules or complying fund rules, the relevant fund provider may remove an amount from a person’s account for the purposes of paying to the Com- missioner an amount of tax credit paid in excess of that prop- erly payable under this subpart.
Claw-back: permanent emigration (6) When a person for whom amounts of tax credit have been paid makes an application for, or otherwise wants, after their per- manent emigration, a withdrawal or transfer from their Kiwi- Saver scheme or complying superannuation fund under sched- ule 1, clause 14 of the KiwiSaver Act 2006 or a rule the same as that clause,— (a) the relevant fund provider must pay to the Commis- sioner the lesser of— (i) the amounts of the tax credit that have been paid for the person and are held by the fund provider: the amount of employee’s superannuation accu- mulation for the person, for a complying super- annuation fund: the amount of the member’s accumulation as deﬁned in the KiwiSaver Act 2006 for the person, for a KiwiSaver scheme; and (ii) (iii) 1794 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KJ 6 (b) the payment described in paragraph (a) must be made to the Commissioner as soon as practicable.
Recovery of claw-back (7) A fund provider has an amount of tax credit paid in excess of that properly payable to the extent to which they fail to comply with subsection (6)(b).

Deﬁned in this Act: amount, complying fund rules, complying superannuation fund, , employee’s superannuation accumulation, , fund provider, KiwiSaver scheme.

Subpart KJ (sections KJ 1 to KJ 5) was inserted, as from 1 July 2007, by section 39 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section KJ 5(3): amended (with effect from 1 July 2007), on 19 December 2007, by section 9(1) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section KJ 5(6)(a)(i): amended (with effect from 1 July 2007), on 19 December 2007, by section 9(2) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
KJ 6 Tax credits relating to employers contributing to KiwiSaver schemes and complying superannuation funds Tax credit (1) An employer who meets the requirements in section KJ 7 for a PAYE period has an amount of tax credit for the PAYE period.

(2) (3) (4) Amount of tax credit The amount of the tax credit is calculated under section KJ 8.

Rules Section KJ 9 provides some rules for using the tax credit.
Sec- tion KJ 10 provides a special rule for certain shortpaid and un- paid amounts of compulsory employer contribution.

Section KJ 11 provides a special rule for when employees opt out of a KiwiSaver scheme.

Section KJ 12 provides a special rule to treat a group of persons as 1 employer.
Treatment of private domestic workers For the purposes of this section and sections KJ 7 to KJ 12, 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 making payments of salary or wages to themselves in the capacity of employee.
Consequently, the 1795 Part K s KJ 7 Income Tax Act 2004 Reprinted as at 29 August 2011 private domestic worker may be both employer and employee, for the purposes of this section and sections KJ 7 to KJ 12.

Deﬁned in this Act: amount, , complying superannuation fund, , compulsory employer contribution, employee, , employer, , KiwiSaver scheme, , PAYE period, , private domestic worker Section KJ 6: added, on 1 April 2008, by section 10 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
KJ 7 Employer requirements For the purposes of section KJ 6(1), the requirements are that the employer— (a) pays an amount of employer contribution, and the em- ployee is— (i) (ii) aged 18 or over; and is not entitled to withdraw an amount from a fund or scheme under schedule 1, clause 4(3) (which relates to lock-in of funds) of the Kiwi- Saver scheme rules in the KiwiSaver Act 2006 or a rule the same as that clause; and (b) (c) claims the amount of their entitlement to a tax credit under this subpart for an employee, in an employer monthly schedule or remittance certiﬁcate they furnish, unless they meet a requirement in paragraph (c); and if paragraph (b) does not apply,— (i) has an amount of compulsory employer contri- bution unpaid, speciﬁed in a notice under section 101I(5) of the KiwiSaver Act 2006; or has an amount of short payment under Part 3, subpart 3 of that Act.
(ii) (d) meets 1 of the requirements in section 6(2) of that Act.

Deﬁned in this Act: amount, , compulsory employer contribution, employee, , employer, , employer contribution, employer monthly schedule, , remittance certiﬁcate Section KJ 7: added, on 1 April 2008, by section 10 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
KJ 8 Tax credit amount Tax credit amount For the PAYE period, the amount of the tax credit is equal to the lesser of— (1) 1796 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KJ 9 (2) (a) (b) the employer contributions for the employee, to the ex- tent to which the employee meets the requirements of section KJ 7(a) for the period; and the amount calculated using the following formula: $20 × weeks in PAYE period.
Deﬁnition of item in formula In the formula, weeks in PAYE period is the number of weeks (with fractions of a week expressed as a decimal) in the PAYE period that the employee meets the requirements of section KJ 7(a), including weeks in the PAYE period that the employer does not pay an amount of employer contribution.
Deﬁned in this Act: amount, , employee, , employer, , employer contribution, PAYE period Section KJ 8: added, on 1 April 2008, by section 10 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
KJ 9 Using the tax credit (1) (2) Timing The tax credit arises— (a) (b) (c) on the last day for the payment of tax deductions pre- scribed in section NC 15 for the PAYE period, if section KJ 7(b) applies to the employer and the employer is not a private domestic worker: on the last day for the payment of tax prescribed in sec- tion NC 16 for the PAYE period, if section KJ 7(b) ap- plies to the employer and the employer is a private do- mestic worker: if section KJ 7(c) applies to the employer, on the day the Commissioner— (i) receives the notice under section 101I(5) of the KiwiSaver Act 2006; or decides that the employer has an amount of short payment under Part 3, subpart 3 of that Act.
(ii) Use The tax credit is used in the following order: (a) ﬁrst, either— (i) used by the Commissioner to pay the amount of short payment under Part 3, subpart 3 of the 1797 Part K s KJ 10 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) KiwiSaver Act 2006 that relates to a compulsory employer contribution for the PAYE period; or paid by the Commissioner to the fund provider of the complying superannuation fund to meet the amount of compulsory employer contribu- tions unpaid, speciﬁed in a notice under section 101I(5) of that Act: (b) (c) (d) (e) second, used by the Commissioner to pay employer contributions: third, used by the Commissioner to pay an amount that is payable by the employer to the Commissioner under an Inland Revenue Act for the PAYE period: fourth, used by the Commissioner to pay an amount that is payable by the employer to the Commissioner under an Inland Revenue Act: ﬁfth, treated as tax paid in excess and refundable under section MD 1.
Treatment of tax credit used (3) An amount of tax credit used or paid under subsection (2)(a) is treated as an amount of compulsory employer contribution— received by the Commissioner for the PAYE period, for (a) the purposes of calculating an amount of short payment under Part 3, subpart 3 of the KiwiSaver Act 2006: consequentially reducing a relevant amount of compul- sory employer contributions remaining unpaid, for the purposes of section 101K of that Act: received by the Commissioner, for the purposes of sec- tion 74 of that Act.
(b) (c) Deﬁned in this Act: amount, , Commissioner, , compulsory employer contribu- tion, employer, , PAYE period, , tax deduction Section KJ 9: added, on 1 April 2008, by section 10 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
KJ 10 Treatment when short payment and unpaid amount of compulsory employer contributions found after tax credit used When this section applies This section applies, for an employer, if— (1) 1798 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KJ 11 (a) (b) the Commissioner has used an amount of tax credit, under 1 or both of section KJ 9(2)(c) and (d), to pay an amount payable that is described in those paragraphs; and after the amount of tax credit has been used by the Commissioner under those paragraphs, there is, for the PAYE period to which the amount of tax credit relates,— (i) an amount of short payment under Part 3, subpart 3 of the KiwiSaver Act 2006: compulsory employer contributions unpaid, spe- ciﬁed in a notice under section 101I(5) of that Act.
(ii) (2) (3) Liability to pay for credits already used The employer is liable to pay an amount equal to the lesser of— (a) the amount of tax credit used that relates to the PAYE period; and the amounts described in subsections (1)(b)(i) and (ii) for that PAYE period.

(b) Treatment of liability The employer’s liability under subsection (2) is treated as a li- ability to pay a tax deduction for the PAYE period in which the relevant amounts in subsections (1)(b)(i) and (ii) are notiﬁed to the employer.
New tax credit granted (4) An amount equal to the employer’s liability under this section is treated as a tax credit to be used under section KJ 9(2)(a).

Deﬁned in this Act: amount, , Commissioner, , compulsory employer contribu- tion, employer, , PAYE period, , tax deduction Section KJ 10: added, on 1 April 2008, by section 10 of the Taxation (Kiwi- Saver) Act 2007 (2007 No 110).
KJ 11 Employees who opt out (1) When this section applies This section applies when an employee opts out under the KiwiSaver Act 2006.

1799 Part K s KJ 12 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) Treatment of tax credits The amount of tax credit for an employer contribution for the employee’s salary or wages is treated as an amount of tax credit paid in excess of that properly payable under this sub- part.
Deﬁned in this Act: employee, , salary or wages Section KJ 11: added, on 1 April 2008, by section 10 of the Taxation (Kiwi- Saver) Act 2007 (2007 No 110).
KJ 12 Group of persons 1 employer For the purposes of sections KJ 6 to KJ 11, a group of persons described in 1 of the following paragraphs is treated as 1 em- ployer: (a) 2 or more companies, if those 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 each estate of a deceased person or each trust or each company in liquidation or each assigned estate or each other case where property is vested or controlled in a ﬁduciary capacity.
(b) (c) Deﬁned in this Act: company, , employer, , group of companies Section KJ 12: added, on 1 April 2008, by section 10 of the Taxation (Kiwi- Saver) Act 2007 (2007 No 110).
Subpart KZ—Terminating provisions Contents KZ 1 Rebate from tax payable by persons receiving war pension KZ 2 Rebate in respect of loss not carried forward KZ 3 Continuation of rebates in respect of certain speciﬁed development projects Page 1800 1801 1802 KZ 1 Rebate from tax payable by persons receiving war pension (1) Where the assessable income derived in any tax year by any taxpayer who, having served in the First World War with any 1800 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KZ 2 naval, military, or air forces of any part of the Commonwealth is, in the year in which that assessable income is derived, in receipt of a pension granted by the government of any part of the Commonwealth in respect of the taxpayer’s total disable- ment attributable to such service comprises assessable income otherwise than income from employment, there is allowed as a rebate of income tax for that tax year 7.5% of so much of the amount that would be the taxable income if the only assess- able income derived were derived by the taxpayer otherwise than from— (a) income from employment; or (b) New Zealand superannuation.
For the purposes of this section, income from employment does not include a periodic payment by way of superannuation, pension, retiring allowance, or annuity in respect of or in rela- tion to the past employment of any person to whom this section relates.
Compare: 1994 No 164 s KZ 1 (2) KZ 2 Rebate in respect of loss not carried forward (1) Where— (a) if the Land and Income Tax Amendment Act (No 3) 1968 had not been passed any taxpayer would have been entitled to claim that a loss be carried forward for the purpose of calculating social security income tax on in- come derived in the 1969-70 tax year; and that loss exceeds the loss to be carried forward to that tax year in accordance with section 137(4) of the Land and Income Tax Act 1954,— (b) (2) the Commissioner must allow a rebate of 7.5% of that excess in accordance with subsection (2).
The rebate provided for in subsection (1), to the extent that it has not been deducted from the tax payable in respect of the in- come derived by the taxpayer in the 1976-77 or any earlier tax year, must be deducted from the income tax that, apart from this section and after taking into account all other rebates al- lowed under this Act, is payable in respect of income derived by the taxpayer in the 1977-78 tax year, so far as that tax ex- tends and, so far as it cannot then be deducted, is deducted 1801 Part K s KZ 3 Income Tax Act 2004 Reprinted as at 29 August 2011 from the tax payable in respect of income derived by the tax- payer in the next succeeding tax year, and so on.
Compare: 1994 No 164 s KZ 2 KZ 3 Continuation of rebates in respect of certain speciﬁed development projects (1) Notwithstanding 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 In- come Tax Act 1994 Amendment Act (No 3) 1995, a non-resi- dent investment company, in relation to the development pro- jects speciﬁed in subsection (4), continues to be eligible for the rebates speciﬁed in subsections (2) and (3) and, accord- ingly,— (a) sections NF 1(2)(a)(vi) and NG 1(2)(f) continue to apply in respect of the company; and section OB 5 and the deﬁnitions of any terms relevant to those rebates are treated as continuing in force for the purposes of this section.
(b) (2) Where the Commissioner is satisﬁed that, if this section had not been passed, the amount that would be the income tax li- ability of a non-resident investment company if the only as- sessable income of the company were interest derived by it in any tax year from development investments would exceed the amount of income tax that would be payable by the company in respect of that interest if the company had derived the in- terest from a source in the country or territory in which the company is resident, the Commissioner must allow the excess as a rebate of income tax: provided that in any case where— any interest is derived by a non-resident investment (a) company in any tax year from development invest- ments; and the company and the person by whom the interest is paid are not associated persons,— (b) the amount that would be the income tax liability of the com- pany if the only assessable income of the company were that interest must not exceed 15% of the gross amount of that in- terest.
(3) Where the Commissioner is satisﬁed that, if this section had not been passed, the amount that would be the income tax li- 1802 Reprinted as at 29 August 2011 Income Tax Act 2004 Part K s KZ 3 (4) ability of a non-resident investment company, as determined by section NG 3, if the only assessable income of the company were dividends derived by it from development investments would exceed the amount of income tax that would be payable by the company in respect of those dividends if the company had derived the dividends from a source in the country or terri- tory in which the company is resident, the Commissioner must allow the excess as a rebate of income tax.
This section applies to the development projects speciﬁed in the following orders: (a) the Income Tax (Non-Resident Investment Companies) Order 1970 (SR 1970/138): the Income Tax (Non-Resident Investment Companies) Order 1972 (SR 1972/19): the Income Tax (Non-Resident Investment Companies) Order (No 2) 1972 (SR 1972/248): the Income Tax (Non-Resident Investment Companies) Order (No 3) 1974 (SR 1974/277).
(b) (c) (d) Compare: 1994 No 164 s KZ 3 Part L Credits Contents Subpart LB—Imputation credits: shareholders and imputation system LB 1 Determination of amount of credit in certain cases LB 1A Treatment of imputation credits of beneﬁciary minor LB 2 Credit of tax for imputation credit LB 3 Credit of retirement scheme contribution withholding tax for imputation credit Page 1805 1811 1811 1815 Subpart LC—Foreign tax LC 1 Credits in respect of tax paid in country or territory outside 1816 New Zealand LC 1A Amendment of schedule 6 by Order in Council LC 2 Maximum credits LC 3 Recovery of excess credit allowed through not taking into 1819 1819 1819 account refund of foreign tax 1803 Income Tax Act 2004 Reprinted as at 29 August 2011 Foreign tax credits: CFCs LC 4 LC 5 Group of companies CFC tax credits LC 8 CFC tax credits of amalgamating company LC 9 Ordering of CFC tax credits of amalgamated company LC 10 CFC tax credits of amalgamated company LC 11 CFC tax credits of amalgamated company credited against 1821 1825 1826 1827 1828 1828 income tax liability of another company LC 12 CFC tax credits of company credited against income tax 1829 liability of amalgamated company LC 13 Information for credit to be furnished within 4 years 1829 Miscellaneous provisions LC 14 Ascertainment of New Zealand income tax liability LC 14A Source of dividends LC 15 United Kingdom tax on dividends [Repealed] LC 16 Foreign tax credits of consolidated group members Subpart LD—Credit for tax paid or withheld LD 1 Tax deductions to be credited against tax assessed LD 1B Tax deductions from certain accident compensation payments: credit allowed to provider LD 1C Tax deductions from certain accident compensation payments: credit allowed to claimant LD 2 Non-resident withholding tax: credit allowed LD 3 Resident withholding tax payments to be credited against income tax assessed 1830 1831 1831 1832 1836 1838 1839 1840 1840 LD 3A Maori authority credit to be credited against income tax 1842 assessed LD 4 Credit of retirement scheme contribution
 withholding tax 1843 for Maori authority credit LD 6 Allowance for provisional tax paid by agent LD 7 Provisional tax to be credited against income tax liability LD 8 Credit of tax for dividend withholding payment credit in hands of shareholder LD 9 Refund to non-resident or exempt shareholders LD 10 Credit for investor for tax paid by entity if portfolio investor allocated income not excluded income LD 10B Credit for zero-rated portfolio investor for tax paid by entity in relation to portfolio investor allocated income 1844 1844 1844 1846 1848 1848 LD 11 Credit for investor for payment under section HL 21(5) by 1849 entity for portfolio investor exit period LD 12 Credit for retirement scheme contribution withholding tax 1849 if retirement scheme contribution not excluded income 1804 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LB 1 Subpart LE—Non-resident investors Purpose of subpart LE 1 LE 2 Credits in respect of dividends to non-resident investors LE 3 LE 4 Allocation of deductions by section LE 3 holding Special rules for holding companies company Subpart LF—Underlying foreign tax credits LF 1 Underlying foreign tax credits generally, and interpretation LF 2 Granting of underlying foreign tax credit LF 3 Amount of underlying foreign tax credit LF 4 Dividends from lower-tier companies LF 5 Dividends from grey list companies LF 6 LF 7 Procedures with respect to underlying foreign tax credit Interest paid in conduit ﬁnancing arrangements Subpart LG—Conduit tax relief credits LG 1 Conduit tax relief additional dividends Subpart LB—Imputation credits: shareholders and imputation system Contents LB 1 Determination of amount of credit in certain cases LB 1A Treatment of imputation credits of beneﬁciary minor LB 2 Credit of tax for imputation credit LB 3 Credit of retirement scheme contribution withholding tax for imputation credit 1851 1851 1854 1857 1858 1860 1862 1865 1866 1873 1876 1878 Page 1805 1811 1811 1815 LB 1 Determination of amount of credit
 in certain cases (1) For the purposes of sections CD 9(1) and (2), HI 5, LB 2(1), LD 3A, and LD 8, the amount of an imputation credit, divi- dend withholding payment credit, or Maori authority credit is, where appropriate, as follows: (a) in the case of a beneﬁciary of a trust, other than to the extent speciﬁed in subsection (2), the amount of the im- putation credit or dividend withholding payment credit 1805 Part L s LB 1 Income Tax Act 2004 Reprinted as at 29 August 2011 calculated, in relation to the beneﬁciary, in accordance with the formula stated in subsection (3): in the case of a beneﬁciary of a trust who is a minor, the amount of the imputation credit or dividend withholding payment credit calculated, in relation to the beneﬁciary, in accordance with the formula in subsection (3) as if section HH 3A(1)(b) did not apply: in the case of a partner of a partnership, the amount of the imputation credit or dividend withholding payment credit calculated, in relation to the partner, in accord- ance with the formula stated in subsection (4): in the case of an imputation credit attached to a divi- dend that has an imputation ratio greater than the ratio calculated in accordance with the formula stated in sec- tion ME 8(1), so much of the imputation credit as would arise if the imputation ratio of the dividend were the ra- tio so calculated: in the case of a dividend withholding payment credit at- tached to a dividend with a dividend withholding pay- ment ratio greater than the ratio calculated in accord- ance with the formula stated in section MG 8(1), so much of the dividend withholding payment credit as would arise if the dividend withholding payment ratio of the dividend were the ratio so calculated: in the case of a dividend with a combined imputation and dividend withholding payment ratio greater than the ratio calculated in accordance with the formula stated in section MG 8(1), so much of the dividend withhold- ing payment credit and the imputation credit as
 remain after any reduction of the dividend withholding pay- ment credit or the imputation credit in accordance with subsection (5): in the case of a Maori authority credit attached to a dis- tribution that has a base ratio greater than the ratio per- mitted by section MK 7, so much of the Maori authority credit that would arise if the base ratio of the distribu- tion were the ratio permitted by section MK 7: in the case of an imputation credit in respect of which any credit of tax has been disallowed under section LB (ab) (b) (c) (d) (e) (ea) (f) 1806 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LB 1 2(4), so much (if any) of the imputation credit as is not disallowed under that provision: in the case of a dividend withholding payment credit in respect of which any credit of tax has been disallowed under section LD 8(3), so much (if any) of the dividend withholding payment credit as is not disallowed under that provision: in the case of an imputation credit that gives rise to a re- duced credit of tax in accordance with section LB 2(5) or (7), so much of the imputation credit as remains after reduction by an amount equal to the amount of reduc- tion under the relevant one of those subsections: in the case of an imputation credit carried forward to a later income year under section LB 2(3C) as a credit of tax, the amount of the credit of tax carried forward reduced by any amount of the credit that is extinguished by the Commissioner under section 177C of the Tax Administration Act 1994: in the case of a dividend withholding payment credit that gives rise to a reduced credit of tax in accordance with section LD 8(4) or (6), so much of the dividend withholding payment credit as remains after reduction by an amount equal to the amount of reduction under the relevant one of those subsections: in the case of an imputation credit attached to a dividend to which section GC 23 applies, a nil amount: in the case of an imputation credit determined under section
 GC 22 to be the subject of an arrangement to obtain a tax advantage, so much of the imputation credit as remains after reduction by the amount referred to in subsection (5)(b) of that section: in the case of a dividend withholding payment credit determined under section GC 22 to be the subject of an arrangement to obtain a tax advantage, so much of the dividend withholding payment credit as remains after reduction by the amount referred to in subsection (5)(b) of that section: in the case of a Maori authority credit determined under section GC 27A to be the subject of an arrangement to (g) (h) (hb) (i) (j) (k) (l) (m) 1807 Part L s LB 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) (3) obtain a tax advantage, so much of the Maori authority credit as remains after it is reduced by the amount re- ferred to in section GC 27A(6)(b).
Subsection (1)(a) does not apply to a beneﬁciary who is an in- vestor of a group investment fund in so far as the beneﬁciary derives an amount from the group investment fund that is cat- egory A income.
The amount of an imputation credit, dividend withholding payment credit, or Maori authority credit, in relation to a beneﬁciary of a trust who, during an income year, derives dividends with an imputation credit or a dividend withhold- ing payment credit attached, or distributions with a Maori authority credit attached, by reason of being a beneﬁciary of the trust is, for the purposes of subsection (1)(a), an amount calculated in accordance with the following formula: where— a is the aggregate of all imputation credits and all divi- dend withholding payment credits attached to all divi- dends distributed, and all Maori authority credits at- tached to all distributions, to beneﬁciaries of the trust in their capacity as such during the income year b c is the aggregate of all distributions (whether of an in- come or a capital nature and whether or not included in the assessable income of the beneﬁciary) made to the beneﬁciary in his or her capacity as a beneﬁciary of the trust during the income year is the aggregate of all distributions (whether of an in- come or a capital nature and whether or not included in the assessable income of the beneﬁciaries) made to beneﬁciaries of the trust in their capacity as such during the income year.
In any case where a beneﬁciary of a trust derives, by reason of being a beneﬁciary of the trust, a supplementary dividend to which section LE 2 applies, subsection (3) applies as if— (a) item “a” of the formula in that subsection included the amount of all supplementary dividends distributed to (3A) 1808 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LB 1 (4) (b) beneﬁciaries of the trust in their capacity as such during the income year; and the amount of the imputation credit calculated with re- spect to that beneﬁciary were reduced by the amount of the supplementary dividend.
The amount of an imputation credit or dividend withholding payment credit, in relation to a partner of a partnership that, during an income year, derives dividends with an imputation credit or dividend withholding payment credit attached by rea- son of being a partner of the partnership is, for the purposes of subsection (1)(b), an amount calculated in accordance with the following formula: where— a is the aggregate of all imputation credits and all divi- dend withholding payment credits attached to dividends derived by partners of the partnership in their capacity as such in the income year b c is the assessable income of the partner as a partner of the partnership for the income year excluding all imput- ation credits and dividend withholding payment credits attached to dividends derived by the partner during the year is the assessable income jointly derived by partners of the partnership for the income year excluding all imput- ation credits and dividend withholding payment credits attached to dividends derived by the partners during the year.
(4A) If a partnership has both resident and non-resident partners, subsection (4) applies as if— (a) supplementary dividends derived by non-resident part- ners were added to item “a” of the formula: the assessable income of a non-resident partner excluded supplementary dividends derived by the non-resident partner: (b) 1809 Part L s LB 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) the assessable income jointly derived by partners ex- cluded supplementary dividends derived by non-resi- dent partners.
(4B) A non-resident partner must reduce the result obtained from applying subsection (4A) by the amount of supplementary dividends derived by the non-resident partner.
(5) Where there is an excess credit amount in respect of a divi- dend with a combined imputation and dividend withholding payment ratio greater than the ratio calculated in accordance with the formula stated in section MG 10(1),— (a) the amount of the dividend withholding payment credit attached to the dividend is, for the purposes of section CD 9(1)(b), reduced by the amount of the excess credit amount in so far as the dividend withholding payment credit extends: the amount of the imputation credit attached to the divi- dend is, for the purposes of section CD 9(1)(a), reduced by so much of the excess credit amount as remains after deduction from the excess credit amount of the amount of the reduction referred to in paragraph (a).
(b) Compare: 1994 No 164 s LB 1 Section LB 1(1)(c): substituted (with effect on 1 October 2007), on 6 October 2009, by section 818 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LB 1(1)(c): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 134(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section LB 1(1)(c): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 134(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LB 1(1)(d): substituted (with effect on 1 October 2007), on 6 October 2009, by section 818 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LB 1(1)(d): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 134(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LB 1(1)(e): substituted (with effect on 1 October 2007), on 6 October 2009, by section 818 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Subsection (1)(hb) was inserted, as from 1 October 2005, by section 68 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
1810 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LB 2 LB 1A Treatment of imputation credits of beneﬁciary minor For the purposes of section LB 2, an imputation credit calcu- lated in respect of a beneﬁciary of a trust who is a minor is included in the assessable income of the trustee of the trust and not in the beneﬁciary’s assessable income.
Compare: 1994 No 164 s LB 1A LB 2 Credit of tax for imputation credit (1) Where the assessable income of a taxpayer for an income year includes any imputation credit, the taxpayer is, subject to the provisions of this section and of section LB 1, entitled to a credit of tax of an amount equal to the imputation credit so included in assessable income.

(1B) A taxpayer who receives an imputation credit as a share user in a returning share transfer is not entitled under subsection (1) to a credit of tax.
(1C) A taxpayer who is issued with a credit transfer notice is entitled under subsection (1) to a credit of tax equal to the amount of imputation credit shown in the notice.

(2) Any such credit of tax is credited, in so far as it extends, against the income tax liability of the taxpayer for the income year.
(2B) Subsection (3) applies to a taxpayer that is— (a) (b) (c) (d) a company: a trustee (other than the Maori Trustee): a Maori authority: a taxpayer whose imputation credit giving rise to the credit of tax is category A income of the trustee of a group investment fund.

(2C) A taxpayer that is a portfolio tax rate entity is entitled under this section to a credit of tax of no more than the extent allowed by subpart HL (Portfolio investment entities).
(2D) A taxpayer that is an investor in a portfolio tax rate entity is, to the extent allowed by subpart HL, entitled to a credit of tax to which the entity’s entitlement is restricted by subsection (2C).
For a taxpayer referred to in subsection (2B), no refund of a credit of tax under this section is available but, where the whole of the credit of the tax is not credited against the income tax liability of the taxpayer for the income year, the taxpayer is, (3) 1811 Part L s LB 2 Income Tax Act 2004 Reprinted as at 29 August 2011 in respect of any amount of the credit that is not so credited, deemed to have a net loss for the income year calculated in accordance with the following formula: where— a is the amount of the credit of tax not credited against the income tax liability for the income year b b is,— (i) (ii) (iii) in any case where the taxpayer is a company, the basic rate of income tax for companies, ex- pressed as a percentage, stated in schedule 1, part A, clause 5, and applying for the income year; and in any case where the imputation credit giving rise to the credit of tax is category A income of the trustee of a group investment fund, the rate of tax applicable to category A income of the trustee of a group investment fund, expressed as a percentage, stated in schedule 1, part A, clause 7, and applying for the income year; and in any case where the taxpayer is a trustee (other than the Maori trustee), the basic rate of income tax for trustees, expressed as a percentage, stated in schedule 1, part A, clause 4, and applying for the income year; and (iiia) in any case where the taxpayer is a Maori author- ity, the basic rate of income tax for Maori author- ities, expressed as a percentage, stated in sched- ule 1, Part A, clause 2 and applying for the in- come year.
(iv) (3A) A taxpayer who has calculated under subsection (3) a net loss in an income year may— (a) offset under subparts IG and IH the net loss wholly or partly against the net income of another company for the income year; or 1812 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LB 2 (b) carry forward under subparts IE and IF the net loss as an available net loss to a later income year.
(3B) For a taxpayer other than a taxpayer referred to in subsection (2B), no refund of a credit of tax under this section is avail- able, but if the whole of the credit of tax is not credited under subsection (2) against the taxpayer’s income tax liability for the income year, subsection (3C) applies to the amount of the credit of tax that remains.
(3C) The remaining credit of tax for an income year is treated in the following ways, applied in the alphabetical order of the paragraphs so far as the credit of tax extends: (a) carried forward as a credit of tax to the next income year: reduced by any amount extinguished under section 177C(5B) of the Tax Administration Act 1994 by the Commissioner in that next income year: reduced by any amount credited against the taxpayer’s income tax liability for that next income year: treated under this subsection as a remaining credit of tax for that next income year.
(b) (c) (d) (5) (4) A taxpayer is not allowed a credit of tax under this section un- less the taxpayer furnishes the shareholder dividend statement, or other sufﬁcient evidence in writing, evidencing the imput- ation credit giving rise to the credit of tax.
Subject to subsection (6), where the Commissioner is satisﬁed that it would be inappropriate for a taxpayer to be allowed, in whole or in part, a credit of tax by reason of the taxpayer receiving an imputation credit in respect of which insufﬁcient income tax or further income tax has been paid by the company that issued the imputation credit,— (a) the taxpayer is not allowed the credit of tax under this section to the extent that the Commissioner is so satis- ﬁed; and any such disallowance is in such manner as the Com- missioner considers fair and equitable.
(b) (6) A credit of tax disallowed under subsection (5) is allowed to the extent the Commissioner is satisﬁed that sufﬁcient income tax or further income tax has subsequently been paid by or on behalf of the company.

1813 Part L s LB 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (7) Where the Commissioner is satisﬁed that the amount of any credit of tax claimed under this section is in excess of the proper amount, the credit of tax is not allowed to the extent of the excess.
(8) An amount is treated as if it were assessable income for the purpose of determining a taxpayer’s entitlement to a credit under this section if the amount would but for section EX 47 be assessable income of the taxpayer from an attributing inter- est in a foreign investment fund.

Compare: 1994 No 164 s LB 2 Subsections (1B) and (1C) were inserted, as from 1 July 2006, by section 124 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section LB 2(2): substituted (with effect on 1 October 2007), on 6 October 2009, by section 819(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LB 2(2): amended (with effect from 1 October 2007), on 19 December 2007, by section 135(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Subsection (2B) was inserted, as from 1 October 2005, by section 69(1) Taxa- tion (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.

Section LB 2(2C): inserted, on 1 October 2007, by section 113 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Section LB 2(2D): inserted, on 1 October 2007, by section 113 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Subsection (3) was amended, as from 1 October 2005, by section 69(2)(a) Tax- ation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “For a taxpayer referred to in subsection (2B), no refund of a credit of tax under this section is available” for “There is no refund to the taxpayer of any credit of tax under this section” with application as from the 2005–06 income year.
Subsection (3), subpara (iiia) of the deﬁnition of item b of the formula, was amended, as from 1 October 2005, by section 69(2)(b)(i) Taxation (Base Main- tenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “year.” for “year; and” with application as from the 2005–06 income year.
Subsection (3), subpara (iv) of the deﬁnition of item b of the formula, was omit- ted, as from 1 October 2005, by section 69(2)(b)(ii) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.

Subsections (3B) and (3C) were inserted, as from 1 October 2005, by section 69(3) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
1814 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LB 3 Section LB 2(8): added (with effect from 1 April 2007), on 19 December 2007, by section 135(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LB 2(8): amended (with effect on 1 April 2007), on 6 October 2009, by section 819(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LB 3 Credit of retirement scheme contribution withholding tax (1) (2) for imputation credit If a retirement scheme contributor attaches an imputation credit to a retirement scheme contribution for a person in an income year, the retirement scheme contributor is entitled to a credit of retirement scheme contribution withholding tax equal to the lesser of the following amounts: (a) (b) the amount of the imputation credit: the liability of the retirement scheme contributor for re- tirement scheme contribution withholding tax on the re- tirement scheme contribution.
If the amount of the imputation credit exceeds the liability of the retirement scheme contributor for retirement scheme con- tribution withholding tax on the retirement scheme contribu- tion,— (a) the amount of the excess is treated as an imputation credit attached to a distribution from the retirement scheme contributor to the person; and the person responsible for withholding the retirement scheme contribution withholding tax must, within 30 days of the contribution, give a notice to the person showing the amount of the excess credit.
(b) Section LB 3: added (with effect from 1 April 2007), on 19 December 2007, by section 136 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subpart LC—Foreign tax Contents LC 1 Credits in respect of tax paid in country or territory outside New Zealand LC 1A Amendment of schedule 6 by Order in Council LC 2 Maximum credits Page 1816 1819 1819 1815 Part L s LC 1 Income Tax Act 2004 Reprinted as at 29 August 2011 LC 3 Recovery of excess credit allowed through not taking into 1819 account refund of foreign tax Foreign tax credits: CFCs LC 4 LC 5 Group of companies CFC tax credits LC 8 CFC tax credits of amalgamating company LC 9 Ordering of CFC tax credits of amalgamated company LC 10 CFC tax credits of amalgamated company LC 11 CFC tax credits of amalgamated company credited against 1821 1825 1826 1827 1828 1828 income tax liability of another company LC 12 CFC tax credits of company credited against income tax 1829 liability of amalgamated company LC 13 Information for credit to be furnished within 4 years 1829 Miscellaneous provisions LC 14 Ascertainment of New Zealand income tax liability LC 14A Source of dividends LC 15 United Kingdom tax on dividends [Repealed] LC 16 Foreign tax credits of consolidated group members 1830 1831 1831 1832 LC 1 Credits in respect of tax paid in country or territory outside New Zealand (1) Where a person who is resident in New Zealand derives assess- able income from a country or territory outside New Zealand, income tax paid in that country or territory in respect of that assessable income is allowed as a credit against the income tax liability of the person: provided that if the person so resident in New Zealand has, as a national or member of that coun- try or territory, paid income tax in that country or territory in respect of that assessable income, there is allowed as a credit against the income tax liability of the person only such amount as does not exceed the amount of income tax that would have been paid by the person in that country or territory in respect of that assessable income if the person, being resident in New Zealand, had not been a national or member of that country or territory.
(1B) A portfolio tax rate entity is allowed under this section a credit of tax of no more than the extent allowed by subpart HL (Port- folio investment entities).

1816 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LC 1 (1C) An investor in a portfolio tax rate entity is, to the extent al- lowed by subpart HL, allowed a credit of tax to which the en- tity’s entitlement is restricted by subsection (1B).
(2) Where in any tax year any beneﬁciary of a trust who is resident in New Zealand derives a taxable distribution,— (a) no credit is allowed in respect of any tax paid on the taxable distribution unless the tax is substantially of the same nature as non-resident withholding tax imposed under the NRWT rules; and the amount of the credit is calculated in accordance with the following formula: (b) where— a is the tax which qualiﬁes for a credit under para- graph (a) b c is the amount of the taxable distribution, includ- ing the tax which qualiﬁes for a credit under para- graph (a) derived by the beneﬁciary is the total amount of the distribution, including the tax which qualiﬁes for a credit under para- graph (a) derived by the beneﬁciary.
(3) A credit is not allowed under this section in respect of income tax paid in a country or a territory speciﬁed in schedule 6 to the extent that the income tax is paid on the types of income speciﬁed in that schedule.
(3A) Despite subsection (1) and sections LC 4 and NH 2, if and to the extent that a taxpayer or a person pays foreign tax, and the taxpayer, the person, or a person associated with either of them receives a refund or repayment of the foreign tax or another amount (whether in money or money’s worth) or a beneﬁt of any kind (including the remission of a debt) which is determined, directly or indirectly, by reference to the amount of the foreign tax paid or any part of that amount, the taxpayer is not allowed— (a) a credit for income tax paid in a country or territory out- side New Zealand against income tax payable in New Zealand; or 1817 Part L s LC 1 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) an underlying foreign tax credit or a credit for foreign withholding tax in calculating under section NH 2(1) the amount of dividend withholding payment to be de- ducted from a foreign withholding payment dividend.
(3B) If a credit initially allowed under subsection (1) or section LC 4, or an underlying foreign tax credit or a credit for foreign withholding tax taken into account under section NH 2, is more than the amount allowable by virtue of subsection (3A), sec- tion LC 3 or, if section LC 3(3) is applicable, section LC 4(11), applies to the excess amount of credit initially allowed.
(4) Any amount that would but for section EX 47 be assessable income of a taxpayer in respect of an attributing interest in a foreign investment fund for a period is treated as if it were as- sessable income for the purpose of determining the taxpayer’s entitlement to a credit under this section, provided that the amount of income to be taken into account in determining item “a” of the formula in section LC 14(1) is the taxpayer’s FIF in- come with respect to the interest and the period.
This subpart and sections BH 1 and CD 11(1), and sections 88 and 108(3B) of the Tax Administration Act 1994, as far as they are applicable and with any necessary modiﬁcations, for the purposes of subsection (1), apply as if that subsection were a double tax agreement.
In this section,— member, in relation to a country or territory outside New Zealand, means any person who, under any law in force for the time being in the country or territory outside New Zealand, is liable to income tax in that country or territory by reason of the domicile or residence of the person in that country or ter- ritory national, in relation to any country or territory, includes a citizen of that country or territory.
Compare: 1994 No 164 s LC 1 (5) (6) Section LC 1(1B): inserted, on 1 October 2007, by section 114 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Section LC 1(1C): inserted, on 1 October 2007, by section 114 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
1818 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LC 3 LC 1A Amendment of schedule 6 by Order in Council (1) The Governor-General may, by Order in Council, amend schedule 6— (a) by adding a country or territory and specifying in re- spect of the country or territory the type of income for which a credit is not allowed against income tax payable in New Zealand: by omitting a country or territory.
(b) (2) An Order in Council made under subsection (1)(a) expires on 31 December in the tax year following that in which it is made, unless it is conﬁrmed by an Act of Parliament before the end of the following tax year, in which case the Order in Council does not expire.

The repeal of an Act passed to conﬁrm an Order in Council does not affect the conﬁrmation of the order unless there is express provision to the contrary.
Compare: 1994 No 164 s LC 1A (3) LC 2 Maximum credits Where, under a double tax agreement, a credit for foreign tax is allowed, the amount of that credit must not exceed the amount of New Zealand tax calculated in accordance with section LC 14.
Compare: 1994 No 164 s LC 2 LC 3 Recovery of excess credit allowed through not taking into (1) account refund of foreign tax Subsection (2) applies if— (a) a credit for foreign tax has been— (i) (ii) initially allowed under section LC 1(1) or LC 4 against a person’s New Zealand income tax liability; or initially taken into account under section NH 2 as an amount of underlying foreign tax credit or credit for foreign withholding tax in calculating the amount of dividend withholding payment to be deducted from a foreign withholding payment dividend; and 1819 Part L s LC 3 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) the credit, or any part of it, is not allowed under section LC 1(3A), irrespective of when the taxpayer, the per- son, or a person associated with either of them received the refund or repayment of the foreign tax or the other amount or beneﬁt referred to in that subsection; and either— (i) (ii) the amount of the credit was more than the amount allowable against New Zealand tax by virtue of section LC 1(3A), after taking into account the refund or repayment of the foreign tax or the other amount or beneﬁt referred to in that subsection; or the amount of dividend withholding payment cal- culated under section NH 2 by taking the credit into account is less than the amount of dividend withholding payment deduction that would have been required by virtue of section LC 1(3A), after taking into account the refund or repayment of the foreign tax or the other amount or beneﬁt re- ferred to in that subsection.
The excess or shortfall is treated as if it were income tax or, as the case may be, a dividend withholding payment which is due and payable to the Commissioner 30 days after the later of— the date of the notice of assessment in which the credit (a) for foreign tax is reﬂected or, in the case of an under- lying foreign tax credit or a credit for foreign withhold- ing tax that is taken into account under section NH 2(1), the due date for payment of the dividend withholding payment deduction under section NH 3(1); and the date the relevant person receives the refund, repay- ment, or the other amount or beneﬁt.
(b) This section does not apply to a credit for which a refund or repayment of foreign tax is received by a controlled foreign company if section LC 4(11) applies to the credit and the re- fund or repayment.
Compare: 1994 No 164 s LC 3 (2) (3) 1820 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LC 4 LC 4 Foreign tax credits: CFCs (1) Subject to this section, a person who has attributed CFC in- come for an income year in respect of an income interest in a controlled foreign company is allowed a credit against the person’s income tax liability for— (a) income tax paid or payable in New Zealand or another country or territory by the controlled foreign company in respect of the attributed CFC income: (b) withholding tax paid or payable in New Zealand or an- other country or territory on behalf of the controlled for- eign company in respect of the attributed CFC income: income tax paid or payable in a country or territory out- side New Zealand by the person in respect of the at- tributed CFC income.
(c) (1B) For the purposes of this section, income tax or withholding tax paid or payable in a currency other than New Zealand currency must be converted into New Zealand currency by, at the option of the person who has the attributed CFC income,— (a) applying the close of trading spot exchange rate applic- able on the date when the income tax or withholding tax was paid or became payable; or applying the average of the close of trading spot ex- change rates for the 15th day of each complete month falling within the period to which the attributed CFC in- come relates.
(b) (1C) The Commissioner must amend an assessment of a person for an income year to reﬂect the amount of a credit under subsec- tion (1) to which the person is entitled if— (a) the amount of the credit cannot be determined before the time by which the person must ﬁle a return of income for the income year; and the Commissioner receives a written request for the amended assessment from the person within 4 years after the end of the income year.
(b) (2) A credit is not allowed under subsection (1) in respect of in- come tax paid or payable in a country or territory speciﬁed in schedule 6.
For the purposes of this section, in respect of any accounting period of a controlled foreign company, the amount of income (3) 1821 Part L s LC 4 Income Tax Act 2004 Reprinted as at 29 August 2011 tax paid or payable by that controlled foreign company in re- spect of the attributed CFC income of any person calculated on the basis of that accounting period is the product of the income interest used to calculate attributed CFC income under section EX 18 and the income tax paid or payable by that company in any country or territory (including New Zealand) in respect of that accounting period.
(4) Any person who is, for an income year, allowed a credit under subsection (1) in respect of attributed CFC income derived in respect of a controlled foreign company (referred to in this subsection as the primary controlled foreign company) is entitled to set off that credit against the person’s income tax liability— (a) for that income year, to the extent it does not exceed the amount that would be the person’s income tax liability for that year if the person did not have any assessable in- come for that year other than attributed CFC income de- rived in respect of any controlled foreign company resi- dent in the same country or territory as that in which the primary controlled foreign company was resident in the accounting period during which the income tax giving rise to the credit was paid or was payable, determined as if the amount of any rebate under section KH 1 were nil; and so far as the credit cannot be set off under paragraph (a), for the income year immediately succeeding that in- come year, to the extent it does not exceed the amount that would be the person’s income tax liability for the year if the person did not have any assessable income for that year other than attributed CFC income derived in respect of any controlled foreign company resident in the country or territory as that in which the primary controlled foreign company was resident in the account- ing period during which the income tax giving rise to the credit was paid or was payable, determined as if the amount of any rebate under section KH 1 were nil; and so far as the credit cannot be set off under paragraph (b), for the next income year to the immediately succeeding income year, to the extent it does not exceed the amount (b) (c) 1822 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LC 4 (6) that could be offset under paragraph (b) if that paragraph applied to the next income year and so on.
(5) Where credits initially allowable in 2 or more income years are carried forward in accordance with the provisions of this section, those credits are allowed in the same order as those credits were initially allowable.
If the person who has any credit allowable is a company, that credit may only be carried forward to any succeeding income year in accordance with this section if and to the extent to which, had that credit been a net loss to which sections IE 1 and IF 1 applied, the carry forward of that net loss would have been permitted by those sections and, for the purposes of this subsection only, that credit is deemed to be a net loss that arose on the last day of the income year in respect of which the credit was initially allowable.
(7) Where during any accounting period any controlled foreign company receives a taxable distribution and, in relation to any person with an income interest of 10% or greater under the rules in sections EX 14 to EX 17 in the controlled foreign company, that taxable distribution gives rise to attributed CFC income to which section EX 19 applies,— (a) no credit is allowed in respect of any tax paid in respect of that attributed CFC income unless the tax is substan- tially of the same nature as non-resident withholding tax imposed under the NRWT rules; and the amount of the tax for which a credit is allowed must not exceed an amount calculated in accordance with the following formula: (b) where— a is the tax which qualiﬁes for a credit under para- graph (a) b is the amount of the taxable distribution, includ- ing the tax which qualiﬁes for a credit under para- graph (a), derived by the controlled foreign com- pany 1823 Part L s LC 4 Income Tax Act 2004 Reprinted as at 29 August 2011 c is the total amount of the distribution, including the tax which qualiﬁes for a credit under para- graph (a), derived by the controlled foreign com- pany; and (c) the credit to which the person is entitled is calculated as the product of the income interest of the person in the controlled foreign company and the tax calculated in accordance with the formula in paragraph (b).
(a) (b) (10) For the purposes of this section, where and to the extent to which by virtue of any legislation of any country or territory which has similar intent and application to the provisions of the international tax rules any foreign company has paid income tax in respect of the income derived by any controlled foreign company, that income tax is deemed to have been paid by the controlled foreign company and not by the foreign company.
(11) Where, by virtue of the preceding provisions of this section,— a credit has been allowed against the income tax liability of any person; and that credit has not taken into account any refund or re- payment of income tax received by the controlled for- eign company in question, whether before or after that credit was allowed; and the amount of that credit was in excess of the amount that would have been allowed if only the amount of the income tax not refunded or repaid to the controlled for- eign company had been taken into account in calculat- ing the credit,— the amount of that excess— (d) must be applied to reduce the balance of the credits car- ried forward under subsection (4) in respect of that con- trolled foreign company; and to the extent that the amount of the excess is not applied in accordance with paragraph (d) that excess is deemed to be income tax due and payable to the Commissioner on the 30th day after the date of the notice of assessment in which the credit is reﬂected or the date of the receipt by the controlled foreign company of that refund or re- (e) (c) 1824 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LC 5 payment, whichever date is the later, and this Act and the Tax Administration Act 1994 apply accordingly.
Compare: 1994 No 164 s LC 4 Subsection (1) was substituted, as from 1 April 2006, by section 125(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2006–07 tax year.
Subsections (1B) and (1C) were inserted, as from 1 April 2006, by section 125(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscel- laneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2006–07 tax year.
LC 5 Group of companies CFC tax credits (1) Where a company (in this section referred to as the primary company) has for any income year a credit in relation to an income interest in a controlled foreign company (referred to in this section as the taxpaying controlled foreign company) that is allowable under section LC 4 or has been carried for- ward to that income year in accordance with section LC 4 and that credit may not be utilised by the primary company in that income year in accordance with section LC 4(4), that credit may be set off against the income tax liability of another com- pany (referred to in this section as the member company) for that income year in accordance with subsection (2) where the member company is, for the income year, a member of the same group of companies as the primary company to the ex- tent that the credit does not exceed the amount that would be the member company’s income tax liability if its only assess- able income were the attributed CFC income derived in respect of that income year and is in respect of any controlled foreign company resident in the same country or territory as that in which the taxpaying controlled foreign company was resident in the accounting period in which was paid or was payable the income tax giving rise to the credit.
(2) A credit under subsection (1) may only be allowed against the income tax liability of the member company where that credit would be able to be allowed under section IG 2 were— (a) each reference in that section to a group of companies to be treated as if it were a reference to a wholly-owned group of companies; and 1825 Part L s LC 8 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) (d) (e) (f) (g) (h) (i) (j) each reference in that section to the loss company to be treated as if it were a reference to the primary company; and each reference in that section to a net loss of the loss company to be treated as if it were a reference to the credit allowed to the primary company; and each reference in that section and section GC 4 to the offset of a net loss against net income to be treated as if it were a reference to allowance of the credit against the income tax liability; and each reference in that section to the proﬁt company to be treated as if it were a reference to the member company; and each reference in that section to the net income of the proﬁt company to be treated as if it were a reference to the income tax liability of the member company; and each reference in that section (other than the references in subsection (9)) to sections IE 1 and IF 1 to be treated as if it were a reference to section LC 4; and the reference in section IG 2(2)(f) to “any net loss which is available to the proﬁt company under this section” to be treated as if it were a reference to “any other amount allowed to the member company under this section”; and section IG 2(4), (5), and (10) to be treated as if omitted; and the reference in section IG 2(8) to the “same group of companies for the purposes of section 191(5) and (7) of the Income Tax Act 1976” to be treated as if it were a reference to the “same speciﬁed group in accordance with section 191(4) of the Income Tax Act 1976”,— and to the extent to which a credit has been so allowed to the member company, the credit may not be allowed to or carried forward by the
 primary company.
Compare: 1994 No 164 s LC 5 LC 8 CFC tax credits of amalgamating company Where— 1826 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LC 9 (a) (b) (c) (d) any amalgamating company ceases to exist on a quali- fying amalgamation; and the amalgamating company, in respect of a tax year, has a controlled foreign company tax credit; and the tax credit has not, under section LC 4 or LC 5, been credited against the income tax liability of the amalgam- ating company or any other company in respect of any period prior to the amalgamation (including any part of the tax year in which the amalgamation takes place); and under section LC 5, the credit could have been credited against income tax payable (if any) in respect of that part of the tax year of the relevant company which ends with the date of the amalgamation by each of the amal- gamated company (unless it is a company incorporated only on the amalgamation) and any company which has, at any time before or during the tax year in respect of which the tax credit is credited under this section, amal- gamated with the amalgamated company,— the tax credit is treated as a tax credit of the amalgamated com- pany and may be credited, under section LC 4, against the income tax liability of the amalgamated company in periods commencing on or after the amalgamation, but applying sec- tion LC 4 (in so far as its application is dependent upon the application of sections IE 1 and IF 1) as if, with respect to all times prior to the amalgamation, the amalgamated com- pany did not separately exist and was instead the amalgamat- ing company with the same holders of shares and options over shares each holding the same number and class of shares and options over shares as they held at the time in the amalgamat- ing company.
Compare: 1994 No 164 s LC 8 LC 9 Ordering of CFC tax credits of amalgamated company Where tax credits of 2 or more amalgamating companies are permitted under section LC 8 to be credited against the amal- gamated company’s income tax liability for a tax year, those tax credits must,— 1827 Part L s LC 10 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) 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 elected by the amalgamated company by notice to the Commissioner in such form as the Commissioner may allow; or if no such election is made, on a pro rata basis.
(ii) Compare: 1994 No 164 s LC 9 LC 10 CFC tax credits of amalgamated company Where— (a) (b) an amalgamated company, in respect of a tax year prior to the tax year in which the amalgamation takes place, has a controlled foreign company tax credit; and the tax credit has not, under section LC 4 or LC 5, been credited against the income tax liability of the amalga- mated company or any other company in respect of any period prior to the amalgamation (including any part of the tax year in which the amalgamation takes place),— the amalgamated company is entitled to carry forward the tax credit into the tax year in which the amalgamation takes place or any subsequent tax year only if— (c) the amalgamated company satisﬁes the relevant require- ments of section LC 4; and under section LC 5, the tax credit could have been cred- ited against income tax liability (if any) in respect of that part of the tax year of the relevant company which ends with the date of the amalgamation by each amal- gamating company.
Compare: 1994 No 164 s LC 10 (d) LC 11 CFC tax credits of amalgamated company credited against income tax liability of another company Where an amalgamated company is deemed under section LC 8 to have a controlled foreign company tax credit, in respect of an amalgamating company which ceased to exist on the amalgamation, for the purposes of determining whether the tax credit may be credited, under section LC 5, against the income 1828 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LC 13 tax liability of another company, that section is applied as if, with respect to all times prior to the amalgamation, the amal- gamated company did not separately exist and was instead the amalgamating company with the same holders of shares and options over shares each holding the same number and class of shares and options over shares as they held at the time in the amalgamating company.
Compare: 1994 No 164 s LC 11 LC 12 CFC tax credits of company credited against income tax liability of amalgamated company Where a company (referred to in this section as the credit com- pany) has a controlled foreign company tax credit, in respect of a period which falls wholly or partly before an amalgam- ation, the tax credit may be credited under section LC 5 against the income tax liability of the amalgamated company if and only if the tax credit can be so credited, by applying the com- monality of ownership and other tests contained in that section severally to the credit company and the amalgamated company in respect of each company which has in the course of or before the amalgamation amalgamated with the amalgamated com- pany, as if, with respect to all times prior to the amalgamation, the amalgamated company did not separately exist and was instead that amalgamating company with the same holders of shares and options over shares each holding the same number and class of shares and options over shares as they held at the time in the amalgamating company.
Compare: 1994 No 164 s LC 12 LC 13 Information for credit to be furnished within 4 years (1) A credit for foreign tax is not allowed unless, within 4 years after the end of the tax year in which arose the income tax li- ability of the taxpayer against which the credit is claimed, or within such further period, not exceeding 2 years, as the Com- missioner allows in any case or class of cases, the taxpayer claiming the credit— (a) makes application in writing to the Commissioner for the credit; and 1829 Part L s LC 14 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) (b) furnishes to the Commissioner all information neces- sary to determine the amount of the credit, including information relevant to the application of section LC 1(3A).
If an entitlement to a refund or repayment of the foreign tax or another amount or a beneﬁt referred to in section LC 1(3A) changes after their application is made, the taxpayer must furnish to the Commissioner all information relating to the change as soon as possible.
Compare: 1994 No 164 s LC 13 Miscellaneous provisions LC 14 Ascertainment of New Zealand income tax liability (1) Subject to subsections (2) and (3), the part of a taxpayer’s in- come tax liability for a tax year that is treated as being in re- spect of assessable income of the taxpayer from a particular source or of a particular nature that is allocated to the tax year is an amount calculated in accordance with the following for- mula: where— a is the total of the taxpayer’s assessable income from that source or of that nature that is allocated to the tax year b c d is the total of the taxpayer’s deductions that are allo- cated to the tax year and that are attributable to assess- able income of the type referred to in item “a” is the taxpayer’s net income for the tax year is the taxpayer’s notional income tax liability for the tax year.
If, for a tax year, the amount or the total of the amounts de- termined under subsection (1) exceeds the taxpayer’s notional income tax liability for the tax year, the amount that is treated as being part of the taxpayer’s income tax liability that is in respect of assessable income from a particular source or of a particular nature is the amount calculated in accordance with the following formula: (2) 1830 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LC 15 where— d e has the same meaning as in subsection (1) is the total of the amounts calculated under subsection (3) (4) (1) by the taxpayer for that tax year f is the amount calculated under subsection (1).
If an amount calculated under subsection (1) is less than nil, the amount is deemed to be zero.

For the purposes of this section, the notional income tax li- ability of a taxpayer for a tax year is the amount calculated in accordance with the following formula: (g – h) × i where— g h is the taxpayer’s net income is the amount (if any) of net losses that the taxpayer has offset against the net income in accordance with subparts IE and IF is the taxpayer’s applicable basic tax rate.
i Compare: 1994 No 164 s LC 14 Subsection (1), item b of the formula, was amended, as from 1 October 2005, by section 220 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “assessable income” for “counted income”.
LC 14A 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.
Compare: 1994 No 164 s LC 14A LC 15 United Kingdom tax on dividends [Repealed] Section LC 15 was repealed, as from 1 April 2005, by section 70 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with ap- plication as from the 2005–06 income year.
1831 Part L s LC 16 Income Tax Act 2004 Reprinted as at 29 August 2011 LC 16 Foreign tax credits of consolidated group members (1) Where any consolidated group has in respect of an income year a tax credit available for crediting under section LC 4(1) against the income tax liability of the consolidated group, no part of that credit is treated for the purposes of this Act as a tax credit available to any individual member company of that consolidated group.
(2) Where— (a) (b) any company is a member of a consolidated group in an income year (in this subsection referred to as the speciﬁed year); and the company is entitled under section LC 4 to carry for- ward to the speciﬁed year and credit (against an income tax liability for the speciﬁed year) any credit for income tax resulting from income tax payable in any preceding income year,— that credit must, subject to subsections (3) and (4), be credited against the income tax liability (if any) of the consolidated group for the speciﬁed year (but must not exceed the amount that would be that consolidated group’s income tax liability for the year if it had not derived any assessable income other than the attributed CFC income derived in respect of any controlled foreign company or companies resident in the relevant country or territory) and, only so far as it cannot be so credited, is eligible to be— (c) credited against the income tax liability of the company or any other consolidated group in the speciﬁed year; or carried forward by the company in accordance with sec- tion LC 4 to any succeeding income year; or treated for the purposes of section LC 5 as a credit of the company carried forward to the speciﬁed year, in which event that credit may be credited against the in- come tax liability of any other company (other than the consolidated group) subject to and in accordance with that section.
(d) (e) (3) Where tax credits available to a consolidated group or to 1 or more member companies of the group are permitted, under section LC 4, or required, under this section, to be credited 1832 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LC 16 (b) against the income tax liability of a consolidated group, those credits are,— (a) if resulting from tax payable in 2 or more income years, credited in the same order as the tax was payable; and if resulting from tax payable in the same income year, credited, so far as the income tax extends,— (i) in the order elected by the consolidated group by notice to the Commissioner in such form as the Commissioner may allow; or if no such election is made, on a pro rata basis.
(ii) (4) In any case where— (a) subsection (2) would, except to the extent of the applica- tion of this subsection, require the whole or part of any tax credit of any company, resulting from income tax payable by the company in any income year (in this sub- section referred to as the preceding year), to be credited against the income tax liability of a consolidated group of companies in a subsequent income year (in this sub- section referred to as the subsequent year); and the company was not a member of the same group of companies, for the preceding year or any income year falling between the preceding year and the subsequent year, as any 1 or more companies which are members of the consolidated group in the subsequent year,— (b) the amount credited under subsection (2) against the income tax liability of the consolidated group in the subsequent year must not exceed the aggregate of— (c) the amount of the credit which could be credited by the company in the subsequent year under section LC 4 against its own income tax liability were it not in that subsequent year a member of a consolidated group of companies (its taxable income being nevertheless cal- culated in accordance with section HB 2(1)); and the aggregate amount which could be credited against their own income tax liability (their taxable income be- ing nevertheless calculated in accordance with section HB 2(1)) under section LC 5 by companies (d) (other than the company) which are members of the consoli- dated group in the subsequent year if— 1833 Part L s LC 16 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) neither the company nor those other companies were members of the consolidated group in the subsequent year; and the company were to take all necessary steps under sec- tion LC 5 to permit that crediting by the other compan- ies under that section.
(5) In any case where— (a) subsection (2) would, except to the extent of application of this subsection and subsection (4), require the whole or part of any tax credit of any company resulting from income tax payable by the company in any income year (in this subsection referred to as the preceding year) to be credited against the income tax liability of a consoli- dated group of companies in a subsequent income year (in this subsection referred to as the subsequent year); and the company was a member of the consolidated group for part only of the subsequent year,— (b) the amount of tax credit credited under subsection (2) against the income tax liability of the consolidated group in the sub- sequent year must not exceed the lesser of— (c) the excess (if any) of the amount of tax credit of the company for the preceding year required, but for the application of this subsection and subsection (4), to be credited against the income tax liability of the consoli- dated group in respect of the subsequent year over the aggregate of— (i) any income tax liability of the company in the subsequent year in respect of any period prior to the company being a member of the consolidated group (calculated by applying the provisions of section FD 9(2)) against which income tax liabil- ity that tax credit would be able to be credited under this Act; and any part of the tax credit required, under subsec- tion (2), to be credited against the income tax li- ability for the subsequent year of another consoli- dated group of companies of which the company was a member during the subsequent year prior (ii) 1834 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LC 16 (d) to the company being a member of the consoli- dated group; and the amount (if any), as shown in adequate and suf- ﬁciently detailed accounts furnished to the Commis- sioner with the consolidated group’s return of income for the income year, of the consolidated group’s income tax liability for the income year (being the income tax liability against which that tax
 credit could be credited under this Act) as is reasonably and fairly allocable to the part of the income year during which the company was a member of the consolidated group.
Compare: 1994 No 164 s LC 16 Subpart LD—Credit for tax paid or withheld Contents LD 1 Tax deductions to be credited against tax assessed LD 1B Tax deductions from certain accident compensation payments: credit allowed to provider LD 1C Tax deductions from certain accident compensation payments: credit allowed to claimant LD 2 Non-resident withholding tax: credit allowed LD 3 Resident withholding tax payments to be credited against income tax assessed Page 1836 1838 1839 1840 1840 LD 3A Maori authority credit to be credited against income tax 1842 assessed LD 4 Credit of retirement scheme contribution withholding tax 1843 for Maori authority credit LD 6 Allowance for provisional tax paid by agent LD 7 Provisional tax to be credited against income tax liability LD 8 Credit of tax for dividend withholding payment credit in hands of shareholder LD 9 Refund to non-resident or exempt shareholders LD 10 Credit for investor for tax paid by entity if portfolio investor allocated income not excluded income LD 10B Credit for zero-rated portfolio investor for tax paid by entity in relation to portfolio investor allocated income 1844 1844 1844 1846 1848 1848 LD 11 Credit for investor for payment under section HL 21(5) by 1849 entity for portfolio investor exit period 1835 Part L s LD 1 Income Tax Act 2004 Reprinted as at 29 August 2011 LD 12 Credit for retirement scheme contribution withholding tax 1849 if retirement scheme contribution not excluded income LD 1 Tax deductions to be credited against tax assessed (2) If, for a tax year, the Commissioner has received an employer monthly schedule showing tax deductions from source deduc- tion payments in relation to an employee, the amount of the tax deductions must be credited successively against— (a) (b) (c) (d) the income tax liability (if any) of the employee for the tax year: the income tax liability (if any) of the employee that has not otherwise been satisﬁed for any tax year before that tax year: the income tax liability (if any) of the employee that has not otherwise
 been satisﬁed for any tax year after that tax year and, if more than 1, in the order of those years: the provisional tax (if any) that is due by the employee and unpaid for any tax year after that tax year and, if more than 1, in the order of those years,— and the Commissioner must refund to the employee in accord- ance with section MD 1, and the Tax Administration Act 1994, an amount equal to the tax deductions not so credited.
(2AA) Subsection (2) does not apply to a non-ﬁling taxpayer.
(2A) The amount credited or refunded must not exceed the amount of the tax deductions received by the Commissioner, if— the employee is employed by a close company; and (aa) the employee and the employer are associated persons, (a) or the spouse, civil union partner or de facto partner of the employee and the employer are associated persons; and the amount of tax deductions from source deduction payments shown in the employer monthly schedule was deducted from source deduction payments made to the employee by the employer.
(b) (3) If the amount credited under subsection (2)(b) is less than the income tax liability referred to in that subsection, the amount 1836 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LD 1 credited must be applied in satisfaction, so far as the amount extends, of the income tax liability.
(4) A tax deduction must not be credited against an income tax liability, nor must a tax deduction made in relation to an em- ployee be refunded, if the Commissioner considers that a par- ticular in an employer monthly schedule is incorrect.

(5) A tax deduction referred to in subsection (4) may be credited in satisfaction of an income tax liability or refunded when the Commissioner is satisﬁed the particulars received are correct.
If a tax deduction relating to an employee is credited in sat- isfaction of an income tax liability or is refunded, and the amount credited or refunded— (a) (6) exceeds the amount that the employer or a PAYE inter- mediary deducted from a source deduction payment, particulars of which are contained in an employer monthly schedule; or exceeds the amount of the tax deductions received by the Commissioner, if subsection (2A) applies to the em- ployee,— (b) (7) the employer and the employee, or the PAYE intermediary and the employee, are jointly and severally liable to pay to the Commissioner the amount of the excess and that amount is deemed to be due and payable on the 31 May in the tax year after the tax year in which the tax deductions were made.
Subsection (6) does not apply to a non-ﬁling taxpayer who has provided the taxpayer’s correct tax ﬁle number and correct tax code for a tax year.

Compare: 1994 No 164 s LD 1 Subsection (2) was amended, as from 3 April 2006, by section 126(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting the words before para (a).
Subsection (2A) was amended, as from 3 April 2006, by section 126(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting the words before para (a).

Subsection (2A)(aa) was inserted, as from 3 April 2006, by section 126(2) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).
Subsection (2A)(a) was amended, as from 26 April 2005, by section 3(1) In- come Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner” for the word “spouse”.

1837 Part L s LD 1B Income Tax Act 2004 Reprinted as at 29 August 2011 Subsection (2A)(a) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner” for “spouse or civil union partner”.
Subsection (6)(b) was substituted, as from 3 April 2006, by section 126(3) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).
LD 1B Tax deductions from certain accident compensation payments: credit allowed to provider This section applies if— (a) a claimant under the Injury Prevention, Rehabilitation, and Compensation Act 2001— (i) is paid a personal service rehabilitation payment for the claimant for a period, for a key aspect of social rehabilitation referred to in the deﬁnition of personal service rehabilitation payment in section OB 1 (the key aspect of social rehabili- tation); and pays another person for providing a key aspect of social rehabilitation to the claimant for a period; or (ii) (b) the Accident Compensation Corporation pays another person a personal service rehabilitation payment for the claimant for a period, for providing a key aspect of so- cial rehabilitation to the claimant for the period.
The person (the provider) is allowed a credit against the provider’s income tax liability for the tax year corresponding to the provider’s income year that includes the period.

The amount of the credit allowed under subsection (2) is cal- culated using the following formula: amount received × tax rate 1 – tax rate.
In the formula,— (a) amount received is the amount paid to the provider for providing a key aspect of social rehabilitation to the claimant for the period, to the extent to which the amount is equal to or less than the amount of the per- sonal service rehabilitation payment for a key aspect of (1) (2) (3) (4) 1838 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LD 1C (b) social rehabilitation for the claimant for the period, after any deduction of tax under this Act: tax rate is the rate at which tax is deducted from a per- sonal service rehabilitation payment for a key aspect of social rehabilitation for the period.
Section LD 1B: inserted, on 1 July 2008, by section 137 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
LD 1C Tax deductions from certain accident compensation (1) payments: credit allowed to claimant This section applies if— (a) a claimant under the Injury Prevention, Rehabilitation, and Compensation Act 2001 is paid a personal service rehabilitation payment for the claimant for a period, for a key aspect of social rehabilitation referred to in the deﬁnition of personal service rehabilitation payment in section OB 1 (the key aspect of social rehabilita- tion); and the claimant pays another person (the provider) for providing a key aspect of social rehabilitation to the claimant for the period; and the amount paid to the provider is less than the amount of personal service rehabilitation payment for the claimant for the period, after any deduction of tax under this Act.
(b) (c) (2) The tax credits under section LD 1(2) for the tax deductions relating to the amount are limited to the amount calculated using the following formula: total tax deductions – amount paid × tax rate 1 – tax rate.
(3) In the formula,— (a) total tax deductions is the total of deductions of tax for the personal service rehabilitation payment paid to the claimant for the period: amount paid is the amount paid to the provider, de- scribed in subsections (1)(b) and (c): (b) 1839 Part L s LD 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) tax rate is the rate at which tax is deducted from the personal service rehabilitation payment paid to the claimant for the period.
Section LD 1C: inserted, on 1 July 2008, by section 137 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
LD 2 Non-resident withholding tax: credit allowed There is allowed as a credit against the income tax liability of a person for a tax year an amount equal to the non-resident with- holding tax (but not including any penalties) deducted from the non-resident withholding income of that person and paid to the Commissioner in respect of that non-resident withholding in- come.
Compare: 1994 No 164 s LD 2 LD 3 Resident withholding tax payments to be credited against income tax assessed (1) Where a person derives an amount of resident withholding income other than a replacement payment, from which an amount has been deducted on account of resident withhold- ing tax, the amount of resident withholding income, for the purposes of this Act, includes such amount deducted.
(1B) A portfolio tax rate entity is allowed under this section a credit of tax of no more than the extent allowed by subpart HL (Port- folio investment entities).

(2) (1C) An investor in a portfolio tax rate entity is, to the extent al- lowed by subpart HL, allowed a credit of tax to which the en- tity’s entitlement is restricted by subsection (1B).
Subject to this section, where any resident withholding tax, not being a penalty, has been paid in relation to any amount of resident withholding income, not being a replacement pay- ment made under a share-lending arrangement, derived by any person in any tax year, the amount of the resident withholding tax payment must be credited successively against— (a) the income tax liability (if any) of the person for that tax year; and the income tax liability (if any) of the person that has not otherwise been satisﬁed for any tax year before that tax year; and (b) 1840 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LD 3 (c) (d) the income tax liability (if any) of the person that has not otherwise been satisﬁed for any tax year after that tax year and, if more than 1, in the order of those years; and the provisional tax (if any) that is due by the person and unpaid for any tax year after that tax year and, if more than 1, in the order of those years,— and the Commissioner must refund to the person an amount equal to the excess of the resident withholding tax payments over the amounts which are so credited in accordance with section MD 1, and the Tax Administration Act 1994, as if it were tax paid in excess.
(3) Any credit of tax to which a person is entitled under this section must be credited, so far as it extends, after allowing for any credit of tax allowable in accordance with sections LB 2 and LC 1 and subpart LE.
(4) A credit of tax is not allowed and a refund must not be paid under subsection (2) in relation to resident withholding tax deducted, unless the Commissioner has received— (a) the resident withholding tax deduction certiﬁcate relat- ing to that resident withholding tax or other evidence in writing satisfactory to the Commissioner evidencing the deduction; and such other information as the Commissioner may re- quire.
(b) (5) Where the Commissioner is satisﬁed that the amount of any tax credit or refund claimed in accordance with this section is in excess of the amount properly allowable in accordance with this section, the Commissioner may disallow the credit or refuse to make the refund to the extent of the excess.

For the purposes of giving effect to this section, the Commis- sioner may at any time amend any assessment or any deter- mination, notwithstanding the time bar.
Compare: 1994 No 164 s LD 3 (7) The heading to section LD 3 was amended, as from 1 October 2005, by sec- tion 71(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “payments” for the word “deductions” with ap- plication as from the 2005–06 income year.
Subsection (1) was amended, as from 1 July 2006, by section 128(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) 1841 Part L s LD 3A Income Tax Act 2004 Reprinted as at 29 August 2011 Act 2006 (2006 No 3) by inserting “other than a replacement payment,” after the words “Where a person derives an amount of resident withholding income”.
Section LD 3(1B): inserted, on 1 October 2007, by section 115 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Section LD 3(1C): inserted, on 1 October 2007, by section 115 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Subsection (2) (before paragraph (a)) was amended, as from 1 October 2005, by section 71(2)(a) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “paid in relation to” for “deducted from” with application as from the 2005–06 income year.
Subsection (2) (before paragraph (a)) was amended, as from 1 October 2005, by section 71(2)(b) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “payment” for the word “deduction” with application as from the 2005–06 income year.
Subsection (2) (after paragraph (d)) was amended, as from 1 October 2005, by section 71(3) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “payments” for the word “deducted” with application as from the 2005–06 income year.
Subsection (2) was amended, as from 1 July 2006, by section 128(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “, not being a replacement payment made under a share-lending arrangement,” after the words “any amount of resident with-holding income”.
LD 3A Maori authority credit to be credited against income (1) (2) tax assessed If a person for a tax year derives a taxable Maori authority distribution, whether as income or as exempt income under section CW 34 or CW 35, the person is, subject to section LB 1, allowed a credit of tax for an amount equal to the Maori authority credit attached to the distribution.
The credit of tax must be credited successively against— (a) (b) the person’s income tax liability for the tax year; and the person’s income tax liability that has not otherwise been satisﬁed for any year before the tax year; and the person’s income tax liability that has not otherwise been satisﬁed for any year after the tax year and, if more than 1, in the order of those years; and the provisional tax that is due by the person and unpaid for any tax year after the tax year and, if more than 1, in the order of those years.
(c) (d) (3) If the credit of tax under subsection (1) exceeds the total of the amounts referred to by subsection (2)(a) to (d), the Com- 1842 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LD 4 missioner must refund to the person, under section MD 1 and under the Tax Administration Act 1994, the amount of the sur- plus as if it were tax paid in excess.
(4) A credit of tax to which a person is entitled under this section must be credited so far as it extends, after allowing for any credit of tax allowable in accordance with sections LB 2 and LC 1, and subpart LE.
(5) A credit of tax is not allowed and a refund must not be paid under subsection (3), unless the Commissioner has received— the Maori authority distribution statement relating to the (a) Maori authority credit or other evidence in writing evi- dencing the deduction that is satisfactory to the Com- missioner; and such other information as the Commissioner may re- quire.
(b) (6) (7) If the Commissioner is satisﬁed that the amount of a credit of tax or refund claimed under this section is in excess of the proper amount, the Commissioner may refuse to allow the credit of tax or refund to the extent of the excess.

For the purpose of giving effect to this section, the Commis- sioner may at any time amend any assessment or any deter- mination, despite the time bar.
Compare: 1994 No 164 s LD 3B LD 4 Credit of retirement scheme contribution withholding tax (1) for Maori authority credit If a retirement scheme contributor attaches a Maori authority credit to a retirement scheme contribution for a person in an income year, the retirement scheme contributor is entitled to a credit of retirement scheme contribution withholding tax equal to the lesser of the following amounts: (a) (b) the amount of the Maori authority credit: the liability of the retirement scheme contributor for re- tirement scheme contribution withholding tax on the re- tirement scheme contribution.
(2) If the amount of the Maori authority credit exceeds the liabil- ity of the retirement scheme contributor for retirement scheme 1843 Part L s LD 6 Income Tax Act 2004 Reprinted as at 29 August 2011 contribution withholding tax on the retirement scheme contri- bution,— (a) the amount of the excess is treated as a Maori authority credit attached to a taxable Maori authority distribution from the retirement scheme contributor to the person; and the person responsible for withholding the retirement scheme contribution withholding tax must within 30 days of the contribution give a notice to the person showing the amount of the excess credit.
(b) Section LD 4: inserted (with effect from 1 April 20007), on 19 December 2007, by section 138 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

LD 6 Allowance for provisional tax paid by agent Where an agent is liable to pay any amount of provisional tax on behalf of the agent’s principal, any amount paid by the agent is credited against the principal’s account on the date on which that payment is made.
Compare: 1994 No 164 s LD 6 LD 7 Provisional tax to be credited against income tax liability The provisional tax paid by a taxpayer for a tax year is credited against the taxpayer’s income tax liability for that year.
Compare: 1994 No 164 s LD 7 LD 8 Credit of tax for dividend withholding payment credit in hands of shareholder (1) Where the assessable income of a taxpayer for an income year includes any dividend withholding payment credit, then, sub- ject to this section and section LB 1,— (a) the taxpayer is entitled to a credit of tax equal to the dividend withholding payment credit so included in as- sessable income; and the credit of tax is credited, so far as it extends, against the taxpayer’s income tax liability for the income year; and to the extent that the credit of tax is not so credited, the excess is refundable to the taxpayer in accordance with (b) (c) 1844 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LD 8 section MD 1, and the Tax Administration Act 1994, as if it were tax paid in excess.
(1B) A taxpayer that is a portfolio tax rate entity is entitled under this section to a credit of tax of no more than the extent allowed by subpart HL (Portfolio investment entities).

(1C) A taxpayer that is an investor in a portfolio tax rate entity is, to the extent allowed by subpart HL, entitled to a credit of tax to which the entity’s entitlement is restricted by subsection (1B).
(1B) A taxpayer who receives a dividend withholding payment credit is not entitled under subsection (1) to a credit of tax if they issue a credit transfer notice in respect of the dividend withholding payment credit.

(1C) A taxpayer who is issued with a credit transfer notice is entitled under subsection (1) to a credit of tax equal to the amount of dividend withholding payment credit shown in the notice.
(2) Any credit of tax to which a taxpayer is entitled under this section is credited after allowing for any credit of tax allowable in accordance with sections LB 2, LC 1, and LD 3.

(4) (3) A credit of tax is not allowed under this section unless the tax- payer furnishes the shareholder dividend statement, or other sufﬁcient evidence in writing, evidencing the dividend with- holding payment credit giving rise to the credit of tax.
Subject to subsection (5), where the Commissioner is satisﬁed that it would be inappropriate for a taxpayer to be allowed a credit of tax under this section by reason of the taxpayer receiving any dividend withholding payment credit in respect of which no dividend withholding payment or further dividend withholding payment has been paid by the company that issued the dividend withholding payment credit,— (a) the taxpayer is not allowed the credit of tax to the extent the Commissioner is so satisﬁed: any such disallowance is in such a manner as the Com- missioner considers fair and reasonable.
(5) A credit of tax previously disallowed under subsection (4) is allowed to the extent the Commissioner is satisﬁed that sufﬁ- cient dividend withholding payment or further dividend with- holding payment has subsequently been paid by or on behalf of the company.
(b) 1845 Part L s LD 9 Income Tax Act 2004 Reprinted as at 29 August 2011 (6) Where the Commissioner is satisﬁed that the amount of any credit of tax claimed under this section is in excess of the proper amount, the credit of tax is not allowed to the extent of the excess.

For the purposes of giving effect to this section, the Commis- sioner may at any time amend any assessment or any deter- mination, notwithstanding the time bar.
Compare: 1994 No 164 s LD 8 (9) Section LD 8(1)(a): substituted (with effect on 1 October 2007), on 6 October 2009, by section 820 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LD 8(1)(a): amended (with effect from 1 October 2007), on 19 De- cember 2007, by section 139 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
First section LD 8(1B): inserted, on 1 October 2007, by section 116 of the Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

First section LD 8(1C): inserted, on 1 October 2007, by section 116 of the Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Subsections (1B) and (1C) were inserted, as from 1 July 2006, by section 129 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
LD 9 Refund to non-resident or exempt shareholders (1) Where a dividend with a dividend withholding payment credit attached is paid to a shareholder of a company (being a com- pany resident in New Zealand) who is— (a) (b) a person who is not resident in New Zealand; or a person who is resident in New Zealand and for whom the dividend is exempt income otherwise than by virtue of sections CW 9 to CW 11,— the Commissioner must, except as otherwise provided in this section, pay to the shareholder by way of a refund of dividend withholding payment credit an amount equal to the amount of the dividend withholding payment credit.
(1B) The Commissioner must, except as otherwise provided in this section, pay to a person by way of a refund of dividend with- holding payment credit an amount equal to the amount of the dividend withholding payment credit shown in a credit trans- fer notice issued to the person if— 1846 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LD 9 (2) (a) the person is not resident in New Zealand: (b) The amount of any refund payable under this section to a share- holder in respect of a dividend withholding payment credit— (a) must not exceed the amount of the dividend withholding payment credit that would be included in that assessable income in accordance with section CD 9 or LB 1: (b) must be reduced by any amount of the dividend with- holding payment credit that is applied in accordance with section NG 2(2) to reduce an amount of non-resi- dent withholding tax: in the case of an amount of the dividend withholding payment credit shown in a credit transfer notice, must be reduced by any amount of dividend withholding pay- ment credit applied in accordance with section NG 2(2) to reduce an amount of non-resident withholding tax in respect of the dividend to which the credit transfer no- tice relates.
(c) (4) (3) A shareholder who becomes entitled to a refund under this sec- tion must make application for the refund, in a form authorised by the Commissioner, no earlier than the 31 May that follows the end of the imputation year during which the dividend with the credit attached was paid to the shareholder.
The Commissioner may not pay a refund under this section unless the Commissioner receives the shareholder dividend statement, or such other evidence as the Commissioner consid- ers necessary, evidencing the dividend withholding payment credit giving rise to the refund of dividend withholding pay- ment.

Compare: 1994 No 164 s LD 9 Subsection (1B) was inserted, as from 1 July 2006, by section 130(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Subsection (1B)(b) was repealed, as from 1 July 2006, by section 117 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Subsection (2)(b) was amended, as from 1 July 2006, by section 130(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “tax:” for “tax.”.
Subsection (2)(c) was inserted, as from 1 July 2006, by section 130(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
1847 Part L s LD 10 Income Tax Act 2004 Reprinted as at 29 August 2011 (1) LD 10 Credit for investor for tax paid by entity if portfolio investor allocated income not excluded income This section applies for a taxpayer and a tax year if the tax- payer has for the tax year portfolio investor allocated income from a portfolio tax rate entity that— (a) (b) would be excluded income of the taxpayer in the ab- sence of section CX 44D(1)(b) (Portfolio investor allo- cated income and distributions of income by portfolio tax rate entities).
is not excluded income of the taxpayer; and (2) The taxpayer is entitled to a credit of tax against the taxpayer’s income tax liability for the tax year equal to the amount of income tax liability satisﬁed by the portfolio tax rate entity in relation to the portfolio investor allocated income referred to in subsection (1).

Section LD 10: added, on 1 October 2007, by section 118 of the Taxation (Sav- ings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section LD 10(2): substituted, on 1 October 2007, by section 40 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section LD 10(2): amended (with effect on 1 October 2007), on 7 September 2010, by section 205 of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
LD 10B Credit for zero-rated portfolio investor for tax paid by entity in relation to portfolio investor allocated income This section applies for a taxpayer and a tax year if the tax- payer is a zero-rated portfolio investor and has for the tax year portfolio investor allocated income from a portfolio tax rate entity that pays income tax in relation to the portfolio investor allocated income.
The taxpayer is entitled to a credit of tax against the taxpayer’s income tax liability for the tax year equal to the amount of income tax liability satisﬁed by the portfolio tax rate entity in relation to the portfolio investor allocated income referred to in subsection (1).

Section LD 10B: inserted, on 1 October 2007, by section 41 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section LD 10B(2): amended (with effect on 1 October 2007), on 7 September 2010, by section 206 of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
(1) (2) 1848 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LD 12 LD 11 Credit for investor for payment under section HL 21(5) (1) (2) by entity for portfolio investor exit period This section applies for a taxpayer and a tax year if— (a) the taxpayer has for the tax year portfolio investor allo- cated income from a portfolio tax rate entity for a port- folio investor exit period; and the entity makes a payment under section HL 21(5) (Payments of tax by portfolio tax rate entity making no election) to the Commissioner after the portfolio in- vestor exit period.
(b) The taxpayer is entitled to a credit of tax against the taxpayer’s income tax liability for the tax year equal to the amount of the payment by the entity under section HL 21(5).

Section LD 11: added, on 1 October 2007, by section 118 of the Taxation (Sav- ings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Section LD 11(2): substituted, on 1 October 2007, by section 42 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
LD 12 Credit for retirement scheme contribution withholding (1) (2) (3) tax if retirement scheme contribution not excluded income This section applies for a taxpayer and a tax year if the tax- payer— (a) derives income as a retirement scheme contribution for a period in the corresponding income year; and the retirement scheme contributor pays an amount of retirement scheme contribution withholding tax under subpart NEB in relation to the retirement scheme con- tribution; and the income is not excluded income of the taxpayer under section CX 42B.
(b) (c) If the taxpayer is a New Zealand resident, the taxpayer is en- titled to a credit of tax against the taxpayer’s income tax li- ability for the tax year equal to the amount paid as retirement scheme contribution withholding tax.
If the taxpayer is a non-resident and subsection (4) does not apply, the taxpayer is entitled to a credit of tax against the taxpayer’s income tax liability for the tax year equal to any amount by which the amount paid as retirement scheme contri- bution withholding tax exceeds the amount treated under sec- 1849 (4) (5) Income Tax Act 2004 Reprinted as at 29 August 2011 tion NG 16 as being non-resident withholding tax paid in re- lation to the retirement scheme contribution.
If the taxpayer is a non-resident and the retirement scheme contribution is a taxable Maori authority distribution, the tax- payer is entitled to a credit of tax against the taxpayer’s income tax liability for the tax year equal to the amount paid as retire- ment scheme contribution withholding tax in relation to the retirement scheme contribution.
For the purposes of section BC 10(2)(a) and (b), if a taxpayer has surplus credits from a tax credit under this section for the tax year, the Commissioner must— (a) ﬁrst, use the tax credit to satisfy the taxpayer’s income tax liability for a tax year before the tax year: second, use the tax credit to satisfy the taxpayer’s in- come tax liability for a tax year after the tax year, ap- plying this paragraph to tax years in numerical order: third, use the tax credit to pay the taxpayer’s provisional tax for a tax year after the tax year, applying this para- graph to tax years in numerical order: fourth, use the tax credit to pay an amount that is payable by the taxpayer under an Inland Revenue Act: ﬁfth, treat the tax credit as tax paid in excess and refund- able or transferable to the extent that section MD 1 and Part 10B of the Tax Administration Act 1994 apply.
(b) (c) (d) (e) Section LD 12: added (with effect from 1 April 2007), on 19 December 2007, by section 140 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subpart LE—Non-resident investors Contents Purpose of subpart LE 1 LE 2 Credits in respect of dividends to non-resident investors LE 3 LE 4 Allocation of deductions by section LE 3 holding Special rules for holding companies Page 1851 1851 1854 1857 company 1850 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LE 2 LE 1 Purpose of subpart Subject always to its express provisions, the purpose of this subpart is to allow a company that pays to a non-resident in- vestor a dividend with an imputation credit attached, and a supplementary dividend to the same investor, a credit of tax calculated by reference to the imputation credit which is equal to and sufﬁcient to fund the supplementary dividend.
Compare: 1994 No 164 s LE 1 LE 2 Credits in respect of dividends to non-resident investors (1) This section applies if a company resident in New Zealand pays in an income year with respect to its own shares— (a) a dividend (referred to in this section as the dividend); and a single supplementary dividend with respect to the dividend— (b) (2) derived by a person not resident in New Zealand.
The company is entitled to a credit against its income tax li- ability calculated under the following formula: where— IC is the imputation credit (if any, and calculated having regard to subsections (9) and (10)) attached to the divi- dend.

(3) (2A) A section LE 3 holding company may elect to reduce the amount of credit applied against its income tax liability under subsection (2) to an amount that is not less than the amount of supplementary dividends derived in that income year.
If a part of the tax credit cannot be credited under subsection (2) against the company’s income tax liability for the income year in which the supplementary dividend was paid, or if the amount credited is reduced under subsection (2A), the com- pany may— (a) elect under subsection (4) that the excess credit be set off against any other income tax liability of the company or an income tax liability of another company; and 1851 Part L s LE 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) if and to the extent that the excess credit cannot be set off against an income tax liability as a result of an election under subsection (4), carry forward the excess credit under subsection (5) to a later income year.
(4) (b) If any part of the tax credit cannot be set off under subsection (2) against the company’s income tax liability and the com- pany so elects, by notice to the Commissioner with the com- pany’s return of income for the income year, the excess credit (so far as it extends) must be set off against the income tax li- ability,— (a) for the income year in which the supplementary divi- dend is paid, of any other company that is for that in- come year (or, in any case where 1 of the companies exists for part only of the income year, at all times in the income year at which the 2 companies both exist) in the same wholly-owned group of companies as the company; or for any of the 4 income years immediately preceding the income year in which the supplementary dividend is paid (being in each case the 1993-94 income year or a subsequent income year), of— (i) (ii) the company; or any other company which is, for both the income year in which the supplementary dividend is paid and the relevant preceding income year (or, in any case where 1 of the companies exists for part only of the relevant income year, at all times in the relevant income year at which the 2 companies both exist) in the same wholly-owned group of companies as the company.
(5) A company which has an excess credit for an income year (referred to in this section as the original income year) may carry the excess credit forward to the succeeding or a later income year (referred to in this section as the year of carry forward) if and only if there is a group of persons,— (a) the aggregate of whose minimum voting interests in the company in the period from the beginning of the ori- ginal income year to the end of the year of carry forward 1852 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LE 2 (b) (in this subsection referred to as the continuity period) is equal to or greater than 49%; and in any case where at any time during the continuity period a market value circumstance exists in respect of the company, the aggregate of whose minimum market value interests in the company in the continuity period is equal to or greater than 49%,— and, for the purposes of this subsection, the minimum voting interest or minimum market value interest, as the case may be, of any person in the company in the continuity period is equal to the lowest voting interest or market value interest, as the case may be, in the company that that person has during the continuity period.
If a company has carried forward any excess credit to a year of carry forward, the excess credit is to be set off in the ﬁrst instance against the income tax liability of the company for the year of carry forward, to the extent that the credit does not exceed the income tax liability for that year after allowing for any credit under section LC 1.
If any part of the excess credit cannot be set off under subsec- tion (6) against the company’s income tax liability for the year of carry forward, and the company so elects by notice to the Commissioner with the company’s return of income for the year of carry forward, the excess credit is to be set off against the income tax liability for the year of carry forward of any other company that is in the same wholly-owned group of com- panies as the company for both the year of carry forward and the original income year (or, in any case where 1 of the com- panies exists for part only of the relevant income year, at all times in the relevant income year at which the 2 companies both exist).
If and to the extent that an excess credit is set off against an in- come tax liability under subsection (4) or (6) or (7), the excess credit ceases to be available otherwise to be carried forward or credited under this section.

The benchmark dividend provisions of sections ME 8 and MG 8 and the provisions of section GC 22 apply as if the company had never paid the supplementary dividend.
1853 (6) (7) (8) (9) Part L s LE 3 Income Tax Act 2004 Reprinted as at 29 August 2011 (10) The maximum imputation credit ratio and benchmark dividend provisions of section ME 8 and the provisions of section GC 22 apply as if the imputation credit attached to the dividend were increased by an amount equal to the tax credit calculated with respect to the dividend under subsection (2).
If the company pays such a supplementary dividend with re- spect to all shares of the relevant class held by persons not resident in New Zealand, the payment of the supplementary dividend with respect only to certain shares of that class is not to be treated as contravening— (a) (11) (b) any provision of the Companies Act 1955 or section 53 of the Companies Act 1993; or any provision of the company’s articles of association or constitution (not being a provision which expressly refers to this subsection); or any rule of law— (c) that would otherwise prohibit the payment by the company at the time of dividends of different amounts in relation to shares of the class.
If a trustee derives the dividend and is required under the terms of the trust to distribute it as beneﬁciary income to a beneﬁ- ciary, the distribution by the trustee of the supplementary divi- dend to the same beneﬁciary is not to be treated as contraven- ing any term of the trust.
[Repealed] Compare: 1994 No 164 s LE 2 (12) (13) Section LE 2(13): repealed (with effect on 1 October 2007), on 6 October 2009, by section 821 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section LE 2(13): added (with effect from 1 October 2007), on 19 December 2007, by section 141 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
LE 3 Special rules for holding companies (1) Subsections (4) to (10) apply if a company (referred to in this section as the company) resident in New Zealand pays in any income year with respect to its own shares— (a) a dividend (referred to in this section as the dividend); and 1854 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LE 3 (b) a single supplementary dividend with respect to the dividend— derived by a section LE 3 holding company.
(2) A section LE 3 holding company is a company resident in New Zealand which— (a) (b) has given a notice to the company before the dividend is paid advising the company that it is a section LE 3 holding company; and has not revoked that notice before the dividend is paid.
(3) A notice given under subsection (2)(a) is treated as having been revoked by the company which gave it (referred to in this sec- tion as the former section LE 3 holding company), and the former section LE 3 holding company must give notice to the company of the revocation as soon as is practicable, if— (a) more than 7 years have passed since the end of the in- (c) (d) (b) come year in which the notice was given; or the former section LE 3 holding company elects to re- voke the notice; or the former section LE 3 holding company does not have the purpose, in keeping the notice in existence, of en- abling, directly or indirectly, the payment of a sup- plementary dividend to a person not resident in New Zealand; or the only persons holding voting interests in the former section LE 3 holding company are residents of New Zealand; or dividends derived by the former section LE 3 holding company are excluded income or are exempt income other than under any of sections CW 9 to CW 11.
Section LE 2 applies, with respect to the dividend and the sup- plementary dividend, as if the section LE 3 holding company were not resident in New Zealand.
(e) (4) (5) Notwithstanding subsection (4) and section LE 2, if— (a) (b) the section LE 3 holding company and the company are associated persons (as deﬁned in section OD 8(3) but as if each reference in that provision to “50% or more” instead read “more than 50%”); and because the section LE 3 holding company has an earlier income tax balance date than the company, the dividend 1855 Part L s LE 3 Income Tax Act 2004 Reprinted as at 29 August 2011 is derived by the section LE 3 holding company in a later income year than the income year of the company in which the company pays the dividend,— the provisions of section LE 2 allowing the company a tax credit apply as if the income year in which the company pays the dividend were the later income year.
(6) Where section CW 10 would otherwise apply to the dividend, the dividend is exempt income under that section only to the extent to which it exceeds the amount calculated under the following formula: where— IC is the amount of imputation credit attached to the divi- dend SD T is the amount of the supplementary dividend is the basic rate of income tax for companies, ex- pressed as a percentage, stated in schedule 1, part A, clause 5, and applying in respect of the income year— and the imputation credit is deemed, for the purposes of sec- tion LB 2, to be included in the part of the dividend that is assessable income.
The dividend is ignored for the purposes of the RWT rules to the extent to which it does not exceed the amount calculated under the formula in subsection (6) and the imputation credit is deemed to be included in the part ignored.

The supplementary dividend is not exempt income under sec- tion CW 10.

The supplementary dividend is ignored for the purposes of the RWT rules.
If in an income year a section LE 3 holding company derives a supplementary dividend,— (a) the maximum amount of net losses that the company may offset against its net income for the income year is the amount calculated under section IF 7(1); and the maximum aggregate amount of deductions that the company may allocate to the income year is the amount (b) (7) (8) (9) (10) 1856 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LE 4 (11) calculated in accordance with the formula in section LE 4(2).
If a section LE 3 holding company is a member of a consoli- dated group, this section does not apply to a dividend received by the section LE 3 holding company from a member of the consolidated group.

Compare: 1994 No 164 s LE 3 Subsection (3)(e) was amended, as from 1 April 2005, by section 72 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “are exempt income other than” for “are exempt income” with application as from the 2005–06 income year.
Section LE 3(6) item T: substituted (with effect on 1 October 2007), on 6 Octo- ber 2009, by section 822 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LE 3(6) item T: amended (with effect from 1 October 2007), on 19 De- cember 2007, by section 142 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
LE 4 Allocation of deductions by section LE 3 holding company This section applies when a person is a section LE 3 holding (1) company and derives a supplementary dividend in an income year.
The maximum total amount of deductions of the person that may be allocated to the income year is the amount calculated using the formula— (2) (3) In the formula,— income is the person’s income non-refundable credits is the total amount of non-refundable credits that are available under this Part to be set off against the person’s income tax liability convertible credits is the total amount of convertible credits that are available under this Part to be set off against the person’s income tax liability supplementary dividends is the total amount of supplemen- tary dividends derived by the person in the income year applicable tax rate is the applicable basic tax rate.
1857 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) (5) (6) If subsection (2) prevents an amount from being allocated to an income year, the section LE 3 holding company may offset or carry forward the amount under subsection (5) and under no other provision of this Act.
If subsection (2) prevents an amount from being allocated to an income year, the section LE 3 holding company may— (a) carry forward to a later income year under subparts IE and IF some or all of the amount as an available net loss; or offset under subpart IG or IH some or all of the amount as a net loss against the net income of another company for the income year.
(b) This section does not affect the calculation under this subpart of the non-refundable credits and convertible credits of a sec- tion LE 3 holding company.
Compare: 1994 No 164 s EQ 1 Subpart LF—Underlying foreign tax credits Contents LF 1 Underlying foreign tax credits generally, and interpretation LF 2 Granting of underlying foreign tax credit LF 3 Amount of underlying foreign tax credit LF 4 Dividends from lower-tier companies LF 5 Dividends from grey list companies LF 6 LF 7 Procedures with respect to underlying foreign tax credit Interest paid in conduit ﬁnancing arrangements Page 1858 1860 1862 1865 1866 1873 1876 LF 1 Underlying foreign tax credits generally, and interpretation This subpart, taken in conjunction with section NH 2,— (a) allows in certain circumstances a company resident in New Zealand to claim a credit against a liability to pay a dividend withholding payment in respect of a foreign withholding payment dividend paid by a foreign com- pany; and (1) 1858 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LF 1 (ab) provides that the amount of the credit, in general terms, be calculated to reﬂect a proportionate share of the New Zealand and foreign income tax paid, or deemed to be paid,— (i) (ii) on the income of the foreign company that gives rise to the foreign withholding payment dividend; and by the company, the foreign company, or another company directly or indirectly funding the for- eign withholding payment dividend; and provides for the entitlement to the credit to arise where, in general terms,— (i) the company that is resident in New Zealand and is liable to pay the dividend withholding payment has at least a 10% interest in the company pay- ing the income tax in respect of which the credit arises, at the time the income tax was paid; and the company can provide to the Commissioner sufﬁcient details to enable accurate calculation of the credit entitlement.
(ii) (b) (2) A person has a sufﬁcient interest in a company at any time only where— (a) the person has at the time— (i) a voting interest of 10% or greater in the company (determined as if paragraphs (a) to (c) of the def- inition of shareholder decision-making rights did not apply and section OD 3(3)(d) did not apply to deem any voting interest held or deemed to be held by the person to be held by any other per- son); and in any case where at the time a market value cir- cumstance exists in respect of the company, a market value interest of 10% or greater in the company (determined as if section OD 4(3)(d) did not apply to deem any market value interest held or deemed to be held by the person to be held by any other person)— (ii) and, if the time is on or after 1 April 1993, the company is, at the time, either— 1859 Part L s LF 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (iii) (iv) (v) a branch equivalent company; or a grey list company; or a company resident in New Zealand that is not a company that, under a double tax agreement, is treated as not being resident in New Zealand for the purposes of the double tax agreement; or in any case where the time is on or after 1 April 1988,— the person has at the time an income interest of (i) 10% or greater under the rules in sections EX 14 to EX 17 in the company; and the company is at the time a controlled foreign company.
(ii) (b) Compare: 1994 No 164 s LF 1 Subsection (1)(a) was substituted, as from 1 April 2006, by section 131 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Subsection (1)(ab) was inserted, as from 1 April 2006, by section 131 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
LF 2 Granting of underlying foreign tax credit (1) Where a taxpayer derives at any time a foreign withholding payment dividend from a company, the amount of underlying foreign tax credit arising with respect to the dividend is,— (a) where— (i) (ii) subsection (2) does not apply with respect to the dividend; and at the time either— (A) (B) the company is not a grey list company; or the company is a grey list company and section LF 5(1) does not apply with respect to the dividend,— the amount determined by section LF 3; and (b) where— (i) (ii) subsection (2) does not apply with respect to the dividend; and at the time the company is a grey list company and section LF 5(1) applies with respect to the dividend,— the amount determined by section LF 5; and 1860 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LF 2 (c) where subsection (2) applies with respect to the divi- dend, nil.
(2) (3) The underlying foreign tax credit arising with respect to a for- eign withholding payment dividend derived by a taxpayer at any time from a company is nil— (a) in any case where, at the time, the taxpayer is a qualify- ing company; or if, at the time, the taxpayer does not have a sufﬁcient interest in the company; or where the share in respect of which the dividend is paid (or, in the case of any dividend being attributed repat- riation, any share taken into account in calculating the income interest giving rise to the attributed repatriation) is a ﬁxed rate share; or (b) (c) (db) (d) where the company is allowed a deduction, in respect of the payment of the dividend, in calculating its liability to income tax in any country or territory outside New Zealand; or if the company, as a result of the payment of the divi- dend, is liable to pay no income tax in relation to an amount, or part of an amount, from which the dividend is sourced; or where— (i) (e) (ii) (iii) the dividend is sourced, directly or indirectly, out of an amount derived by the company from an- other company; and the company was not liable to income tax in any country or territory outside New Zealand in re- spect of that amount; and the other company is allowed a deduction, in re- spect of the payment of the amount, in calculat- ing its liability to income tax in any country or territory outside New Zealand.
In this section, ﬁxed rate share means— (a) any share where the dividend payable in respect of the share is payable at a rate which is— (i) a speciﬁc ﬁxed percentage of the amount sub- scribed in respect of the issue of the share; or 1861 Part L s LF 3 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) (iii) a percentage of the amount subscribed in respect of the issue of the share which is determined by a ﬁxed relationship to economic, commodity, in- dustrial, or ﬁnancial indices, or to banking rates or general commercial rates of interest; or a percentage that would be of a kind referred to in subparagraph (i) or (ii) but for any variation in the rate of dividend that may occur only— (A) by a ﬁxed relationship to a rate of income tax; or as may be necessary to compensate the shareholder for any default on the part of the paying company or any expenditure or loss suffered by the shareholder (or a person associated with the shareholder) in respect of the holding of the share,— (B) (b) or due to a combination of those 2 factors; or any share where, having regard to— (i) (ii) whether or not the share is redeemable; and any security provided to the shareholder, includ- ing any option to require the purchase or sale of the share, and any amount payable determined by reference to the amount of dividends payable; and the variability or lack of variability of the divi- dend payable,— (iii) the payment of dividends in respect of the share is equivalent to the payment of interest in respect of money lent.
Compare: 1994 No 164 s LF 2 Subsection (2)(db) was inserted, as from 1 October 2005, by section 221 Taxa- tion (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
LF 3 Amount of underlying foreign tax credit (1) The amount of underlying foreign tax credit arising with re- spect to a foreign withholding payment dividend derived by a taxpayer from a company during an accounting year is the greater of nil and the amount calculated in accordance with the following formula: 1862 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LF 3 where— a is the amount of the foreign withholding payment divi- dend (before deduction of any withholding tax and with- out any reduction under section CD 10C) b c d e is the aggregate amount of income tax paid or payable on the income of the company with respect to all eligible accounting years (not being income tax deemed paid under section LF 4) is the aggregate amount of income tax deemed under section LF 4 to be paid by the company in all eligible accounting years with respect to dividends derived from lower tier companies is the aggregate of all underlying foreign tax credit amounts, determined under section LF 2, with respect to all dividends paid by the company during an eligible accounting year (not including the current year), calcu- lated as if,— (a) in the case of any dividend not derived by the tax- payer, the dividend were derived by the taxpayer at a time when the taxpayer had a sufﬁcient inter- est in the company; and in the case of any dividend derived before 28 Sep- tember 1993, as if this section applied at the time the dividend was derived (b) is the aggregate amount of underlying foreign tax credit amounts with respect to all dividends paid by the company during the current year, being dividends to which section LF 5(1) applies, calculated as if, in the case of any dividend paid during the current year which was not derived by the taxpayer, the dividend were derived by the taxpayer at a time when the taxpayer had a sufﬁcient interest in the company f is equal to the greater of— (a) the aggregate amount of after-income tax earn- ings (less after-income tax losses) of the com- pany with respect to all eligible accounting
 years; or 1863 Part L s LF 3 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) the aggregate of— (i) all dividends paid by the company during the accounting year other than dividends included in item “h”; and the amounts of items “g” and “h” (ii) g h is the aggregate amount of dividends paid by the com- pany during an eligible accounting year (not including the current year) is the aggregate amount of dividends paid by the com- pany during the current year which— (a) are dividends to which section LF 2(2) or LF 5(1) applies; or in the case of any dividends not derived by the taxpayer, would be dividends to which section LF 2(2) or LF 5(1) would apply if derived by the taxpayer.
(b) (2) Where— (a) an amount of underlying foreign tax credit is being cal- culated under subsection (1) with respect to any divi- dend paid by a company during an accounting year; and the ﬁnancial statements of the company for the account- ing year are prepared in a currency other than New Zealand currency,— (b) the calculation of the amount of underlying foreign tax credit must be undertaken in the foreign currency and converted to New Zealand currency at the close of trading spot exchange rate for the day on which the dividend is paid.
Compare: 1994 No 164 s LF 3 Subsection (1) item a was amended, as from 1 April 2006, by section 132(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “and without any reduction under section CD 10B” after the words “withholding tax”.
Subsection (1) item a was amended, as from 1 April 2006, by section 119 Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “section CD 10C” for “section CD 10B”.

Subsection (1) item b was amended, as from 1 April 2006, by section 132(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “on the income of the com- pany” for “by the company”.
1864 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LF 4 LF 4 Dividends from lower-tier companies (1) For the purposes of section LF 3 with respect to the calculation of an amount of underlying foreign tax credit in respect of a foreign withholding payment dividend derived by a taxpayer, where— (a) a company pays a standard dividend to another com- pany; and at the time the dividend is paid, the taxpayer has a suf- ﬁcient interest in both companies,— (b) the other company is deemed to have paid (in addition to any actual tax paid or payable), with respect to its earnings in its accounting year in which the dividend is derived, income tax equal to the amount of underlying foreign tax credit deter- mined under section LF 2 with respect to the dividend as if— (c) (d) the other company were the taxpayer; and the dividend were a foreign withholding payment divi- dend to which section LF 2 applies; and the only dividends paid by the company paying the standard dividend were those of its dividends which are standard dividends; and all such standard dividends were foreign withholding payment dividends to which section LF 2 applies.
(e) (f) (2) Notwithstanding subsection (1), the income tax deemed paid must not exceed the amount (being not less than nil) calculated in accordance with the following formula: ((a + b + c) x d) – c where— a is the amount of the dividend (after deduction of any b c d withholding tax paid in respect of the dividend) is the amount of underlying foreign tax credit referred to in subsection (1) is the withholding tax paid in respect of the dividend is the basic rate of income tax for companies, ex- pressed as a percentage, stated in schedule 1, part A, clause 5, and applying in respect of the tax year in which the dividend is paid.
(3) Notwithstanding any provision of section LF 3 or the preced- ing provisions of this section, the amount of underlying foreign tax credit arising with respect to a foreign withholding pay- 1865 Part L s LF 5 Income Tax Act 2004 Reprinted as at 29 August 2011 ment dividend, including the notional credit calculated under the concluding phrase and 4 paragraphs of subsection (1), paid by a company resident in New Zealand which has ever been an imputation credit account company must not exceed the imput- ation credit attached to the dividend and is nil if no imputation credit is attached.
Compare: 1994 No 164 s LF 4 LF 5 Dividends from grey list companies (1) Where— (a) a taxpayer derives a foreign withholding payment divi- dend from a grey list company; and for all eligible accounting years, a country or territory speciﬁed in schedule 3, part A— (i) is the residence of the company under section OE 2(3) to (6) and imposes on the company liability for income tax on the company’s income because the company is domiciled in the country, is resi- dent in the country, is incorporated in the country, or has its place of management in the country: is the country under whose laws the company is organised and imposes on persons holding in- come interests in the company a liability for in- come tax on the company’s income and is the source of 80% or more of the company’s income; and (ii) for all eligible accounting years, the income of the com- pany that is liable to income tax in the country or terri- tory is calculated without applying any features of the taxation law of the country or territory that are speciﬁed in schedule 3, part B (except where and to the extent that the feature is that speciﬁed in schedule 3, part B, clause 1 and the exemption is in respect of business activities carried on in a country or territory speciﬁed in schedule 3, part A); and the company is either— (i) times during the period commencing at all with— (b) (c) (d) 1866 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LF 5 (A) (B) the ﬁrst day of the third accounting year of the company preceding the ﬁrst account- ing year in which the taxpayer had a sufﬁ- cient interest in the company; or the date of incorporation of the company, where the taxpayer had a sufﬁcient interest in the company when it was ﬁrst incorpor- ated or ﬁrst acquired a sufﬁcient interest in the company less than 3 years after the date of incorporation of the company,— (ii) and ending with the time at which the dividend is paid, a foreign company; or at the time the dividend is paid, a member of the same wholly-owned group of companies as the
 taxpayer; and (e) the taxpayer has maintained, with respect to transac- tions occurring on or after the latest of— (i) (ii) 20 October 1992; and the ﬁrst day of the ﬁrst eligible accounting year; and the ﬁrst day of such eligible accounting year as the taxpayer elects,— (iii) (such latest date being referred to in subsection (2) as the effective date) and can furnish to the Commissioner, if requested, the tracking account required under sub- section (2) in order to determine the extent of the appli- cation of this subsection to the dividend,— the amount of the underlying tax credit arising with respect to the dividend is equal to the amount calculated in accordance with the following formula: where— a is the amount of the dividend (before deduction of any withholding tax) b is the basic rate of income tax for companies, ex- pressed as a percentage, stated in schedule 1, part A, clause 5, and applying in respect of the tax year in which the dividend is paid.
1867 Part L s LF 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) Subsection (1) applies to a dividend paid by a company to the taxpayer in an accounting year only to the extent to which it exceeds the amount calculated by multiplying the dividend by the lesser of 1 and the following fraction: where— a is the credit balance (if any) at the last day of the ac- counting year of the company in an account which is— credited with each of the following amounts (re- (a) ferred to in this subsection as the applicable pay- ments) derived or received by the company on or after the effective date and before the end of the accounting year, except to the extent such amounts are paid by a company resident in New Zealand or, had they been dividends derived by the taxpayer, would have been dividends with re- spect to which an amount of underlying tax credit would have been deemed to arise under subsec- tion (1): (i) any standard dividend in respect of which the company is not liable to income tax; and a dividend paid by a relevant associate and in respect of which the company is not liable to income tax, not being— (A) (B) (C) attributed repatriation; or a standard dividend; or a dividend arising only by virtue of a difference between the rate of in- terest speciﬁed in section CD 28(6) to (8) and the interest rate in fact payable in respect of a loan made by the relevant associate to the com- pany, to the extent to which the loan is treated as an applicable payment under subparagraph (iv); and any amount subscribed for shares issued by the company (or otherwise contributed (ii) (iii) 1868 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LF 5 (v) (iv) to the company as additional equity) by a relevant associate, to the extent to which the relevant associate has, at the time of subscription (or contribution), retained earnings; and any amount advanced by way of loan to the company by a relevant associate (ex- cept where and to the extent that the tax- payer anticipates that the advance will be repaid within 5
 years and the advance is in fact so repaid) to the extent to which the relevant associate has, at the time of ad- vance, retained earnings; and any amount, not being a dividend, paid by a relevant associate, which would be assessable income of the company if the company were at all times resident in New Zealand and in respect of which the com- pany is not liable to income tax; and in any case where the effective date is determined by subsection (1)(e)(iii), credited with the re- tained earnings of the company at the end of the accounting year immediately preceding the ac- counting year in respect of which the taxpayer makes the election; and debited with the aggregate of amounts (not be- ing dividends to which paragraph (d) of this item applies) paid by the company on or after the ef- fective date and before the end of the accounting year and derived by another company as applic- able payments where and to the extent that— (i) the taxpayer maintains, with respect to that other company, a tracking account with an effective date earlier than the time of payment of the amount; and the amount is credited to that account maintained with respect to that other com- pany; and (ii) 1869 (b) (c) Part L s LF 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) (e) debited with the aggregate amount of dividends paid by the company on or after the effective date and before the start of the accounting year in re- spect of which an amount of underlying foreign tax credit amount would have been deemed to arise under subsection (1) but for the application, in respect of the taxpayer, of this subsection (had all such dividends been derived by the taxpayer); and in any case where the company prepares its ﬁ- nancial statements in a currency (referred to in this paragraph as the ﬁrst currency) other than New Zealand currency, prepared in the ﬁrst cur- rency and converted, in any case where the ap- plicable payment is paid in a different currency, to the ﬁrst currency at the close of
 trading spot ex- change rate (as if all references to New Zealand currency in the deﬁnition of close of trading spot exchange rate were to the ﬁrst currency) on the day on which the applicable payment or dividend is paid b is the aggregate amount of dividends paid by the com- pany during the accounting year to which subsection (1) (or would, but for this subsection) applies to deem an amount of underlying foreign tax credit to arise (had all such dividends been derived by the taxpayer).
For the purposes of subsection (2), a company is treated as not being liable to income tax of a country or territory in respect of an amount derived by the company where and to the extent that the derivation of the amount gives rise, under the taxation law of the country or territory, to a rebate, credit, deduction, subsidy, or similar beneﬁt (not being in any case merely the deduction of a current year loss to offset the amount or the op- eration merely, under the taxation law of the country or terri- tory, of provisions equivalent to this subpart or any of sections BH 1, IE 1, IF 1, IG 2, LC 1, and MF 5) which has the direct or indirect effect of rebating to the company the income tax for which the company is liable in respect of the amount.
(3) 1870 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LF 5 (3A) Where a company carries on the business of providing life in- surance, subsection (2) applies as if the amounts referred to in paragraph (a)(i) to (v) of item “a” in that subsection were limited to such amounts as are actuarially determined to be part of the proﬁt or loss of the company which the sharehold- ers (and not the policyholders in the company) are attributed with, except where the Commissioner— (a) considers that the amounts so determined are not a rea- sonable and fair reﬂection of the relevant part of the proﬁt or loss; or has requested but has not received sufﬁcient informa- tion to allow the Commissioner to review the actuarial calculation of the amount.
(b) (5) (4) Where, as a result of subsection (2), subsection (1) applies to part of a dividend only, the part to which subsection (1) does not apply is treated as a separate dividend to which section LF 3 applies to calculate an amount of underlying foreign tax credit.
In subsection (2),— relevant associate means, at any time with respect to any tax- payer and any dividend paid by any company (referred to in this deﬁnition as the company), a company (other than the taxpayer) which is at the time— (a) (b) associated with both the taxpayer and the company; and either— (i) (ii) resident in New Zealand; or a controlled foreign company retained earnings means, with respect to any company at any time, the aggregate at the time of the company’s shareholders’ funds (calculated under generally accepted accounting prac- tice) after deduction of the aggregate of— (a) (b) (c) the company’s paid up share capital; and the company’s share premium account; and any amount subscribed by the company, prior to the time, for shares issued by another company and cred- ited, under paragraph (a)(iii) of item “a” of the formula in subsection (2), to the tracking account maintained with respect to another company; and 1871 Part L s LF 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) (e) any principal balance outstanding, at the time, of a loan by the company which has been credited, under para- graph (a)(iv) of item “a” of the formula in subsection (2), to the tracking account maintained with respect to another company; and any amount, not being an amount previously or other- wise deducted in calculating the aggregate at the time of the company’s shareholders’ funds, paid by the com- pany prior to the time and credited, under paragraph (a)(v) of item “a” of the formula in subsection (2), to the tracking account maintained with respect to another company,— not being amounts of the company’s paid-up share capital or share premium account resulting from— (f) (g) bonus issues by the company; or reinvestment, directly or indirectly, of distributions made by the company,— except to the extent to which such bonus issues or distributions were— (h) derived by another company as applicable payments (as deﬁned in paragraph (a) of item “a” of the formula in subsection (2)) where the taxpayer maintains, with
 re- spect to that other company, a tracking account with an effective date (as deﬁned in subsection (1)(e)) earlier than the time of derivation of the bonus issue or distri- bution; or foreign withholding payment dividends; or derived by a shareholder of the company subject to in- come tax.
Compare: 1994 No 164 s LF 5 (i) (j) Subsection (1)(b) was substituted, as from 1 April 2006, by section 133(1) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).
Subsection (1)(c) was amended, as from 1 April 2006, by section 133(2) Taxa- tion (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3) by substituting “for all eligible accounting years, the income of the company that is liable to income tax in the country or territory is calculated” for “the company has in respect of all eligible accounting years, for the purposes of income tax in the country or territory, calculated its income liable to income tax”.
1872 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LF 6 LF 6 Procedures with respect to underlying foreign tax credit (1) A taxpayer may, before 28 September 1995 (or by such later date as the Commissioner may allow, where the Commissioner is satisﬁed that the reason for the failure to meet the deadline is beyond the control of the taxpayer), furnish to the Commis- sioner, in such form as the Commissioner may allow, details of— (a) the earnings of a company for any 1 or more accounting years immediately preceding the commencement date; and the income tax paid or payable with respect to the earn- ings of those years; and dividends paid by the company during those years; and amounts of underlying foreign tax credits arising under section LF 2 with respect to those dividends.
(b) (c) (d) (2) Notwithstanding any provision in section NH 3 or in section 102 or 139B of the Tax Administration Act 1994, the Commis- sioner may not assess any company for dividend withholding payment or late payment penalty for late payment of dividend withholding payment, to the extent such assessment is made only by reason of the Commissioner disputing details provided by the company to the Commissioner under subsection (1) or (6)(c), after the expiration of 4 years from the later of— (a) (b) the date upon which the details were provided; and the last date speciﬁed in or allowed by the Commis- sioner under subsection (1) or (6), as the case may be, for ﬁling the details,— except where, in the opinion of the Commissioner, the details are fraudulently or wilfully misleading.
(3) Where— (a) a taxpayer furnishes under subsection (1) details in re- spect of an accounting year of a company to which para- graph (c)(i) or (ii) of the deﬁnition of eligible account- ing year does not apply; and the company is at any time in the accounting year a low tax jurisdiction company,— (b) for the purposes of this subpart the company is treated as— (c) deriving, in that accounting year, only those of its earn- ings for the accounting year which are dividends derived 1873 Part L s LF 6 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) (d) from another company which is, at the time of deriv- ation, not a low tax jurisdiction company; and paying, with respect to its earnings in that accounting year, only those amounts of income tax paid or payable with respect to the earnings for the accounting year which are— (i) income tax payable, in the country or territory in which the other company is resident, with respect to those dividends; or income tax deemed under section LF 4 to be payable by the company with respect to deriv- ation of those dividends— and the taxpayer must furnish the details accordingly.
For the purposes of section LF 3, with respect to any taxpayer, no amount of income tax is paid or payable in respect of earn- ings of a company for an accounting year except where— (a) (ii) (ii) (iii) the taxpayer has available to furnish, if requested, to the Commissioner— (i) a copy of a receipt issued by the relevant revenue authority evidencing payment of the amount of tax; or a copy of a return of income, of substantially the same nature as a return of income furnished under this Act, of the company as furnished to the rele- vant revenue authority and showing as payable the amount of tax; or a copy of a demand, statement of account, or sim- ilar paper issued by the relevant revenue authority requesting payment of the amount of tax; or the Commissioner is satisﬁed on the basis of any other evidence, such as an auditor’s certiﬁcate, the amount of tax is paid or payable; or the company is deemed under section LF 4 to have paid the amount of tax (but without prejudice to the deter- mination of whether the lower-tier company paying the relevant dividend is treated as paying any amount of tax).
that (b) (c) (5) Where, with respect to any taxpayer and any company,— 1874 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LF 6 (a) (b) the taxpayer has reason to believe that the statements used, under the deﬁnition of after-income tax earnings, to measure the after-income tax earnings or after-in- come tax loss of the company for any eligible account- ing year do not fairly present the actual after tax proﬁts or loss of the company for the eligible accounting year; or the Commissioner has concluded that such statements do not fairly present the actual after-tax proﬁts or loss of the company for an eligible accounting year; or no statements exist to which any of the paragraphs of the deﬁnition of after-income tax earnings apply in re- spect of the company and an eligible accounting year,— then, for the purposes of section LF 3, the income tax paid or payable by that company with respect to its earnings for that accounting year, the immediately preceding accounting year, and the immediately succeeding accounting year is in each case nil.
(c) (6) Where the amount of any dividend withholding payment de- ductible under section NH 2(1) with respect to a foreign with- holding payment dividend derived by a taxpayer is reducible by virtue of an amount of underlying foreign tax credit arising with respect to the dividend, then, notwithstanding anything in section NH 2, no such reduction is allowed unless the tax- payer has furnished to the Commissioner, within such time as the Commissioner may allow in a particular case or class of cases having regard to the period stated in section LC 13, all information speciﬁed by the Commissioner as being necessary to verify the calculation of the amount of underlying foreign tax credit, including, if speciﬁed by the Commissioner,— (a) details of the calculation of the amounts of items “a” to “h” of the formula in section LF 3(1) with respect to the underlying foreign tax credit amount; and in any case where the amount of underlying foreign tax credit is calculated under section LF 5(1), details of the relevant tracking account and entries in that account; and in any case where the amount of underlying foreign tax credit is calculated having regard to underlying foreign (b) (c) 1875 Part L s LF 7 Income Tax Act 2004 Reprinted as at 29 August 2011 tax credit amounts arising under section LF 4 with re- spect to a lower-tier company, details of the calculation of items “a” to “h” of the formula in section LF 3(1), or of the relevant tracking account and entries in that ac- count (as the case may be) with respect to the underlying foreign tax credit amount in respect of the lower-tier company.
Compare: 1994 No 164 s LF 6 Subsection (4) was amended, as from 1 April 2006, by section 134 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “no amount of income tax is paid or payable in respect of earnings of a company” for “a company is treated as hav- ing no amount of income tax paid or payable with respect to its earnings”.
LF 7 Interest paid in conduit ﬁnancing arrangements Notwithstanding anything in sections DB 6 to DB 8, or any other provision of this Act, where— (a) any company— (i) (ii) incurs any interest expenditure for which the company is allowed a deduction under this Act; or incurs expenditure under the ﬁnancial arrange- ments rules,— in any tax year; and in that tax year or a preceding tax year— (i) (ii) the company; or another company resident in New Zealand which is at the time of derivation associated with the company,— derives a dividend from a company (referred to in this section as the ﬁrst foreign company); and section LF 5(1) deems an amount of underlying foreign tax credit to arise in respect of the dividend or, by virtue of section LF 4, results in an amount of underlying for- eign tax credit arising in respect of the dividend; and the interest, or the consideration payable by the com- pany giving rise to the expenditure incurred under the ﬁnancial arrangements rules, is paid, directly or indi- rectly and whether by 1 transaction or a series of trans- actions, to— (b) (c) (d) 1876 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LF 7 (i) (ii) the ﬁrst foreign company; or a person (referred to in this section as the associ- ate) who, at the time of payment,— (A) is associated with the ﬁrst foreign com- pany; and is a foreign company; and (B) (e) (f) the interest or consideration is paid; or the dividend is paid,— at the time at which— (i) (ii) persons not resident in New Zealand have— (iii) (iv) voting interests; or in any case where at the time a market value cir- cumstance exists in respect of the company, mar- ket value interests,— aggregating 50% or greater in the ﬁrst foreign company and, in any case to which paragraph (d)(ii) applies, the associate; and at the time at which— (i) (ii) the recipient (referred to in paragraph (d)(i) and (ii)) of the direct or indirect payment of interest or consider- ation (referred to in that paragraph) is not a controlled foreign company,— the interest or
 consideration is paid; and the dividend is paid,— the company is denied any deduction in calculating the net in- come of the company for such interest or expenditure incurred in the tax year except where and to the extent that the aggre- gate of such interest or expenditure incurred in the tax year exceeds the amount calculated in accordance with the follow- ing formula: a – b where— a is the aggregate amount of dividends (before deduction of any withholding tax) in respect of which an amount of underlying foreign tax credit has been deemed to arise under or by virtue of section LF 5(1), derived by— (i) (ii) the company; or another company resident in New Zealand which is associated at the time with the company,— 1877 Income Tax Act 2004 Reprinted as at 29 August 2011 in the tax year or any preceding tax year from the ﬁrst foreign company b is the aggregate amount of— (i) (ii) such interest or expenditure incurred in any pre- ceding tax year for which, under this section, the company has been denied a deduction by virtue of the receipt of such dividends from the ﬁrst for- eign company; and income derived by the company under a ﬁnancial arrangement for which the interest or expenditure is incurred in any preceding tax year if, in those tax years, the ﬁrst foreign company or the asso- ciate (as the case may be) were a party to the ﬁ- nancial arrangement.
Compare: 1994 No 164 s LF 7 Subpart LG—Conduit tax relief credits Contents LG 1 Conduit tax relief additional dividends Page 1878 LG 1 Conduit tax relief additional dividends (1) equal in amount to the conduit tax relief credit; and paid with respect to the ﬁrst dividend; and derived by the same person.
If a conduit tax relief company pays a dividend to a non-resi- dent and a conduit tax relief credit is attached to the dividend, the company must pay a conduit tax relief additional dividend at the same time.

The additional dividend must be— (a) (b) (c) Sections GC 22, ME 8, and MG 8 apply as if the company had never paid the additional dividend.
The payment of an additional dividend to all non-resident shareholders that hold shares of a particular class (that would otherwise be prohibited) does not contravene— section 53 of the Companies Act 1993; or (a) (2) (3) (4) 1878 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LG 1 (b) (c) a provision of the company’s articles of association or constitution, unless the provision expressly refers to this subsection; or another rule of law.
(5) When a trustee derives the dividend and is required under the terms of the trust to distribute it to a beneﬁciary, the trustee’s distribution of an additional dividend to the same beneﬁciary does not contravene the terms of the trust.

The rules for determining residence in sections OE 7 and OE 8 apply for the purposes of subsections (1) and (4).
Compare: 1994 No 164 s LG 1 (6) Part M Tax payments Contents Subpart MB—Provisional tax Introductory provisions MB 1 Outline of subpart MB 2 Who pays provisional tax?
MB 2A Election to be provisional taxpayer [Repealed] MB 2B Amount of provisional tax based on 1997-98 or earlier tax year [Repealed] MB 3 Becoming provisional taxpayer by election MB 3B Provisional taxpayer affected by self-assessed adverse event or qualifying event [Repealed] Calculation of provisional tax liability MB 4 Methods for calculating provisional tax liability MB 5 Standard method MB 5A Amount of provisional tax instalments in transitional year [Repealed] MB 6 Estimation method MB 7 GST ratio method Instalments of provisional tax MB 8 Provisional tax payable in instalments MB 9 Calculating amount of instalment under standard and estimation methods Page 1890 1891 1892 1892 1892 1893 1893 1895 1896 1896 1897 1901 1906 MB 9A Provisional tax and attribution rule for services [Repealed] 1908 1879 Income Tax Act 2004 Reprinted as at 29 August 2011 MB 10 Calculating amount of instalment using GST ratio MB 11 Using GST refund to pay instalment of provisional tax MB 11B Transitional provisions relating to alignment of dates of payment for provisional tax and GST [Repealed] MB 12 Voluntary payments MB 13 Paying 2 instalments for tax year MB 14 Paying 1 instalment for tax year Requirements for using GST ratio MB 15 Who may use GST ratio?
MB 16 Choosing to use GST ratio MB 17 Changing determination method MB 18 Disposal of assets Transitional years MB 19 Calculating residual income tax in transitional years MB 20 Paying provisional tax in transitional years MB 21 Calculating instalments in transitional years: standard method 1908 1909 1909 1910 1910 1911 1913 1916 1916 1918 1920 1921 1923 MB 22 Calculating instalments in transitional years: estimation 1924 method MB 23 Calculating instalments in transitional years: GST ratio 1925 method MB 24 Consequences of change in balance date 1925 When provisional taxpayers start or stop paying GST, or change taxable periods MB 25 Registering for GST or cancelling registration MB 26 Changing GST cycle MB 27 Payment of provisional tax instalments when GST cycle 1928 1929 1930 changed Penalties and interest provisions MB 28 Application of provisions of Tax Administration Act 1994 1933 Treatment of groups of companies and amalgamated companies MB 29 Provisional tax rules and consolidated groups MB 30 Residual income tax of consolidated groups MB 31 Consolidated groups using estimation method MB 32 Consolidated groups using GST ratio method MB 33 Wholly-owned groups of companies MB 34 Amalgamated companies: calculating residual income tax 1934 1934 1935 1936 1937 1938 1880 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LG 1 MB 35 Attribution rule for services Attribution rule for services Overpayments and credits MB 36 Overpaid provisional tax MB 37 Further income tax credited to provisional tax liability 1939 1940 1942 MB 38 Provisional taxpayer affected by self-assessed adverse 1942 event or qualifying event Disaster relief Subpart MBA—Pooling of provisional tax MBA 1 Purpose MBA 2 Function of intermediary and tax pooling account MBA 3 Application to establish tax pooling account MBA 4 Tax pooling account MBA 5 Deposits to tax pooling account MBA 6 Transfers from tax pooling account MBA 7 Refunds from tax pooling account MBA 8 Wind up of tax pooling account MBA 9 Tax treatment of payments of
 interest Subpart MBB—Early-payment discount of income tax MBB 1 Purpose MBB 2 Availability of early-payment discount MBB 3 Credit treated as being payment as income tax MBB 4 Some deﬁnitions MC 1 Payment of terminal tax Subpart MC—Terminal tax Subpart MD—Refunds MD 1 Refund of excess tax MD 2 Limit on refunds and allocations of tax MD 2A Limits on refunds of tax for certain qualifying unit trusts and group investment funds MD 2B Limits on refunds of tax in relation to Maori authorities MD 3 Refund of income tax not to exceed amount of credit balance MD 5 No credits or debits for excess income tax or dividend withholding payments not refunded or allocated 1944 1944 1944 1945 1946 1947 1948 1949 1950 1950 1951 1952 1952 1953 1954 1956 1960 1960 1962 1964 Subpart ME—Imputation credit accounts Imputation credit accounts: general ME 1 Companies required to maintain imputation credit account 1967 1881 Income Tax Act 2004 Reprinted as at 29 August 2011 ME 1A Companies electing to maintain imputation credit account ME 1B Amount of dividend for imputation rules if paid in Australian currency Imputation credit account ME 2 Balance of imputation credit account ME 3 ME 4 Credits arising to imputation credit account ME 5 Debits arising to imputation credit account ME 6 Company may attach imputation credit to dividend ME 6B Share user may attach imputation credit to replacement 1968 1970 1971 1971 1972 1979 1989 1993 payment ME 7 Transfer by life insurance company of credit balance to 1993 policyholder credit account ME 8 Allocation rules for imputation credits ME 9 Further tax payable where end of year debit balance, or when company ceases to be imputation credit account company 1995 1997 ME 9B Imputation credit account company leaving wholly-owned 2000 group ME 9C Imputation credit account company joining wholly-owned 2003 group Consolidated imputation groups ME 10 Consolidated imputation group to maintain separate imputation credit account ME 11 Credits arising to imputation
 credit account of group ME 12 Debits arising to imputation credit account of group ME 13 Debiting and crediting between consolidated imputation group and individual companies ME 14 Application of speciﬁc imputation provisions to consolidated imputation groups Policyholder credit accounts ME 15 Resident life insurance companies to maintain policyholder credit account ME 16 Calculation of balance of policyholder credit account ME 17 Policyholder credit account of company ME 18 Credits and debits arising to policyholder credit account of company 2006 2007 2013 2020 2022 2026 2026 2026 2027 ME 19 Election to use credit balance as credit against policyholder 2030 base income tax liability or as credit in imputation credit account ME 19A Credit balance may be transferred on transfer of life 2031 insurance business 1882 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LG 1 ME 20 Determinations by Commissioner as to credits and debits 2032 arising to policyholder credit account ME 21 Person may elect to maintain policyholder credit account ME 22 Policyholder credit account of person ME 23 Credits and debits arising to policyholder credit account of person ME 24 Use of credit balance to reduce income tax Policyholder credit accounts: consolidated groups ME 25 Policyholder credit accounts and consolidated groups ME 26 Credits and debits arising to group policyholder credit account ME 27 Debiting and crediting between group and individual policyholder credit accounts 2033 2034 2035 2037 2038 2038 2040 ME 28 Application of policyholder credit account provisions to 2041 consolidated group Imputation credit accounts and policyholder credit accounts: amalgamated companies ME 29 Debits and credits arising to imputation credit account or 2042 policyholder credit account on amalgamation Imputation credit accounts: statutory producer boards ME 30 Statutory producer board may determine to attach imputation credit to certain distributions ME 31 Amount of imputation credit to be
 attached to cash 2044 2045 distribution ME 32 Amount of imputation credit to be attached to notional 2046 distribution ME 33 Notional distribution deemed to be dividend ME 34 Statutory producer boards and dividend withholding 2048 2049 payments Imputation credits: co-operative companies ME 35 Co-operative company may make annual determination to 2050 attach imputation credit to certain distributions ME 36 Amount of imputation credit to be attached to cash 2051 distribution ME 37 Amount of imputation credit to be attached to notional 2052 distribution ME 38 Notional distribution deemed to be dividend or taxable 2052 Maori authority distribution ME 39 Co-operative companies and dividend withholding 2053 payments 1883 Income Tax Act 2004 Reprinted as at 29 August 2011 Imputation credit accounts: credits and debits incorrectly recorded ME 40 Determinations by Commissioner as to credits and debits 2054 arising to imputation credit account Imputation credit accounts: unit trusts and group investment funds ME 41 Special debits arising to imputation credit account of unit 2055 trust or group investment fund Subpart MF—Branch equivalent tax accounts Branch equivalent tax accounts of companies MF 1 Company may elect to maintain branch equivalent tax account MF 2 Balance of branch equivalent tax account MF 3 Branch equivalent tax account of company MF 4 Credits and debits arising to branch equivalent tax account 2058 2059 2059 2060 of company MF 5 Use of credit to reduce dividend withholding payment, or 2066 use of debit to satisfy income tax liability MF 6 Determinations by Commissioner as to credits and debits 2068 arising to branch equivalent tax account Consolidated groups MF 7 Branch equivalent tax accounts and consolidated groups MF 8 Debits and credits arising to group branch equivalent tax account MF 9 Debiting and crediting between group and individual branch equivalent tax accounts MF 10 Use of consolidated group credit to reduce dividend withholding payment, or use of
 group or individual debit to satisfy income tax liability Branch equivalent tax accounts of persons MF 11 Person may elect to maintain branch equivalent tax 2070 2071 2075 2075 2079 account MF 12 Branch equivalent tax account of person MF 13 Credits and debits arising to branch equivalent tax account 2080 2080 of person MF 14 Debit election to offset income tax payable in respect of 2082 foreign dividend MF 15 Extension of branch equivalent tax account provisions to 2082 certain FIF income 1884 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LG 1 Amalgamated companies MF 16 Debits and credits arising to branch equivalent tax account 2083 of amalgamated company on amalgamation Subpart MG—Dividend withholding payment accounts MG 1 Balance of dividend withholding payment account MG 2 Company may elect to maintain dividend withholding payment account MG 3 Dividend withholding payment account MG 4 Credits arising to dividend withholding payment account MG 5 Debits arising to dividend withholding payment account MG 6 Company may attach dividend withholding payment credit to dividend 2085 2086 2087 2088 2090 2094 MG 7 Transfer by life insurance company of credit balance to 2095 policyholder credit account MG 8 Allocation rules for dividend withholding payment credits MG 8B Policyholder credit account companies and dividend withholding payment credits MG 9 Further dividend withholding payment payable by company MG 10 Dividend with both imputation credit and dividend withholding payment credit attached 2096 2098 2102 2104 MG 11 Transfer of credit balance to imputation credit account 2105 Credits and debits incorrectly recorded MG 12 Determinations by Commissioner as to credits and debits 2105 arising to dividend withholding payment credit account Consolidated groups MG 13 Dividend withholding payment accounts and consolidated 2107 groups MG 14 Credits arising to group dividend withholding payment 2109 account MG 15 Debits arising to group dividend withholding
 payment 2111 account MG 16 Debiting and crediting between group and individual 2114 dividend withholding payment accounts MG 16A Application of speciﬁc dividend withholding provisions 2116 to consolidated groups Amalgamated companies MG 17 Debits and credits arising to dividend withholding 2118 payment account of amalgamated company on amalgamation 1885 Income Tax Act 2004 Reprinted as at 29 August 2011 Subpart MH—Payment of tax by public authorities MH 1 Payment of tax by public authorities Subpart MI—Conduit tax relief accounts MI 1 Balance of conduit tax relief account MI 2 Company may elect to be conduit tax relief company and maintain conduit tax relief account MI 3 Conduit tax relief account MI 4 Credits arising to conduit tax relief account MI 5 Debits arising to conduit tax relief account MI 6 End of imputation year clearing transfer to or from dividend withholding payment account MI 7 Attachment of conduit tax relief credit to dividend MI 8 Allocation rules for conduit tax relief credits MI 9 Arrangement to obtain tax advantage MI 10 Dividend withholding payment payable in respect of conduit tax relief account debits MI 11 Refund of tax in respect of transfer from dividend withholding payment account Credits and debits incorrectly recorded MI 12 Correction by Commissioner of credits and debits MI 13 Debits and credits arising to conduit tax relief account of amalgamated company on amalgamation 2120 2121 2121 2122 2123 2124 2127 2128 2128 2128 2128 2129 2130 2130 Consolidated groups MI 14 Consolidated group to maintain separate conduit tax relief 2132 account MI 15 Consolidated group conduit tax relief account MI 16 Consolidated group member is conduit tax relief company MI 17 Credits arising to group conduit tax relief account MI 18 Debits arising to group conduit tax relief account MI 19 Debiting and crediting between group and individual conduit tax relief accounts MI 20 End of imputation year clearing transfer to or from dividend withholding payment
 account MI 21 Dividend with-holding payment payable in respect of group conduit tax relief account debits MI 22 Application of speciﬁc conduit tax relief account provisions to consolidated groups 2132 2132 2132 2134 2136 2137 2138 2139 1886 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LG 1 Subpart MJ—Supplementary available subscribed capital accounts MJ 1 Qualifying unit trust or group investment fund may elect 2141 to maintain supplementary available subscribed capital account MJ 2 Balance of supplementary available subscribed capital 2141 MJ 3 MJ 4 account Supplementary available subscribed capital account Supplementary available subscribed capital account: opening balance MJ 5 Credits arising to supplementary available subscribed capital account MJ 6 Debits arising to supplementary available subscribed capital account Liquidation of qualifying unit trust or group investment fund MJ 7 Special rule for certain qualifying unit trusts and group investment funds Credits and debits incorrectly recorded MJ 8 Correction by Commissioner of credits and debits Subpart MK—Maori authority credit accounts MK 1 Maori authority to maintain Maori authority credit account MK 2 Balance of Maori authority credit account MK 3 Maori authority credit account MK 4 Credits arising to Maori authority credit account MK 5 Debits arising to Maori authority credit account MK 6 Maori authority may attach Maori authority credit to distribution MK 7 Allocation rules for Maori authority credit account credits MK 8 Further tax payable for end of year debit balance or when Maori authority ceases to exist Credits and debits incorrectly recorded MK 9 Correction by Commissioner of credits and debits Subpart MZ—Terminating provisions MZ 1 Savings for certain credits arising in relation to overpayment of income tax or dividend withholding payment MZ 2 Ordering rule for purposes of section MZ 1 2142 2142 2143 2144 2145 2145 2146 2147 2147 2147 2149 2153 2153 2155 2156 2157 2158 1887
 Income Tax Act 2004 Reprinted as at 29 August 2011 MZ 3 Transfers of dividend withholding payment credit balance 2159 to imputation credit account MZ 4 Attachment of dividend withholding payment credits to 2160 dividends to non-residents MZ 5 Application of excess tax to nil period MZ 6 Application of excess tax for 2001-02 tax year MZ 7 Application of allocation debit rules to certain dividends [Repealed] MZ 8 Certain elections to become provisional taxpayer MZ 9 Amount of provisional tax based on 199798 or earlier tax year MZ 10 Calculating provisional tax instalments: section MB 4 MZ 11 Calculating provisional tax instalments: sections MB 7 and MB 10 MZ 12 Calculating provisional tax instalments: section MB 9 2161 2162 2163 2163 2163 2164 2164 2164 Subpart MB—Provisional tax Subpart MB: substituted, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Contents Introductory provisions MB 1 Outline of subpart MB 2 Who pays provisional tax?
MB 2A Election to be provisional taxpayer [Repealed] MB 2B Amount of provisional tax based on 1997-98 or earlier tax year [Repealed] MB 3 Becoming provisional taxpayer by election MB 3B Provisional taxpayer affected by self-assessed adverse event or qualifying event [Repealed] Calculation of provisional tax liability MB 4 Methods for calculating provisional tax liability MB 5 Standard method MB 5A Amount of provisional tax instalments in transitional year [Repealed] MB 6 Estimation method MB 7 GST ratio method 1888 Page 1890 1891 1892 1892 1892 1893 1893 1895 1896 1896 1897 Reprinted as at 29 August 2011 Income Tax Act 2004 Part L s LG 1 Instalments of provisional tax MB 8 Provisional tax payable in instalments MB 9 Calculating amount of instalment under standard and estimation methods MB 9A Provisional tax and attribution rule for services [Repealed] MB 10 Calculating amount of instalment using GST ratio MB 11 Using GST refund to pay instalment of provisional tax MB 11B Transitional provisions relating to alignment of dates of payment for provisional tax and GST [Repealed] MB 12 Voluntary payments MB 13 Paying 2 instalments for tax year MB 14 Paying 1 instalment for tax year Requirements for using GST ratio MB 15 Who may use GST ratio?
MB 16 Choosing to use GST ratio MB 17 Changing determination method MB 18 Disposal of assets Transitional years MB 19 Calculating residual income tax in transitional years MB 20 Paying provisional tax in transitional years MB 21 Calculating instalments in transitional years: standard method 1901 1906 1908 1908 1909 1909 1910 1910 1911 1913 1916 1916 1918 1920 1921 1923 MB 22 Calculating instalments in transitional years: estimation 1924 method MB 23 Calculating instalments in transitional years: GST ratio 1925 method MB 24 Consequences of change in balance date 1925 When provisional taxpayers start or stop paying GST, or change taxable periods MB 25 Registering for GST or cancelling registration MB 26 Changing GST cycle MB 27 Payment of provisional tax instalments when GST cycle 1928 1929 1930 changed Penalties and interest provisions MB 28 Application of provisions of Tax Administration Act 1994 1933 Treatment of groups of companies and amalgamated companies MB 29 Provisional tax rules and consolidated groups MB 30 Residual income tax of consolidated groups 1934 1934 1889 Part M s MB 1 Income Tax Act 2004 Reprinted as at 29 August 2011 MB 31 Consolidated groups using estimation method MB 32 Consolidated groups using GST ratio method MB 33 Wholly-owned groups of companies MB 34 Amalgamated companies: calculating residual income tax MB 35 Attribution rule for services Attribution rule for services Overpayments and credits MB 36 Overpaid provisional tax MB 37 Further income tax credited to provisional tax liability 1935 1936 1937 1938 1939 1940 1942 MB 38 Provisional taxpayer affected by self-assessed adverse 1942 event or qualifying event Disaster relief Introductory provisions Heading: inserted, on 1 October 2007, by section 137(1) of the Taxation (De- preciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 1 Outline of subpart When this subpart applies Sections MB 2 to MB 38 apply for the purposes of the provi- sional tax rules to determine (a) (b) who pays provisional tax: a taxpayer’s provisional tax liability for a tax year, and the methods for calculating the amount payable: the number of instalments and the instalment dates for an income year: how the amount of an instalment is determined: the payment of provisional tax in transitional years: the application of the rules relating to use of money interest, late payment penalties, and shortfall penalties.
(c) (d) (e) (f) Amount 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 the provisional tax rules as if the amount were in- come tax imposed under section BB 1 (Imposition of income tax).
(1) (2) 1890 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 2 (3) Instalment dates In this subpart, a reference to an instalment classiﬁed by the letters A to H is a reference to a date in the table in schedule 13, part A (Months for payment of provisional tax and terminal tax) on which an instalment of provisional tax (A to F) or ter- minal tax (G and H) is payable by a provisional taxpayer for an income year that corresponds to a tax year.
Deﬁned in this Act: amount, , income tax, , income year, , instalment date, , pay, , provisional tax, , provisional tax rules, , provisional taxpayer, , shortfall penalty, , tax year, , terminal tax, , transitional year Section MB 1: inserted, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

MB 2 Who pays provisional tax?


Meaning of provisional taxpayer (1) A provisional taxpayer, for a tax year, means (a) (b) a person whose residual income tax for the tax year is more than $2,500; or a person who chooses under section MB 3 to be a pro- visional taxpayer.
(2) Exclusions The following persons are not provisional taxpayers: (a) (b) (c) a company that does not have a ﬁxed establishment in New Zealand and is not treated as resident in New Zealand: a person to whom section 33A of the Tax Administra- tion Act 1994 applies: a non-resident contractor as deﬁned in regulation 2 of the Income Tax (Withholding Payments) Regulations 1979 who has not been issued with an exemption certiﬁ- cate by the Commissioner for the tax year under regu- lation 5.
No obligation (3) 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: company, , ﬁxed establishment, , New Zealand, , non- resident, , provisional taxpayer, , resident in New Zealand, , residual income tax, , tax year 1891 Part M s MB 2A Income Tax Act 2004 Reprinted as at 29 August 2011 Section MB 2: substituted, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Subsection (1)(aa) and (ab) was repealed, as from 1 April 2005, by section 73 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.

MB 2A Election to be provisional taxpayer [Repealed] Section MB 2A: repealed, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 2B Amount of provisional tax based on 1997-98 or earlier tax year [Repealed] Section MB 2B: repealed, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 3 Becoming provisional taxpayer by election A taxpayer, when ﬁrst providing a return of income for a tax year, may choose to be a provisional taxpayer 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 a provisional taxpayer for the tax year, other than by this election.
(b) Deﬁned in this Act: corresponding income year, , ﬁnal instalment, , instalment date, , provisional tax, , provisional taxpayer, , return of income, , tax year, , taxpayer, , transitional year Section MB 3: substituted, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
1892 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 4 MB 3B Provisional taxpayer affected by self-assessed adverse event or qualifying event [Repealed] Section MB 3B: repealed, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Calculation of provisional tax liability Heading: inserted, on 1 October 2007, by section 137(1) of the Taxation (De- preciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

MB 4 Methods for calculating provisional tax liability (1) Choice of method The provisional tax payable by a provisional taxpayer for a tax year must be calculated using 1 of the methods described in subsections (3) to (7).
Meaning of next affected instalment date (2) Next affected instalment date for a tax year means the instal- ment date for the tax year that next follows the date on which the calculation is made.
Standard method (3) Under the standard method, the amount of provisional tax payable for the tax year is (a) (b) 105% of the taxpayer’s residual income tax for the pre- ceding tax year, determined under section MB 5, if para- graph (b) does not apply; or 110% of the taxpayer’s residual income tax for the tax year before the preceding tax year if (i) the taxpayer is required to provide a return of income for the preceding tax year; and the return is not due on or before the ﬁrst instal- ment date for the tax year through the application of section 37 of the Tax Administration Act 1994 or an extension granted under that section; and the taxpayer has not provided the return on or before the instalment date; and the instalment date is not the date of instalment F for the corresponding income year.
(ii) (iii) (iv) 1893 Part M s MB 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) Relationship of other methods with standard method, and modiﬁcation of standard method Subsections (5) to (7) override subsection (3).

Section MZ 10 (Calculating provisional tax instalments: section MB 4) modiﬁes subsection (3).

Estimation method (5) A taxpayer may make an estimate of their residual income tax under section MB 6 as their provisional tax liability for the tax year.
GST ratio method (6) A taxpayer who is eligible under section MB 15 may choose to use a GST ratio under section MB 7 for the purposes of determining their provisional tax liability for the tax year.

(7) Commissioner’s determination If the Commissioner determines a taxpayer’s provisional tax liability under section 119 of the Tax Administration Act 1994, the amount is that last determined by the Commissioner and notiﬁed to the taxpayer at least 30 days before the instalment date.
The 30-day requirement does not apply in a case to which section 119(1)(d) applies (which relates to an estimate of re- sidual income tax that is not fair and reasonable).
Life insurance business (8) A provisional taxpayer, who carries on a business of providing life insurance and who is liable for income tax under the life in- surance rules, must at the time they determine their provisional tax liability provide the Commissioner with details of the cal- culation of that liability, in particular, the extent to which the amount of that provisional tax relates to the policyholder base.
Deﬁned in this Act: amount, , business, , Commissioner, , corresponding in- come year, , GST ratio, , instalment date, , life insurance, , life insurance rules, , notify, , pay, , policyholder base, , provisional tax, , provisional taxpayer, , qualifying event, , residual income tax, , return of income, , tax year, , taxpayer Section MB 4: substituted, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MB 4(4) heading: substituted, on 1 October 2007, by section 43 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section MB 4(4): substituted, on 1 October 2007, by section 43 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
1894 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 5 MB 5 Standard method (1) (2) (3) (4) When this section applies This section applies for the purposes of section MB 4(3) and the calculation of the amount of provisional tax payable for a tax year under the standard method.
Assessment for preceding tax year The taxpayer’s residual income tax for a tax year is based on their assessment for the preceding tax year unless the Com- missioner has issued a notice of assessment for the tax year at least 30 days before the relevant instalment date, in which case it is based on the Commissioner’s assessment for the preced- ing tax year.
Commissioner’s assessment for preceding tax year The taxpayer’s residual income tax is based on the Commis- sioner’s assessment for the preceding tax year, whenever the assessment is made, if (a) the taxpayer is required under section 37 of the Tax Ad- ministration Act 1994 to provide a return of income for the preceding tax year but has failed to do so by the rele- vant instalment date; or the taxpayer is not required under section 37 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 residual income tax for the preceding tax year if (a) the taxpayer is not required to provide a return of in- come for the preceding tax year; or the taxpayer’s residual income tax for that tax year was $2,500 or less and they were not required to provide, and have not provided, a return of income for that tax year by the date of instalment F for the corresponding income year.
(b) (5) Later increased assessment If the Commissioner assesses a taxpayer’s income tax liability after the due date for an instalment of provisional tax and the taxpayer’s residual income tax is increased by the assessment, 1895 Part M s MB 5A Income Tax Act 2004 Reprinted as at 29 August 2011 (6) the residual income tax is treated for the purposes of the pro- visional tax rules as if it had not been increased.
Transitional years and consolidated groups Residual income tax in transitional years is calculated under section MB 19.

For consolidated groups of companies, the calculation is made under section MB 30.
Deﬁned in this Act: amount, , assessment, , Commissioner, , consolidated group, , corresponding income year, , income tax liability, , instalment date, , notice, , pay, , provisional tax, , residual income tax, , return of income, , tax year, , taxpayer, , transitional year Section MB 5: substituted, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 5A Amount of provisional tax instalments in transitional year [Repealed] Section MB 5A: repealed, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

MB 6 Estimation method (1) When this section applies This section applies for the purposes of section MB 4(5) and the calculation of the amount of provisional tax payable for a tax year under the estimation method.
Fair and reasonable estimate (2) On or before an instalment date, a provisional taxpayer may make a fair and reasonable estimate of their residual income tax for the tax year by informing the Commissioner of the es- timate.

The estimate may be a revised estimate.


Reasonable care in making and maintaining assessment (3) A taxpayer 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 taxpayer estimates their residual income tax and the esti- mate is more than the provisional tax that is payable for the (4) 1896 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 7 (5) tax year, they are treated as having taken reasonable care in making the estimate.
Changing determination method from GST ratio If, under section MB 17(5), a taxpayer changes the way they determine the amount of provisional tax after the date of an instalment, they must estimate their residual income tax for their corresponding income year, and must pay provisional tax on whichever of the following relevant instalment dates for the income year occur after 30 days from their last ratio instalment date— (a) (b) C and F for changes to a 6-monthly GST taxable period: B, D, and F for other changes.
Disaster relief (6) A taxpayer who is signiﬁcantly affected by a self-assessed adverse event may make an estimate of their provisional tax under section MB 38, and that section overrides this section.
Deﬁned in this Act: amount, , Commissioner, , corresponding income year, , GST ratio, , income year, , instalment date, , pay, , provisional tax, , provisional taxpayer, , ratio instalment date, , residual income tax, , self-assessed adverse event, , tax year, , taxpayer Section MB 6: substituted, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MB 6(5): substituted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 143(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 6 was substituted, as from 1 October 2005, by section 74 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
MB 7 GST ratio method Using GST ratio (1) A provisional taxpayer who meets the requirements of section MB 15 may choose to use a GST ratio to determine the amount of provisional tax payable for a tax year.

Meaning of GST ratio (2) A taxpayer’s GST ratio is the percentage ﬁgure that is obtained by dividing their residual income tax for the preceding tax year by their total taxable supplies for the corresponding income year.
The amount of residual income tax and the amount of 1897 Part M s MB 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) total taxable supplies are called the base amounts in this sec- tion.
When amounts based on tax year before preceding tax year If the base amounts for the preceding tax year or correspond- ing income year have not been assessed, the GST ratio is the percentage based on the assessment for the tax year and cor- responding income year that are immediately before the pre- ceding tax year and corresponding income year.
When subsection (3C) applies instead of subsection (3) (3B) Subsection (3C) applies instead of subsection (3) if,— (a) (b) (ii) for the year before the preceding year referred to in sub- section (3),— (i) an assessment of a base amount has not been made and the absence of assessment is due to an extension of time to ﬁle the return for that year or a period in that 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 year referred to in subsection (3),— (i) (ii) the base amounts have been assessed; and no assessment of a base amount is the subject of a dispute or challenge under the Tax Administra- tion Act 1994; and the year is not a transitional year.
(iii) Amounts based on tax year 2 years before preceding tax year (3C) The GST ratio under this subsection is the percentage based on the assessments of the base amounts for the year that is 2 years before the preceding year referred to in subsection (3).
Commissioner’s calculation and notiﬁcation The Commissioner must calculate a taxpayer’s GST ratio, no- tifying them by (a) including the percentage ﬁgure on the taxpayer’s pre- printed GST return form; or advising them in writing or by telephone; or some other means.
(b) (c) (4) 1898 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 7 (5) Adjustment to GST ratio The Commissioner must adjust a taxpayer’s GST ratio if the base amounts are revised through, among other reasons, (a) an assessment or an amended assessment of the tax- payer’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 the disposal of an asset to which section MB 18 applies.
(b) (c) New GST ratio (6) When subsection (5) applies, the Commissioner must notify the taxpayer of the new GST ratio.

The new ratio applies in relation to the relevant instalment dates that occur 30 days after the date of notiﬁcation.
(7) Transitional years If a taxpayer has paid instalments of provisional tax in a tran- sitional year, for the tax year that follows the transitional year, for the purposes of this section and section MB 10, 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 subsection (7C) applies instead of subsection (7) (7B) Subsection (7C) applies instead of subsection (7) if,— (a) (b) for the year before the transitional year referred to in subsection (7),— (i) an assessment of a base amount has not been made and the absence of assessment is due to an extension of time to ﬁle the return for that year or a period in that 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 referred to in subsection (7),— (i) the base amounts have been assessed; and (ii) 1899 Part M s MB 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) (iii) no assessment of a base amount is the subject of a dispute or challenge under the Tax Administra- tion Act 1994; and the year is not a transitional year.
GST ratio based on tax year 2 years before transitional tax year (7C) The GST ratio under this subsection is the percentage based on the assessments of the base amounts for the year that is 2 years before the transitional year referred to in subsection (7).
Total taxable supplies In subsections (2), (5), and (7), and in sections MB 10, MB 15, MB 18, and MB 32, total taxable supplies for a person and a period means the amount that is the total value, including GST, of taxable supplies of the person for the period.

Relationship with other provisions Section MZ 11 (Calculating provisional tax instalments: sec- tions MB 7 and MB 10) modiﬁes this section.
Deﬁned in this Act: amount, , assessment, , base amount, , Commissioner, , corresponding income year, , GST, , GST ratio, , instalment date, , notify, , pay, , provisional tax, , provisional taxpayer, , residual income tax, , tax year, , taxable supply, , total taxable supplies, , transitional year Section MB 7: substituted, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MB 7(3B) heading: inserted (with effect from 1 October 2007), on 19 December 2007, by section 144(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 7(3B): inserted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 144(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MB 7(3C) heading: inserted (with effect from 1 October 2007), on 19 December 2007, by section 144(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 7(3C): inserted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 144(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
inserted (with effect from 1 October 2007), on Section MB 7(7B) heading: 19 December 2007, by section 144(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 7(7B): inserted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 144(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(8) (9) 1900 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 8 inserted (with effect from 1 October 2007), on Section MB 7(7C) heading: 19 December 2007, by section 144(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 7(7C): inserted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 144(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MB 7(9) heading: added, on 1 October 2007, by section 44 of the Taxa- tion (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section MB 7(9): added, on 1 October 2007, by section 44 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Instalments of provisional tax Heading: inserted, on 1 October 2007, by section 137(1) of the Taxation (De- preciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 8 Provisional tax payable in instalments (1) (2) (3) General principle The general principle for the standard and estimation methods is that the amount of a taxpayer’s provisional tax must be spread evenly over the applicable number of instalments, so that equal amounts are paid on each instalment date.

If the amount of provisional tax is not divisible into exactly equal instalments, the ﬁnal instalment carries the difference.
Provisional tax payable in 3 instalments Provisional tax is payable in 3 instalments on the interest in- stalment dates for the tax year in the months set out in schedule 13, part A, columns B, D, and F for the taxpayer’s correspond- ing income year.

The amount of each instalment is calculated under section MB 9.

Subsection (3) overrides this subsection.
Exclusions Subsection (2) does not apply (a) to a provisional taxpayer who (i) (ii) pays GST on a 6-monthly basis: uses a GST ratio to determine the amount of pro- visional tax payable, or who changes their deter- mination method under section MB 17(5): changes the cycle of their taxable periods under section 15C of the Goods and Services Tax Act 1985: (iii) 1901 Part M s MB 8 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) (d) to a new provisional taxpayer who (i) (ii) pays GST on a 6-monthly basis: pays GST on a monthly or 2-monthly basis, and starts a taxable activity after the day that is 30 days before the date of instalment B in their cor- responding income year: to a provisional taxpayer who has not provided a return of income for the preceding tax year, and whose residual income tax for the tax year immediately before the pre- ceding tax year was $2,500 or less: in a transitional year.
Provisional tax when GST paid on 6-monthly basis (4) A provisional taxpayer who pays GST on a 6-monthly basis must pay provisional tax on the 2 interest instalment dates for the tax year in the months set out in schedule 13, part A, columns C and F for the taxpayer’s corresponding income year.
This subsection applies to a new provisional taxpayer other than one who pays GST on a 6-monthly basis and starts a taxable activity after the day that is 30 days before the date of instalment C. Provisional tax determined using GST ratio (5) A provisional taxpayer 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 13, part A, columns A to F for the taxpayer’s corresponding income year.
The amount of each instalment is calculated under section MB 10.

Changing determination method (6) A provisional taxpayer who is unable or decides not to use a GST ratio, changing their determination method under section MB 17, 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 MB 9.
Changing cycle of taxable periods (7) A provisional taxpayer 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 instal- 1902 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 8 ment dates speciﬁed in section MB 27 after the change in tax- able period takes effect under section MB 26.

The amount of each instalment is calculated under section MB 9.
New provisional taxpayers (8) A new provisional taxpayer who starts a taxable activity in a tax year is liable to pay interest calculated under section 120KC of the Tax Administration Act 1994 as if the person were liable to pay provisional tax for the tax year— (a) (b) in 3 instalments under subsection (2) 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 MB 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: (c) in 1 instalment in a case to which section MB 14 applies.
Extension of time for return (9) A provisional taxpayer who has not provided a return of in- come for a preceding tax year and whose residual income tax for the tax year before the preceding tax year was $2,500 or less must pay provisional tax for the tax year on the instal- ment dates set out in section MB 13 or MB 14, as applicable.

(10) Transitional years In a transitional year, provisional tax is due and payable as set out in section MB 20 and schedule 13, part B.
The amount of each instalment is calculated under sections MB 21 to MB 23.

Voluntary payments (11) A provisional taxpayer may pay an instalment of provisional tax under section MB 12 at any time.
Deﬁned in this Act: amount, , corresponding income year, , GST, , GST ratio, , income year, , instalment date, , interest instalment date, , new provisional taxpayer, , pay, , provisional tax, , provisional taxpayer, , ratio instalment date, 1903 Part M s MB 8 Income Tax Act 2004 Reprinted as at 29 August 2011 , residual income tax, , return of income, , tax year, , taxable activity, , taxable period, , taxpayer, , transitional year Table MB 8—Categories for payment of provisional tax Cat- egor- ies: or- din- ary Stand- ard MB 4(3) Esti- ma- tion MB 4(5) GST ratio MB 4(6) GST6- month MB 8(4) Vari- ables Method In- stal- ments Cal- cula- tion In- stal- ment dates Inter- est, penal- ties MB 5 3—MB 8(2) B, D, F MB 9 120KE(1), (2) MB 6 3—MB 8(2) B, D, F MB 9 120KB 1 month MB 7 6—MB 8(5) A to F MB 120KE(3) 10 2 month stand- ard MB 7 MB 5 6—MB 8(5) A to F MB 10(3) 120KE(3), 139C 2—MB 8(4) C and F MB 9 120KE(1) esti- ma- tion MB 6 2—MB 8(4) C and F MB 9 120KB 1904 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 8 Table MB 8—continued Vari- ables Method In- stal- ments Cal- cula- tion In- stal- ment dates Inter- est, penal- ties 120KC MB 9 (MB 13(3)) D and F, or F as re- quired 120KD MB 21, MB 22 MB 9 B, D, F, or C, F as re- quired B, D, F, or C, F as re- quired MB 8(8), MB 13(2), MB 14(2) MB 20 (MB 8(10)) MB 27 (MB 8(7)) MB 5 or MB 6 MB 19 MB 25, MB 26, and 15C and 15D of GST Act Cat- egor- ies: ex- cep- tional New provi- sional tax- payers Tran- si- tional years Chang- ing tax- able period (or start- ing and stop- ping GST regis- tra- tion) 1905 Part M s MB 9 Income Tax Act 2004 Reprinted as at 29 August 2011 Table MB 8—continued B, D, F, or C, F as re- quired MB 4(3) or (5) (MB 6, MB 8(6)) MB 17 MB 12 MB 9 120KE(5)- (7) 120E Chang- ing deter- min- ation method Vol- untary pay- ments Note: References in the last column are to sections of the Tax Administration Act 1994 .
Section MB 8: substituted, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Section MB 8(1): amended, on 1 October 2007, by section 120(1) of the Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section MB 8(6): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 145(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 8(8): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 145(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MB 8(8)(b)(ii): substituted (with effect from 1 October 2007), on 19 December 2007, by section 145(3) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
MB 9 Calculating amount of instalment under standard and estimation methods When this section applies This section applies for the purposes of (a) section MB 4(3) and (5) (which relates to the calculation of a provisional tax liability): section MB 8(2), (4), (6), and (7) (which relates to pay- ment of instalments): (b) (1) 1906 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 9 (2) (3) (c) (d) sections MB 13 and MB 14 (which relate to new pro- visional taxpayers and taxpayers with an extension of time for providing a return): sections MB 25 to MB 27 (which relate to changes in taxable periods).
Calculation The amount of an instalment of provisional tax for a tax year is calculated using the formula— Deﬁnition of items in formula In the formula, (a) (ii) residual tax is a provisional taxpayer’s residual income tax, as applicable (i) for the preceding tax year, uplifted by 5% (section MZ 12 (Calculating provisional tax instalments: section MB 9) modiﬁes this sub- paragraph); or for the tax year immediately before the preceding tax year, uplifted by 10% (section MZ 12 modi- ﬁes this subparagraph); or the amount estimated by the taxpayer: (iii) instalment number is the number of the taxpayer’s in- stalment for the tax year, whether ﬁrst, second, or third: total instalments is the total number of the taxpayer’s instalments for the tax year: provisional tax is the amount of the taxpayer’s provi- sional tax liabilities for the tax year to date.
(b) (c) (d) (4) Instalment amounts after change in balance date or taxable period If a change occurs to the balance date or cycle of taxable periods of a provisional taxpayer, the calculation of the amount of an instalment is made under this section, applying the up- dated ﬁgures to the items in the formula.
Deﬁned in this Act: amount, , balance date, , new provisional taxpayer, , pay, , provisional tax, , provisional taxpayer, , residual income tax, , return of income, , tax year, , taxable period 1907 Part M s MB 9A Income Tax Act 2004 Reprinted as at 29 August 2011 Section MB 9: substituted, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MB 9(1)(b): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 146(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 9(3)(a)(i): amended, on 1 October 2007, by section 45(a) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section MB 9(3)(a)(ii): amended, on 1 October 2007, by section 45(b) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
MB 9A Provisional tax and attribution rule for services [Repealed] Section MB 9A: repealed, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

MB 10 Calculating amount of instalment using GST ratio Calculation The amount of provisional tax payable on an instalment date by a provisional taxpayer who uses a GST ratio for a tax year is calculated using the formula— GST ratio for tax year × taxable supplies.
Item in formula: taxable supplies In the formula, taxable supplies is the amount of the tax- payer’s taxable supplies in the taxable period that matches the instalment period.
Taxable supplies when taxpayer pays on monthly basis For the purposes of subsection (1), a taxpayer who pays GST on a 1-month cycle under section 15 of the Goods and Services 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.
(1) (2) (3) 1908 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 11B (4) Relationship with other provisions Section MZ 11 (Calculating provisional tax instalments: sec- tions MB 7 and MB 10) modiﬁes this section.
Deﬁned in this Act: amount, , GST, , GST ratio, , instalment period, , pay, , provisional tax, , provisional taxpayer, , tax year, , taxable period, , taxable supply Section MB 10: substituted, on 1 October 2007, by section 137(1) of the Taxa- tion (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3).

Section MB 10(4) heading: added, on 1 October 2007, by section 46 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section MB 10(4): added, on 1 October 2007, by section 46 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
MB 11 Using GST refund to pay instalment of provisional tax (1) (2) Offsetting amount If a provisional taxpayer has an excess of deductions over ag- gregate output tax in a taxable period under section 20(5) of the Goods and Services Tax Act 1985, they may choose to use an amount of the excess to pay some or all of an instalment of provisional tax that is due on the same instalment date.
If a person makes an election under subsection (1) affecting an amount of an excess of deductions over aggregate output tax (elected amount) and the Commissioner makes an amended assessment reducing the amount of the excess to less than the elected amount, the person’s payment of provisional tax aris- ing from the GST refund is the amount of the excess after the reassessment.
Deﬁned in this Act: amount, , Commissioner, , GST, , instalment date, , pay, , provisional tax, , provisional taxpayer, , taxable period Section MB 11: substituted, on 1 October 2007, by section 137(1) of the Taxa- tion (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3).
MB 11B Transitional provisions relating to alignment of dates of payment for provisional tax and GST [Repealed] Section MB 11B: repealed, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
1909 Part M s MB 12 Income Tax Act 2004 Reprinted as at 29 August 2011 MB 12 Voluntary payments A taxpayer 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 a provisional taxpayer: is more than the provisional tax payable by them for the tax year: is more than the income tax payable by them for the tax year.
(b) (c) Deﬁned in this Act: amount, , income tax liability, , pay, , provisional tax, , provisional taxpayer, , tax year, , taxpayer Section MB 12: substituted, on 1 October 2007, by section 137(1) of the Taxa- tion (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3).
MB 13 Paying 2 instalments for tax year (1) Who this section applies to This section applies for a tax year to (a) (b) a new provisional taxpayer whose ﬁrst business day oc- curs in the period that starts 30 days before the date of instalment B and ends 30 days before the date of instal- ment D; or a taxpayer 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 (i) the taxpayer was required to provide a return for the preceding tax year but, under section 37 of the Tax Administration Act 1994 or an extension under that section, the taxpayer is not required to provide the return 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.
(ii) Who this section does not apply to (2) Despite subsection (1), this section does not apply to a provi- sional taxpayer who pays GST on a 6-monthly basis.

When instalments are due The instalments are due and payable on the date of instalments D and F for the taxpayer’s corresponding income year.

(3) 1910 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 14 (4) Formula for amount of instalment The amount of each instalment is calculated under section MB 9.
Deﬁned in this Act: amount, , corresponding income year, , ﬁrst business day, , new provisional taxpayer, , pay, , residual income tax, , return of income, , tax year, , taxpayer Section MB 13: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MB 13 example: substituted, on 1 October 2007, by section 121(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
MB 14 Paying 1 instalment for tax year (1) Who this section applies to This section applies for a tax year to (a) (b) a new provisional taxpayer whose ﬁrst business day oc- curs in the period that starts 30 days before the date of instalment D and ends at the end of the corresponding income year: a taxpayer whose return of income for the preceding tax year is not provided on or before the date of instalment D if (i) the taxpayer was required to provide a return for the preceding tax year but, under section 37 of the Tax Administration Act 1994 or an extension 1911 Part M s MB 14 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) (ii) under that section, is not required to provide the return by the date of instalment D; and their residual income tax for the tax year before the preceding tax year was $2,500 or less: 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: 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 due The instalment is due and payable on the date of instalment F for the taxpayer’s corresponding income year.
Amount of instalment The amount of the instalment is calculated under section MB 9.

Deﬁned in this Act: amount, , corresponding income year, , ﬁrst business day, , GST, , new provisional taxpayer, , pay, , provisional tax, , residual income tax, , return of income, , tax year, , taxpayer Section MB 14: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
1912 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 15 Section MB 14 example: substituted, on 1 October 2007, by section 122(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Requirements for using GST ratio Heading: added, on 1 October 2007, by section 137(1) of the Taxation (Depre- ciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

MB 15 Who may use GST ratio?


General eligibility (1) A provisional taxpayer may choose to use a GST ratio to de- termine under section MB 4(6) the amount of provisional tax payable for a tax year only if they meet all the requirements in subsections (2) and (3) in relation to the same entity.
(2) Requirements for preceding tax year For the purposes of determining their eligibility for a tax year, the taxpayer must meet the following requirements in the pre- ceding tax year and corresponding income year: (a) their residual income tax, as assessed, was more than $2,500 but no more than $150,000; and they were a person registered under section 51 of the Goods and Services Tax Act 1985 for the whole income year, and provided returns under that Act for an entity whose business or taxable activity did not begin oper- ations in that tax year; and the ratio of their residual income tax to total taxable supplies, as calculated under section MB 7(2) and ex- pressed as a percentage, is between zero and 100%.
(b) (c) (3) Requirement for current year For the tax year in which the taxpayer 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 (4) An election to use a GST ratio applies for the tax year for which the election is made and in later tax years, unless the tax- payer changes their determination method under section MB 17.

The election is made under section MB 16.
1913 Part M s MB 15 Income Tax Act 2004 Reprinted as at 29 August 2011 Requirement to discontinue use of GST ratio (5) Despite subsections (1) to (4), a taxpayer must discontinue the use of the GST ratio for the tax year and must apply section MB 17(4) or (5) if (a) (b) their GST registration ends in the tax year; or they no longer qualify under subsection (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 subsection (3) as a result of a change in their taxable period.
(c) Failure to provide GST returns (6) A taxpayer must not use, or must discontinue the use of, a GST ratio for a tax year if the taxpayer (a) is liable to provide a return under the Goods and Ser- vices Tax Act 1985 for a period in the taxpayer’s cor- responding income year; and becomes in default under this subsection by failing to provide the return before the date that is 60 days after the due date for ﬁling the return.
(b) (7) Provisional tax instalments for periods following default If a taxpayer is required by subsection (6) to discontinue the use of a GST ratio for a determination method, the taxpayer must make provisional tax instalments as required by section MB 17 for instalment periods (a) beginning on or after the due date for ﬁling of the return for which the taxpayer becomes in default under sub- section (6)(b); and not affected by a notice issued by the Commissioner under subsection (8).
(b) Further use of GST ratio (8) A taxpayer who would otherwise be prohibited by subsection (6) from using a GST ratio for a determination method for an instalment period referred to in subsection (7)(a) may never- theless use that determination method for the instalment period if the taxpayer (a) applies in writing or by telephone for the Commissioner to issue a notice under this subsection; and satisﬁes the Commissioner that (b) 1914 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 15 (i) (ii) (iii) the failure referred to in subsection (6)(b) is a re- sult of an event or circumstance beyond the con- trol of the taxpayer; and as a consequence of that event or circumstance, the taxpayer has a reasonable justiﬁcation or ex- cuse for the failure; and the taxpayer corrected the failure as soon as prac- ticable; and (c) is sent a notice in writing by the Commissioner that the taxpayer may use the GST ratio for a determination method for the instalment period.
Standard of satisfaction The taxpayer must satisfy the Commissioner under subsec- tion (8)(b) to a standard that would justify the remission of a penalty under section 183A of the Tax Administration Act 1994.
(9) Effect of later default (10) A notice to a taxpayer under subsection (8) does not apply to an instalment period if (a) the taxpayer becomes in default under subsection (6) in relation to a return for which the due date is after the date of the notice; and the default is not expressly anticipated and taken into account in the notice; and the instalment period begins on or after the due date referred to in paragraph (a).
(b) (c) (11) 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, , assessment, , business, , corresponding income year, , GST ratio, , income tax liability, , instalment period, , pay, , provisional tax, , provisional taxpayer, , registered person, , residual income tax, , tax year, , taxable activity, , taxable period, , taxable supply Section MB 15: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
1915 Part M s MB 16 Income Tax Act 2004 Reprinted as at 29 August 2011 Section MB 15(2): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 147(1)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 15(2)(b): amended (with effect from 1 October 2007), on 19 De- cember 2007, by section 147(1)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section MB 15(8)(a): amended (with effect from 1 October 2007), on 19 De- cember 2007, by section 147(2) of the Taxation (Business Taxation and Remed- ial Matters) Act 2007 (2007 No 109).

Section MB 15(11): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 147(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MB 16 Choosing to use GST ratio A taxpayer who meets the requirements referred to in section MB 15(1) for a tax year may use a GST ratio for the corres- ponding income year if the taxpayer, before the start of the corresponding income year, informs the Commissioner of the election to use a GST ratio for the tax year.
Deﬁned in this Act: Commissioner, , corresponding income year, , GST ratio, , provisional taxpayer, , tax year Section MB 16: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Section MB 16 list of deﬁned terms notice: omitted, on 1 October 2007, by sec- tion 123(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section MB 16 list of deﬁned terms notify: omitted, on 1 October 2007, by sec- tion 123(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
MB 17 Changing determination method When this section applies This section applies if, after having chosen to use a GST ratio for a tax year, a provisional taxpayer either (a) chooses another way to determine the amount of provi- sional tax payable for the corresponding income year; or is required under section MB 15(5) or (6) to discontinue the use of a GST ratio for the corresponding income year.
(b) (1) 1916 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 17 (2) (3) (4) (5) (6) Notifying Commissioner of decision to change The taxpayer must notify 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 for the income year.
Date on which use of GST ratio discontinued For the purposes of subsection (1)(b), the date on which the taxpayer discontinues their use of a GST ratio is, as applicable, (a) (b) 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 end of the period in which a return is liable to be provided under the Goods and Services Tax Act 1985.
(c) (d) Changing method before date of instalment A If the taxpayer is unable or decides not to use a GST ratio be- fore the date of instalment A, they may choose to determine the amount of provisional tax payable under section MB 4(3) or (5).

They are treated as never electing to use the GST ratio method and, for the purposes of section 120KE(5) of the Tax Administration Act 1994, as never changing the way they de- termine an amount of provisional tax under this section.
Changing method after instalment date If the taxpayer is unable or decides not to use the GST ratio after an instalment date, they must determine the amount of provisional tax payable on instalment for the remainder of the income year under section MB 4(5) on the basis of an estimate of their residual income tax for the tax year.

For this purpose, the taxpayer may provide the estimate in writing or by tele- phone.
Date of application when method changed If a taxpayer changes their determination method under sub- section (4) or (5), the date on which the change applies may be a future date agreed between the taxpayer and the Commis- sioner.
Other consequences of changing method For the purposes of this section, (7) 1917 Part M s MB 18 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) (c) (ii) the frequency and the instalment dates remaining for an income year depend on (i) the requirements of the determination method chosen by the taxpayer when they stop using the GST ratio; and the cycle of taxable periods chosen by the tax- payer, being either a monthly or 2-monthly basis: a taxpayer may change from using a GST ratio to a 6-monthly cycle of taxable periods only if (i) the requirements in section 15C of the Goods and Services Tax Act 1985 are met; and their 6-month taxable period is aligned with their balance date under section 15B of the Goods and Services Tax Act 1985: (ii) section 120KE(5) to (7) (Provisional tax and rules on use of money interest) of the Tax Administration Act 1994 applies to determine whether and when use of money interest is payable in relation to instalments under the new determination method.
Deﬁned in this Act: amount, , balance date, , Commissioner, , corresponding income year, , GST ratio, , income year, , instalment date, , notify, , pay, , provisional tax, , provisional taxpayer, , residual income tax, , tax year, , taxable period Section MB 17: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MB 17(2): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 148(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 17(4) heading: amended, on 1 October 2007, by section 124(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section MB 17(4): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 148(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MB 18 Disposal of assets When this section applies This section applies if, as part of the business of an entity de- scribed in section MB 15(1), a provisional taxpayer disposes of an asset (a) that is not revenue account property; and (1) 1918 Reprinted as at 29 August 2011 (b) Income Tax Act 2004 Part M s MB 18 the value of the supply of which is not less than the greater of (i) an amount equal to 5% of the total taxable sup- plies of the business for the previous 12 months: $1,000.
(ii) (2) (3) (4) Adjustment to GST ratio for current and next income year The taxpayer may choose to take the disposal of the asset into account by adjusting their taxable supplies for the relevant tax- able period and income year by subtracting the value, includ- ing GST, of the relevant asset from (a) the total taxable supplies for a taxable period for the pur- poses of the formula in section MB 10(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 MB 7(2), in propor- 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.
(b) Notifying Commissioner For the purposes of subsection (2), the taxpayer must notify 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 ratio, , income year, , instalment date, , notify, , provisional taxpayer, , revenue account property, , taxable period, , taxable supply Section MB 18: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MB 18(2): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 149(1)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 18(2)(a): substituted (with effect from 1 October 2007), on 19 De- cember 2007, by section 149(1)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
1919 Part M s MB 19 Income Tax Act 2004 Reprinted as at 29 August 2011 Section MB 18(2)(b): substituted (with effect from 1 October 2007), on 19 December 2007, by section 149(1)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Transitional years Heading: added, on 1 October 2007, by section 137(1) of the Taxation (Depre- ciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 19 Calculating residual income tax in transitional years (1) (2) Calculation for transitional year This section applies for the purposes of section MB 4(3) and the calculation of a taxpayer’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.
Calculation for transitional year The amount of residual income tax for the transitional year must be increased or decreased by the amount given by the formula in subsection (3) so as to reﬂect the amount that would apply in a 12-month period.
Formula The amount is calculated using the formula— (3) Deﬁned in this Act: amount, , ﬁrst business day, , new provisional taxpayer, , residual income tax, , tax year, , taxpayer, , transitional year Section MB 19: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MB 19(1)(a): amended, on 1 October 2007, by section 125(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Section MB 19(1)(b): amended, on 1 October 2007, by section 125(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
1920 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 20 MB 20 Paying provisional tax in transitional years (1) (2) (3) (4) Total amount payable The total amount of provisional tax payable in a transitional year is the sum of all instalments of provisional tax due in the transitional year.
When instalments due Instalments other than a ﬁnal instalment of provisional tax are due on (a) the 28th day of the months given by schedule 13, part B, if paragraphs (b) and (c) do not apply: the 15th day of January, when the month given by sched- ule 13, part B is December and the year is a transitional year: the 7th day of May, when the month given by schedule 13, part B is April and the year is a transitional year.
(b) (c) When ﬁnal instalment due Payment of the ﬁnal instalment is due 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 the 7th day of May, when March is the ﬁnal month and the year is a transitional year.
Modiﬁcations to instalment dates For the purposes of subsection (2), provisional tax is not due and payable on (a) the date of instalment B, if section MB 13 would have applied had the tax year not been a transitional year; or the dates of instalments B and D, if section MB 14(1)(a) and (b) would have applied had the tax year not been a transitional year; or the dates of instalments B, D, and F, if the taxpayer is a new provisional taxpayer whose ﬁrst business day occurs after the day that is 30 days before the date of instalment F; or the date of instalment C, if section MB l4(1)(c) would have applied had the tax year not been a transitional year; or (b) (c) (b) (c) (d) 1921 Part M s MB 20 Income Tax Act 2004 Reprinted as at 29 August 2011 (e) the dates of instalments C and F, if the taxpayer is a new provisional taxpayer 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. Counting months in transitional years In this section, and in sections MB 21 to MB 24, and in sched- ule 13, part B (Months for payment of provisional tax and ter- minal tax), the number of months in a transitional year is de- termined as follows: (a) the ﬁrst month in a taxpayer’s transitional year is the ﬁrst whole month in the transitional year: the ﬁnal month in a transitional year is the month in which the taxpayer’s 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: amount, , ﬁnal instalment, , ﬁrst business day, , new provi- sional taxpayer, , pay, , provisional tax, , tax year, , transitional year Section MB 20: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MB 20(2)(a): substituted (with effect from 1 October 2007), on 19 De- cember 2007, by section 150(1)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section MB 20(2)(b): substituted (with effect from 1 October 2007), on 19 December 2007, by section 150(1)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MB 20(2)(c): added (with effect from 1 October 2007), on 19 December 2007, by section 150(1)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 20(3)(b): amended (with effect from 1 October 2007), on 19 De- cember 2007, by section 150(1)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section MB 20(3)(c): added (with effect from 1 October 2007), on 19 December 2007, by section 150(1)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(5) 1922 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 21 MB 21 Calculating instalments in transitional years: standard method (1) (2) (3) (4) (5) When this section applies This section applies to instalments of provisional tax payable in a transitional year under section MB 20 by a provisional tax- payer using the standard method to calculate their provisional tax liability.
Instalment other than ﬁnal instalment The amount payable on an instalment date other than the ﬁnal instalment date is calculated using the formula— Deﬁnition of items in formula in subsection (2) In the formula in subsection (2), (a) (b) (c) (d) provisional tax is the provisional tax liability under section MB 4(3): instalments due is the number of instalments due in the transitional year on or before the instalment date: total instalments is whichever of the following applies: 3, for provisional taxpayers who pay on instal- (i) ment dates B, D, and F; or 2, for provisional taxpayers who pay on instal- ment dates C and F: (ii) tax previously due is the amount for the transitional year of provisional tax that is due and payable before the instalment date.
Final instalment The amount payable on a ﬁnal instalment date is calculated using the formula— Deﬁnition of items in formula in subsection (4) In the formula in subsection (4), (a) provisional tax is the provisional tax liability under section MB 4(3): transitional year days is the number of days in the transitional year: (b) 1923 Part M s MB 22 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) (d) preceding year days is the number of days in the pre- ceding tax year: tax previously due is the amount for the preceding tax year of provisional tax that is due and payable before the instalment date.
Deﬁned in this Act: amount, , instalment date, , ﬁnal instalment date, pay, , provisional tax, , provisional taxpayer, , tax year, , transitional year Section MB 21: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 22 Calculating instalments in transitional years: estimation method When this section applies This section applies to instalments of provisional tax payable in a transitional year under section MB 20 by a provisional taxpayer using the estimation method to calculate their provi- sional tax liability.
Instalment other than ﬁnal instalment The amount payable on an instalment date other than the ﬁnal instalment date is calculated using the formula— Deﬁnition of items in formula in subsection (2) In the formula, (a) tax estimate is the provisional tax liability last esti- mated by the taxpayer under section MB 4(5): instalments due is either (i) (b) 4 multiplied by the number of instalments in the transitional year that are due on or before the instalment date, for provisional taxpayers who pay on the equivalent of instalment dates B, D, and F; or 6 multiplied by the number of instalments in the transitional year that are due on or before the instalment date, for provisional taxpayers who pay on the equivalent of instalment dates C and F: (ii) (1) (2) (3) 1924 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 24 (4) (c) (d) transitional months is the number of months in the transitional year: tax previously due is the amount for the transitional year of provisional tax that is due and payable before the instalment date.
Final instalment The amount payable on a ﬁnal instalment date is the amount of provisional tax determined under section MB 4(5) less the amount of any instalment previously due and payable.

Deﬁned in this Act: amount, , instalment date, , ﬁnal instalment date, pay, , provisional tax, , provisional taxpayer, , transitional year Section MB 22: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 23 Calculating instalments in transitional years: GST ratio method (1) (2) What this section applies to This section applies to instalments of provisional tax payable in a transitional year by a provisional taxpayer using a GST ratio.

Adjustment if required The taxpayer must apply the GST ratio under section MB 10 to any period or part period before the start of the new income year on whichever dates of instalments A to F for their corres- ponding income year occur in the transitional year.
Deﬁned in this Act: GST ratio, , income year, , pay, , provisional tax, , provi- sional taxpayer, , transitional year Section MB 23: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 24 Consequences of change in balance date (1) Continuing frequency If a provisional taxpayer changes their balance date, until the new balance date is reached, the taxpayer must continue to use the instalment dates that applied before the change in balance date was approved.
1925 Part M s MB 24 Income Tax Act 2004 Reprinted as at 29 August 2011 How amounts determined Sections MB 19 to MB 23 and schedule 13, part B (Months for payment of provisional tax and terminal tax) apply for the transitional year in subsection (1) to determine the amount and due date of the instalments.
Estimation method In a transitional year, a provisional taxpayer who uses the es- timation method must, (a) before the date on which the Commissioner notiﬁes a change in balance date, estimate the residual income tax as if no change in balance date is or will be approved; and after the date on which the Commissioner notiﬁes a change in balance date, re-estimate the residual income tax.
(b) GST ratio method Subsection (5) applies when a provisional taxpayer who uses a GST ratio to determine the provisional tax payable for a tax year, changes their balance date and moves from (a) a set of instalment dates in even-numbered months to a set of instalment dates in odd-numbered months; or a set of instalment dates in odd-numbered months to a set of instalment dates in even-numbered months.
(b) Adjustment to liability The taxpayer must— (a) (b) adjust their provisional tax liability for the part period of 1 month before the start of the new income year; and pay the instalment of provisional tax for the part period, as their ﬁnal taxable period, by— (i) the day that is 28 days after the end of the part period, if subparagraphs (ii) and (iii) do not apply; or 15 January, if the part period is November; or 7 May, if the part period is March.
(ii) (iii) Aligning taxable periods For a provisional taxpayer with a GST liability, if a change in balance date means that the taxpayer’s taxable period is not aligned with the balance date, an adjustment must be made to (2) (3) (4) (5) (6) 1926 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 24 their taxable period under section 15B(3) or 15C of the Goods and Services Tax Act 1985.
Deﬁned in this Act: amount, , balance date, , Commissioner, , GST ratio, , income year, , instalment date, , notify, , pay, , provisional tax, , provisional taxpayer, , residual income tax, , tax year, , taxable period Section MB 24: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MB 24(5) heading: substituted (with effect from 1 October 2007), on 19 December 2007, by section 151(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

1927 Part M s MB 25 Income Tax Act 2004 Reprinted as at 29 August 2011 Section MB 24(5): substituted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 151(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MB 24 example: substituted, on 1 October 2007, by section 126(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

When provisional taxpayers start or stop paying GST, or change taxable periods Heading: added, on 1 October 2007, by section 137(1) of the Taxation (Depre- ciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 25 Registering for GST or cancelling registration When this section applies This section applies if a provisional taxpayer who uses the standard or estimation method to determine the amount of pro- visional tax payable for a tax year (a) applies to the Commissioner to become a registered per- son under section 51 of the Goods and Services Tax Act 1985; or is treated as registered under section 51B of that Act; or asks the Commissioner to cancel their GST registration, or has their GST registration cancelled under section 52 of that Act.
(b) (c) Starting or ending GST registration: monthly or 2-monthly basis For a taxpayer who becomes registered for GST paying on a monthly or 2-monthly basis, or who cancels or has their GST registration cancelled having paid on that basis, the in- stalments of provisional tax payable by them for the tax year are unaffected.
Starting GST registration: 6-monthly basis For a taxpayer who becomes registered for GST paying on a 6-monthly basis, instalments of provisional tax are due and payable on whichever dates of instalments C and F for their corresponding income year coincide with the cycle of their taxable periods after they become a registered person.
(1) (2) (3) 1928 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 26 (4) (5) (6) Ending GST registration: 6-monthly basis For a taxpayer who pays GST on a 6-monthly basis and cancels their GST registration or has their registration cancelled, in- stalments of provisional tax are due and payable on whichever dates of instalments B, D, and F for their corresponding in- come year occur after 30 days from the date of cancellation.
Date of cancellation For the purposes of subsection (4) and the provisional tax rules, the date of the cancellation is the later of— (a) the date on which the cancellation of GST registration is notiﬁed: the date on which the taxpayer ceases under section 52 of the Goods and Services Act 1985 to be liable to be registered.

(b) Formula for amount of instalment The amount of each instalment is calculated under section MB 9.
Deﬁned in this Act: amount, , corresponding income year, , GST, , pay, , provi- sional tax, , provisional taxpayer, , registered person, , tax year, , taxable period Section MB 25: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MB 25(5) heading: substituted (with effect from 1 October 2007), on 19 December 2007, by section 152(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 25(5): substituted (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 152(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MB 26 Changing GST cycle (1) (2) When this section applies This section applies when a provisional taxpayer with a GST liability changes under section 15C of the Goods and Services Tax Act 1985 their cycle of taxable periods.
When taxable periods aligned The change takes effect as described in section 15D of the Goods and Services Tax Act 1985 if the following coincide: (a) the end of the taxable period in which the taxpayer (i) applies to change the basis on which the tax- payer’s taxable period is set: 1929 Part M s MB 27 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) (ii) is required to change the basis on which the tax- payer’s taxable period is set: the start of the taxable period in the taxpayer’s new cycle.
(b) When taxable periods not aligned If subsection (2) does not apply, the taxpayer must continue to use the taxpayer’s existing cycle until the end of the next taxable period for which the end coincides with the start of a taxable period in the new cycle.

This section overrides section 15D(2) of the Goods and Services Tax Act 1985.
Deﬁned in this Act: instalment dates, , interest instalment date, , provisional tax, , provisional taxpayer, , tax year, , taxable period Section MB 26: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 27 Payment of provisional tax instalments when GST cycle changed (1) (2) (3) When subsection (2) applies Subsection (2) applies in a tax year to a provisional taxpayer who (a) uses the standard or estimation method to determine the amount of provisional tax payable; and has been paying GST on a monthly or 2-monthly basis; and changes to a 6-monthly basis under section 15C(1) of the Goods and Services Tax Act 1985.
(b) (c) When instalments are due: changing to 6-monthly basis Instalments of provisional tax are due and payable on whichever dates of instalments C and F for the taxpayer’s corresponding income year occur after the change in taxable period takes effect under section MB 26.
When subsection (4) applies Subsection (4) applies in a tax year to a provisional taxpayer who (a) uses the standard or estimation method to determine the amount of provisional tax payable; and has been paying GST on a 6-monthly basis; and (b) 1930 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 27 (4) (5) (c) changes to a monthly or 2-monthly basis under section 15C(2) or (3) of the Goods and Services Tax Act 1985.
When instalments due: changing to monthly or 2-monthly basis Instalments of provisional tax are due and payable on whichever dates of instalments B, D, and F for the taxpayer’s corresponding income year occur after the change in taxable period takes effect under section MB 26.
Interest instalment dates in new cycle If an instalment of provisional tax due on an instalment date in the new cycle is payable in relation to a period in the taxpayer’s original cycle and was, under that original cycle, an interest instalment date, it remains an interest instalment date in the new cycle.

However, if the instalment is due and payable on an instalment date other than an interest instalment date, the change does not affect the nature of the instalment.
(6) Formula for amount of instalment The amount of each instalment is calculated under section MB 9.

1931 Part M s MB 27 Income Tax Act 2004 Reprinted as at 29 August 2011 Deﬁned in this Act: amount, , corresponding income year, , GST, , provisional tax, , provisional taxpayer, , tax year, , taxable period Section MB 27: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MB 27 example: substituted, on 1 October 2007, by section 127(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

1932 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 28 Penalties and interest provisions Heading: added, on 1 October 2007, by section 137(1) of the Taxation (Depre- ciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 28 Application of provisions of Tax Administration Act 1994 (1) Safe harbour for standard method If a provisional taxpayer meets the requirements in section 120KE(1) of the Tax Administration Act 1994, their provi- sional tax is treated as due and payable in 1 instalment on their terminal tax date.
GST ratio method (2) A provisional taxpayer who uses a GST ratio in a tax year to determine the amount of an instalment of provisional tax is li- able to pay an amount of use of money interest, a late payment penalty, or a shortfall penalty only in the circumstances set out in, as applicable, the following sections of the Tax Adminis- tration Act 1994: (a) (b) (c) Deﬁned in this Act: amount, , GST ratio, , pay, , provisional taxpayer, , residual income tax, , shortfall penalty, , tax year, , terminal tax date sections 120KB to 120KE: section 139C(1B): section 141EA.
Section MB 28: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Section MB 28(1): amended, on 1 October 2007, by section 128(1) of the Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Treatment of groups of companies and amalgamated companies Heading: added, on 1 October 2007, by section 137(1) of the Taxation (Depre- ciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
1933 Part M s MB 29 Income Tax Act 2004 Reprinted as at 29 August 2011 MB 29 Provisional tax rules and consolidated groups (1) (2) (3) Single company The provisional tax rules apply, with the necessary modiﬁca- tions, to a consolidated group of companies as if it were a sin- gle company.
Joint and several liability Each company in a consolidated group in a tax year is jointly and severally liable for the amount of provisional tax payable by the consolidated group to be credited against the income tax liability of the group for the tax year.

The individual liability of a company for income tax for the tax year is substituted by that joint and several liability to the extent to which the liabil- ity arises while the company is a member of the consolidated group.
Relationship with section HB 1 Section HB 1(5) (Returns, assessments, and liability of con- solidated group) overrides this section.

Deﬁned in this Act: amount, , company, , consolidated group, , income tax, , income tax liability, , pay, , provisional tax, , provisional tax rules, , tax year Section MB 29: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 30 Residual income tax of consolidated groups When this section applies This section applies for the purposes of the provisional tax rules if a company is a member of a consolidated group of companies in a tax year but was not a member of the group for all or part of the preceding tax year.
Increased residual income tax The residual income tax of the consolidated group for the pre- ceding tax year is treated as increased by an amount equal to the residual income tax of the company for the preceding tax year.

If the company is a member of the group for part of the current tax year, the amount of residual income tax is increased as a proportion on the basis of the part of the tax year during which the company is a member of the group.
(1) (2) 1934 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 31 (3) Instalments due after company becomes member If the company is a member of a group for part of the tax year, this section applies only to instalments of provisional tax payable after the date on which the company becomes a member.
Deﬁned in this Act: amount, , company, , consolidated group, , pay, , provi- sional tax, , provisional tax rules, , residual income tax, , tax year Section MB 30: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 31 Consolidated groups using estimation method (1) (2) (3) (4) When subsection (2) applies Subsection (2) applies for the purposes of the provisional tax rules if a company is a member of a consolidated group of companies for all or part of a tax year but is not a member of the group for all or part of the following tax year.
Estimation before ﬁnal instalment date The company must estimate its residual income tax on or be- fore the date of instalment F for the following income year that corresponds to the tax year, and the company is treated as a provisional taxpayer to which section MB 6 applies for the purposes of its estimate.
When company member of another consolidated group The consolidated group, in the case of a company that is a member of another consolidated group, must make an estimate of residual income tax on or before the date of instalment F for the following income year that corresponds to the tax year, and the consolidated group is treated as a provisional taxpayer to which section MB 6 applies for the purposes of its estimate.
When company no longer member If a company stops being a member of the consolidated group in the following tax year, the company’s estimate applies only to instalments of provisional tax payable after the date on which it stopped being a member.
Deﬁned in this Act: company, , consolidated group, , corresponding income year, , pay, , provisional tax rules, , provisional taxpayer, , residual income tax, , tax year 1935 Part M s MB 32 Income Tax Act 2004 Reprinted as at 29 August 2011 Section MB 31: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 32 Consolidated groups using GST ratio method Sections MB 7, MB 8(5), MB 10, and MB 15 to MB 18 apply to a consolidated group of companies with the following modi- ﬁcations: (a) if a consolidated group that is eligible to use, or is using, a GST ratio for a tax year is joined by a new member, the following subparagraphs apply: (i) (ii) (iii) if the new member joins at the start of the tax year and, as a result, the threshold in section MB 15(2)(a) is exceeded, the group is no longer eli- gible to use a GST ratio: if the new member joins at the start of the tax year, and the group, allowing for the inclusion of the new member, is eligible under section MB 15(1), the group may use a GST ratio, subject to the recalculation of the ratio under paragraph (c): if the new member joins at some time in the tax year, the group may continue to use a GST ratio for the tax year, as recalculated under paragraph (c), provided the requirements for eligibility other than the threshold in section MB 15(2)(a) are met: (b) (c) if a consolidated group that does not determine provi- sional tax payable for a tax year using a GST ratio is joined by a new member that is using a GST ratio for the tax year, the group may not start using a GST ratio for this purpose for the tax year: for the purposes of paragraph (a), (i) the group must recalculate the GST ratio apply- ing for a tax year to include the residual income tax of the new member for the preceding tax year and the total taxable supplies of the new member for the corresponding income year, applying sec- tion MB 7(3) if required; and the recalculated GST ratio applies to provisional tax payments made for the corresponding income (ii) 1936 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 33 year on or after the date on which the new mem- ber joins the group: (d) section MB 15(3) and section MB 17(4) or (5), as ap- plicable, apply to a company that leaves a consolidated group at some time in a tax year.
Deﬁned in this Act: consolidated group, , corresponding income year, , GST ratio, , pay, , provisional tax, , residual income tax, , tax year, , taxable supply Section MB 32: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 33 Wholly-owned groups of companies (1) (2) (3) When this section applies This section applies for the purposes of the provisional tax rules and Part 7 of the Tax Administration Act 1994 in relation to a company (company A) that is a member in a tax year of a wholly-owned group of companies that includes another company (company B).

Section MD 2 (Limits on refunds and allocations of tax) overrides this section.
Company A allocating overpayment to company B If, for a tax year, company A has paid an amount of provisional tax that is more than the residual income tax payable for the tax year, the company may allocate some or all of the overpayment to company B to the extent to which the amount of provisional tax paid by company B is less than their residual income tax for the tax year.

Company A must notify the Commissioner under subsection (4).
When allocation made Company A may allocate an amount under subsection (2) on or after the later of (a) the day on which company A overpays the provisional tax; or the day on which the ﬁrst instalment of provisional tax for the tax year becomes payable by company B.
(b) Notice (4) A notice under subsection (2) must (a) (b) name company B, and the amount to be allocated; and state the date on which the overpayment is treated as allocated to company B; and 1937 Part M s MB 34 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) be provided to the Commissioner (i) within the time for providing a return of income for the tax year for company B: (ii) within any extension of time that the Commis- sioner allows.
(5) When allocation made, and how allocation treated For the purposes of this section, (a) an allocation under subsection (2) is treated as made on the date stated in the notice; and provisional tax allocated to company B by company A is treated as provisional tax paid by company B and not by company A.
(b) Deﬁned in this Act: amount, , Commissioner, , company, , notice, , notify, , pay, , provisional tax, , provisional tax rules, , residual income tax, , return of income, , tax year, , wholly-owned group of companies Section MB 33: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 34 Amalgamated companies: calculating residual income tax When this section applies This section applies if an amalgamating company ceases to exist on an amalgamation occurring in an income year of the amalgamated company that corresponds to a tax year.
Residual income tax for preceding tax year The residual income tax of the amalgamated company for the preceding tax year is the amount that would have been the re- sidual income tax of the amalgamated company for the pre- ceding tax year if the amalgamating company and the amalga- mated company had always been 1 company.
Exception: instalments of provisional tax Subsection (2) does not apply for the purposes of the provi- sional tax rules in relation to instalments of provisional tax payable before the amalgamation.
Deﬁned in this Act: amalgamated company, , amalgamating company, , amal- gamation, , amount, , company, , pay, , provisional tax, , provisional tax rules, , residual income tax, , tax year (1) (2) (3) 1938 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 35 Section MB 34: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Attribution rule for services Heading: added, on 1 October 2007, by section 137(1) of the Taxation (Depre- ciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 35 Attribution rule for services (1) (2) (3) (4) When this section applies This section applies for the purposes of the provisional tax rules and Part 7 of the Tax Administration Act 1994 for pro- visional tax paid for income from personal services to which section GC 14B (Attribution rule for personal services) may apply.
Person B allocating amount to person C If, in a tax year, person B pays an amount of provisional tax that is more than the residual income payable for the tax year, person B may allocate some or all of the overpayment to per- son C to the extent to which the amount of provisional tax paid by person C is less than their residual income tax for the tax year.
Person C allocating amount to person B If, in a tax year, person C pays an amount of provisional tax that is more than the residual income payable for the tax year, person C may allocate some or all of the overpayment to per- son B to the extent that the amount of provisional tax paid by person B is less than their residual income tax for the tax year.
When allocation made Persons B and C may allocate an amount under subsection (2) or (3) on or after the later of (a) the day on which the overpayment of provisional tax is paid by person B or person C, as applicable; or the day on which the ﬁrst instalment of provisional tax payable for the tax year becomes payable by (i) (ii) person C, if person B is making the allocation; or person B, if person C is making the allocation.
(b) 1939 Part M s MB 36 Income Tax Act 2004 Reprinted as at 29 August 2011 (5) (6) Notice The Commissioner must be notiﬁed of an allocation under sub- section (2) or (3) in a notice that (a) names the person to whom an allocation is made, and the amount to be allocated; and states the date on which the overpayment is treated as allocated to person B or person C, as applicable; and is provided within the time for providing a return of in- come for the tax year for the person to whom the allo- cation is made.
(b) (c) When allocation made, and how allocation treated For the purposes of this section, (a) an allocation under subsection (2) or (3) is treated as made on the day stated in the notice; and provisional tax allocated to person C by person B for a tax year is treated as provisional tax paid by person C and not by person B; and provisional tax allocated to person B by person C is treated as provisional tax paid by person B and not by person C. (b) (c) Deﬁned in this Act: amount, , Commissioner, , notice, , notify, , pay, , provi- sional tax, , provisional tax rules, , residual income tax, , return of income, , tax year Section MB 35: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Overpayments and credits Heading: added, on 1 October 2007, by section 137(1) of the Taxation (Depre- ciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

MB 36 Overpaid provisional tax When this section applies This section applies when the amount of provisional tax payable by a provisional taxpayer for a tax year is reduced by the taxpayer, or by the Commissioner under section 119(2) of the Tax Administration Act 1994.
(1) 1940 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 36 (2) (3) Reduction in amount of provisional tax payable If the taxpayer applies for a refund of the amount of provisional tax already paid that is as a result of the reduction more than the amount that would have been payable in relation to earlier instalment dates for the tax year, the Commissioner must (a) apply the overpayment as the taxpayer asks under sec- tion 173T of the Tax Administration Act 1994 or, if no request is made, in a way that the Commissioner de- termines in payment of tax or another amount that is payable by them; and refund any balance of the overpayment.
(b) Reduction in assessment If the taxpayer’s residual income tax is assessed as not more than $2,500, and they apply for the refund of an amount of provisional tax that has been determined under section MB 8 and already paid (other than on a ﬁnal instalment), the Com- missioner must (a) apply the amount as the taxpayer asks under section 173T of the Tax Administration Act 1994 or, if no re- quest is made, in a way the Commissioner determines in payment of tax or another amount that is payable by them; and refund any balance of the amount.
(b) Treatment of amount refunded or credited (4) When an overpayment or amount of provisional tax for a tax year has been applied or refunded under subsection (2) or (3), a later instalment payable under section MB 9 or MB (a) 10, as applicable, is calculated as if the total instalments previously payable were reduced by the amount of the overpayment or amount; and the overpayment or amount applied or refunded is, from the date of action taken by the Commissioner, treated as not being provisional tax paid for the tax year.
Deﬁned in this Act: amount, , Commissioner, , instalment date, , pay, , provi- sional tax, , provisional taxpayer, , residual income tax, , tax, , tax year (b) Section MB 36: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
1941 Part M s MB 37 Income Tax Act 2004 Reprinted as at 29 August 2011 MB 37 Further income tax credited to provisional tax liability (1) (2) (3) When this section applies This section applies for the purposes of sections MB 8 to MB 10 if, under section ME 9 (Further tax payable where end of year debit balance or when company ceases to be imputation credit account company), a company applies an amount of fur- ther income tax to pay an instalment of provisional tax for which the company becomes liable after the date of payment of the further income tax.
Amount treated as provisional tax The instalment is satisﬁed to the extent of the amount of further income tax.

The amount is treated as provisional tax paid on the date on which the instalment was due and payable.
Order The Commissioner must credit the amount of the further in- come tax in payment successively of (a) the instalment of provisional tax that is ﬁrst due and payable after the date of payment of the further income tax; and to the extent of the amount of further income tax, to later instalments in the order in which they are due and payable.
(b) Deﬁned in this Act: amount, , company, , further income tax, , pay, , provisional tax Section MB 37: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Disaster relief Heading: added, on 1 October 2007, by section 137(1) of the Taxation (Depre- ciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MB 38 Provisional taxpayer affected by self-assessed adverse event or qualifying event Who this section applies to This section applies to a provisional taxpayer with a business that is signiﬁcantly affected by a self-assessed adverse event or qualifying event.

This section overrides section MB 6.


(1) 1942 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MB 38 (2) (3) (4) Taxpayer’s request The provisional taxpayer may ask the Commissioner to accept an estimate or a revised estimate of the residual income tax payable by them for a tax year.
Acceptance of estimate The Commissioner may accept an estimate or revised estimate described in subsection (2) if all the following requirements are met: (a) the business is signiﬁcantly affected by the self-assessed adverse event or qualifying event; and it is not reasonable to require the taxpayer to provide under section MB 6 an estimate or revised estimate of residual income tax payable by them for the tax year; and the basis on which the taxpayer has chosen to pay pro- visional tax is now inappropriate; and the taxpayer asks to revise their estimate as soon as prac- ticable.
(b) (c) (d) Treatment of revised estimate If a revised estimate is accepted under subsection (3), it is treated as the estimate applying on the date of instalment F. Deﬁned in this Act: Commissioner, , provisional tax, , provisional taxpayer, , qualifying event.

Section MB 38: added, on 1 October 2007, by section 137(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Subpart MBA—Pooling of provisional tax Contents MBA 1 Purpose MBA 2 Function of intermediary and tax pooling account MBA 3 Application to establish tax pooling account MBA 4 Tax pooling account MBA 5 Deposits to tax pooling account MBA 6 Transfers from tax pooling account MBA 7 Refunds from tax pooling account MBA 8 Wind up of tax pooling account Page 1944 1944 1944 1945 1946 1947 1948 1949 1943 Part M s MBA 1 Income Tax Act 2004 Reprinted as at 29 August 2011 MBA 9 Tax treatment of payments of interest 1950 MBA 1 Purpose The purpose of this subpart is to allow taxpayers to manage provisional tax payment risks by— (a) (b) Compare: 1994 No 164 s MBB 1 reducing use of money interest on underpaid tax; and increasing use of money interest on overpaid tax.
MBA 2 Function of intermediary and tax pooling account A taxpayer may agree with a person who holds a tax pooling account that the person (in this subpart called an intermedi- ary) will act as an intermediary between the taxpayer and the Commissioner in using funds from the tax pooling account to meet the taxpayer’s obligations to pay provisional tax.
Compare: 1994 No 164 s MBB 2 MBA 3 Application to establish tax pooling account (1) A person (in this section called the applicant) may apply to the Commissioner for the establishment of a tax pooling account in the applicant’s name by a notice that states— (a) (b) (c) (d) the applicant’s full name, address, and tax ﬁle number; and that the applicant has administration and information technology systems that satisfy section MBA 4(4) and will maintain and operate those systems as required by that section; and that the applicant has established a trust account into which the applicant will pay amounts that the applicant receives as an intermediary; and that the applicant, if a natural person, or each of the per- sons acting as an ofﬁcer of the applicant, if the applicant is not a natural person, and any principal of the appli- cant,— (i) (ii) is not a discharged or undischarged bankrupt; and has not been convicted of an offence involving dishonesty; and is eligible to be a company director; and (iii) 1944 Reprinted as at 29 August 2011 (e) Income Tax Act 2004 Part M s MBA 4 that the applicant, before acting as an intermediary for a taxpayer, will inform the taxpayer— (i) that the Commissioner is not required to oversee or audit the operation of the tax pooling account; and that the Commissioner is not liable for any loss that a person suffers because of the way in which the intermediary operates the tax pooling ac- count; and of the requirements of paragraphs (b), (c), and (d).
(ii) (iii) (2) The Commissioner may give written approval for an applicant to establish a tax pooling account if the Commissioner is sat- isﬁed that— (a) the applicant will operate the tax pooling account cor- rectly; and the applicant’s information technology systems will al- low the applicant to make payments and provide infor- mation in a prescribed format.
(b) Compare: 1994 No 164 s MBB 3 MBA 4 Tax pooling account (1) An intermediary must establish a tax pooling account with the Commissioner in the name of the intermediary.

(2) A tax pooling account continues until wound up and does not relate to a particular tax year.
(3) An intermediary who accepts a payment from a taxpayer for deposit in a tax pooling account must, at or before the time of the payment, give notice to the taxpayer that a payment to the intermediary does not satisfy any obligation of the taxpayer to make a payment to the Commissioner.
(4) An intermediary must maintain and operate administration and information technology systems that— (a) protect the privacy of the personal information and pay- ment details acquired by the intermediary in the oper- ation of the intermediary’s tax pooling account; and record the amount remaining at any time in the inter- mediary’s tax pooling account that has been contributed (b) 1945 Part M s MBA 5 Income Tax Act 2004 Reprinted as at 29 August 2011 by each taxpayer from whom the intermediary accepts payments.
(5) (6) The Commissioner is not required to oversee or audit the op- eration of a tax pooling account.

The Commissioner is not liable for any loss that a person suf- fers because— (a) an intermediary does not deposit a taxpayer’s payment into a tax pooling account: an intermediary makes an unauthorised withdrawal from a tax pooling account: an intermediary fails to request a transfer of funds from a tax pooling account to a taxpayer’s account with the Commissioner.
Compare: 1994 No 164 s MBB 4 (b) (c) MBA 5 Deposits to tax pooling account (1) When a deposit is made to a tax pooling account, the inter- mediary must provide the Commissioner with a notice by elec- tronic means that gives, for each taxpayer who has contributed to the amount deposited,— (a) (b) the name and tax ﬁle number of the taxpayer; and the amount contributed by the taxpayer to the deposit.
(2) When the Commissioner receives a deposit and the details re- quired by subsection (1), the Commissioner must give to the intermediary a notice of— (a) (b) the account into which the deposit has been paid; and the taxpayers who are recorded as being associated with the deposit; and the amount of the deposit that is recorded as being as- sociated with each taxpayer.

(c) The Commissioner must refund a deposit if the details required by subsection (1) are not provided within 5 working days.
The principal amount of a payment that a taxpayer makes to an intermediary for deposit in a tax pooling account is held by the intermediary in trust for the taxpayer until the principal amount is— (a) credited to an account with the Commissioner of the taxpayer: (3) (4) 1946 Income Tax Act 2004 Part M s MBA 6 Reprinted as at 29 August 2011 (b) (5) credited to an account with the Commissioner of an- other taxpayer who is a client of the intermediary: refunded to the taxpayer.
(c) Interest that is paid by the Commissioner on an amount that is deposited in a tax pooling account accrues to the beneﬁt of the intermediary from the date of the deposit and is payable to the intermediary on— (a) the effective date of the credit of the amount to another account with the Commissioner: the date that the amount is refunded by the Commis- sioner to the intermediary.
(b) (6) An amount deposited into a tax pooling account is treated as tax paid by the intermediary for the purpose of calculating use of money interest but for no other purpose.
Compare: 1994 No 164 s MBB 5 MBA 6 Transfers from tax pooling account (1) An intermediary may, from time to time,— (a) (b) request that the Commissioner transfer an amount in the intermediary’s tax pooling account to the account with the Commissioner of a taxpayer who is a client of the intermediary: request that the transferred amount be treated as pro- ducing a credit in the taxpayer’s account on a date that is on or after the date on which the transferred amount was deposited in the tax pooling account.
(2) The date on which a transferred amount is treated as producing a credit in the taxpayer’s account (the effective date of the transfer) is— (a) the date requested by the intermediary for the transfer, unless— (i) the requested date is in a tax year for which the taxpayer’s terminal tax date is more than 60 days before the date on which the Commissioner re- ceives the request; and the taxpayer, when the Commissioner receives the request, is liable for a penalty that relates to the taxpayer’s provisional tax obligations for the tax year; or (ii) 1947 Part M s MBA 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) the date that the Commissioner receives the request for the transfer, otherwise.
(3) (4) (5) The intermediary must provide the Commissioner with the fol- lowing details by electronic means: (a) the date on which an amount is to be transferred and the effective date of the transfer if this is a different date; and the amount to be transferred; and the tax ﬁle number of the taxpayer to whom the amount is to be transferred.
(b) (c) The Commissioner must not transfer an amount if the transfer involves a deposited amount for which the details required by section MBA 5(1) have not been provided and the period of 5 working days for providing the details has not expired.

The Commissioner must not transfer an amount from a tax pooling account to a taxpayer’s account until the details re- quired by subsection (3) have been provided.
(6) Once an amount has been transferred, the Commissioner must provide a statement showing the effect of the transfer to— (a) (b) the intermediary; and the taxpayer in respect of whom the transfer has been made.

(9) (7) An amount transferred and credited to a taxpayer’s account is treated as income tax paid to meet a provisional tax obligation under the provisional tax rules.
The Commissioner may refuse to accept a request for a trans- fer, or may reverse a transfer, if the Commissioner considers that the request for the transfer is made for the purpose or ef- fect of tax avoidance.

Compare: 1994 No 164 s MBB 6 MBA 7 Refunds from tax pooling account An intermediary may request the Commissioner to refund all or part of the balance in their tax pooling account.
Compare: 1994 No 164 s MBB 7 1948 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MBA 8 MBA 8 Wind up of tax pooling account (1) An intermediary may wind up their tax pooling account at any (2) time.
Subject to subsection (3), the Commissioner may require an intermediary to wind up their tax pooling account immedi- ately, or on a date speciﬁed by the Commissioner, if the Com- missioner considers that— (a) the intermediary’s actions are preventing a taxpayer from effectively managing the taxpayer’s liabilities to pay provisional tax and use of money interest; or the intermediary is, or has been, in breach of their obli- gations under this subpart; or the tax pooling account has gone into deﬁcit; or there are, or are likely to be, consistently fewer than 100 taxpayers making payments for depositing in the tax pooling account; or the intermediary, if a natural person, or a person act- ing as an ofﬁcer of the intermediary, if the intermediary is not a natural person, or a principal of the intermedi- ary,— (i) (ii) has been made bankrupt: has been convicted of an offence involving dis- honesty: (iii) is not eligible to be a company director; or the intermediary, if not a natural person, has been put into liquidation or receivership.
(b) (c) (d) (e) (f) (3) If the Commissioner intends to rely on subsection (2)(d) when requiring an intermediary to wind up a tax pooling account, the Commissioner must give 30 days’ notice to the intermediary of the intended action.
(4) When a tax pooling account is wound up, the Commissioner may, at the Commissioner’s discretion,— (a) refund the contents of the tax pooling account to the former holder of the account: apply to a court for directions concerning the disposal of the contents of the tax pooling account.
(b) Compare: 1994 No 164 s MBB 8 1949 Part M s MBA 9 Income Tax Act 2004 Reprinted as at 29 August 2011 MBA 9 Tax treatment of payments of interest (1) This section applies to a payment that is made by an intermedi- ary to a client of an intermediary or by a client of an inter- mediary to the intermediary and that represents a difference between— (a) an amount of funds that has been held in a tax pooling account for a period of time; and an amount that is paid for the entitlement to the funds.
(2) (b) The payment is treated as— (a) a payment of interest to the person who derives the pay- ment, for the purposes of section CC 4, the RWT rules, and the NRWT rules: expenditure incurred in deriving the income of the per- son who makes the payment.
(b) Compare: 1994 No 164 s MBB 9 Subpart MBB—Early-payment discount of income tax Subpart MBB (comprising sections MBB 1 to MBB 4) was inserted, as from 1 October 2005, by section 224 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Contents MBB 1 Purpose MBB 2 Availability of early-payment discount MBB 3 Credit treated as being payment as income tax MBB 4 Some deﬁnitions Page 1950 1951 1952 1952 MBB 1 Purpose The purpose of this subpart is to encourage, by means of a discount of income tax, payments of amounts as income tax by small-business taxpayers in the income year preceding the income year in which the taxpayers are ﬁrst required to pay provisional tax.
Subpart MBB (comprising sections MBB 1 to MBB 4) was inserted, as from 1 October 2005, by section 224 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
1950 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MBB 2 MBB 2 Availability of early-payment discount (1) This section applies to a small-business taxpayer for an income year if the small-business taxpayer— (a) (b) (c) (d) is not required to make payments of provisional tax in the income year; and on or before the taxpayer’s balance date for the income year, makes payments as income tax for the income year; and throughout the period from the taxpayer’s balance date for the income year to the taxpayer’s terminal tax date for the income year, has a credit in an account with the Commissioner that is greater than or equal to the lesser of the following: (i) the amount that, on or before the small-business taxpayer’s balance date for the income year, the small-business taxpayer pays as income tax for the income year: the amount of terminal tax for the income year for which the taxpayer would be liable in the absence of this section; and has, for earlier income years— (i) never been required to make payments of provi- sional tax and— (A) (ii) (B) never received an early-payment discount; or derived assessable income from a busi- ness at no time in a period of 4 income years that began after the latest income year for which the small-business taxpayer received an early-payment discount; or (ii) derived assessable income from a business at no time in a period of 4 income years that began after the latest income year for which the small-busi- ness taxpayer was required to make payments of provisional tax.
(2) If a small-business taxpayer to whom this section applies makes a return of income for the income year and applies for an early-payment discount, the Commissioner must credit the income tax account of the small-business taxpayer with 1951 Part M s MBB 3 Income Tax Act 2004 Reprinted as at 29 August 2011 an early-payment discount found by multiplying the discount rate referred to in subsection (4) by the lesser of the following: the amount that, on or before the small-business tax- (a) payer’s balance date for the income year, the small-busi- ness taxpayer paid as income tax for the income year: 105% of the small-business taxpayer’s residual income tax for the income year.
(b) The small-business taxpayer must make the application re- quired by subsection (2) on or before the date given by section 37(5) of the Tax Administration Act 1994 as the last date for ﬁling a return of income for the income year to which the ap- plication relates.

The discount rate is— (a) (b) 6.7% if no rate is prescribed under paragraph (b): the rate prescribed by the Governor-General by Order in Council.
Subpart MBB (comprising sections MBB 1 to MBB 4) was inserted, as from 1 October 2005, by section 224 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

(3) (4) MBB 3 Credit treated as being payment as income tax A credit of an early-payment discount for a small-business tax- payer for an income year is treated as being a payment made on the day after the last day of the income year by the small-busi- ness taxpayer as income tax for the income year.
Subpart MBB (comprising sections MBB 1 to MBB 4) was inserted, as from 1 October 2005, by section 224 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
MBB 4 Some deﬁnitions In this subpart— early-payment discount means a discount of income tax under this subpart small-business taxpayer means a taxpayer who— (a) conducts a business on the taxpayer’s own account, act- ing alone or as a partner in a partnership; and does not use a company or a trust in the conduct of the business; and derives assessable income that is predominantly— (b) (c) 1952 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MC 1 (i) (ii) from the business; and not interest, dividends, royalties, rents or beneﬁ- ciary income.
Subpart MBB (comprising sections MBB 1 to MBB 4) was inserted, as from 1 October 2005, by section 224 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Subpart MC—Terminal tax Contents MC 1 Payment of terminal tax Page 1953 MC 1 Payment of terminal tax (1) Terminal tax payable by a person for a tax year is due on— (a) the 7th day of the month speciﬁed in schedule 13, part A, column G or H, for the person’s corresponding in- come year, unless January is speciﬁed: the 15th day of January, if January is speciﬁed in sched- ule 13, part A, column G or H for the person’s corres- ponding income year.
(b) (2) For the purposes of subsection (1), the month speciﬁed in schedule 13, part A for the taxpayer’s corresponding income year is— (a) the month in column H, if— (i) (ii) the person’s return of income for the tax year was linked to a tax agent: the Commissioner has been notiﬁed that a tax agent will respond to an income statement for the tax year that the person has requested under sec- tion 80C of the Tax Administration Act 1994 or that the Commissioner has issued under section 80D of that Act: the month in column G, in any other case.
(b) Compare: 1994 No 164 s MC 1 Section MC 1(1)(a): amended, on 1 October 2007, by section 138(1)(a) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

1953 Income Tax Act 2004 Reprinted as at 29 August 2011 Section MC 1(1)(b): substituted, on 1 October 2007, by section 138(1)(b) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MC 1(2): substituted, on 1 October 2007, by section 138(2) of the Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).
Subpart MD—Refunds Contents MD 1 Refund of excess tax MD 2 Limit on refunds and allocations of tax MD 2A Limits on refunds of tax for certain qualifying unit trusts and group investment funds MD 2B Limits on refunds of tax in relation to Maori authorities MD 3 Refund of income tax not to exceed amount of credit balance MD 5 No credits or debits for excess income tax or dividend withholding payments not refunded or allocated Page 1954 1956 1960 1960 1962 1964 MD 1 Refund of excess tax (1) Subject to sections MD 2, MD 2A, MD 2B, MD 3 and NH 4, and subsection (2), the Commissioner must refund an amount that a taxpayer has paid as tax if— (a) the Commissioner is satisﬁed that the amount represents an excess over the tax properly payable by the taxpayer; and the 4-year period referred to in section 108 of the Tax Administration Act 1994 has not ended.
(b) (1A) If, as a result of the issue of an income statement, the amount of tax paid in excess and required to be refunded is more than $50, or such greater amount as the Governor-General by Order in Council prescribes, the Commissioner must not refund the tax until the taxpayer has conﬁrmed the income statement is correct.

(1B) The Commissioner must not pay a refund under subsection (1) to the extent that the excess tax is applied to a nil period under either section MZ 5 or MZ 6.
1954 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MD 1 (2) Subject to sections MD 2, MD 2A, MD 2B, MD 3, and NH 4, the Commissioner must refund an amount that a taxpayer has paid as tax if— (a) the taxpayer paid the amount as a result of an amend- ment to an assessment that increased the amount of tax payable by the taxpayer; and the Commissioner is satisﬁed that the amount represents an excess over the tax properly payable by the taxpayer; and the 4-year period beginning at the end of the income year in which the assessment was amended has not ended.
(b) (c) (2B) The Commissioner may refund an amount that is referred to in subsection (1) or (2) after the end of the 4-year period referred to in the subsection, if— (a) the refund arises from— (i) a clear mistake or simple oversight of the tax- payer: an entitlement of the taxpayer to a rebate of in- come tax under subpart KD; and (b) the refund is made— (i) within the period of 4 years beginning from the end of the 4-year period referred to in the subsec- tion: as a result of an application by or on behalf of the taxpayer that the Commissioner receives before or within the period of 4 years beginning from the end of the 4-year period referred to in the subsection.
(ii) (ii) (3) If, but for this subsection and after the application of sections MD 2, MD 2A, MD 2B, MD 3, and NH 4, a person would be entitled to an amount as a refund under this section, the Com- missioner may apply the amount, in accordance with a request under section 173T of the Tax Administration Act 1994 or, in the absence of such a request, in such order or manner as the Commissioner may determine, in payment of— (a) (b) an amount that is payable by the person under this Act: an amount that is payable by the person under another Inland Revenue Act.
1955 Part M s MD 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (3A) The Commissioner may apply a credit of tax allowed under section KD 5 in satisfaction of an amount added to tax payable under section KD 4(2) in respect of a prior tax year whether that amount is due and payable.
(4) Nothing in subsection (3) authorises the Commissioner to apply in satisfaction of any tax or other amount due the amount of any refund that arises in terms of— (a) subpart KD (which relates to tax credits for families); or section NF 7 (which relates to refunds of excess resident withholding tax); or section NG 16 (which relates to refunds of excess non- resident withholding tax).
(b) (c) Compare: 1994 No 164 s MD 1 Subsection (1) was substituted, as from 1 October 2005, by section 225(1) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Subsection (2) was substituted, as from 1 October 2005, by section 225(2) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Subsection (2B) was inserted, as from 1 October 2005, by section 225(2) Taxa- tion (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Section MD 1(4)(a): amended (with effect from 1 April 2007), on 19 Decem- ber 2007, by section 153(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MD 2 Limit on refunds and allocations of tax (1) If an imputation credit account company becomes entitled at any time to a refund of income tax in accordance with sec- tion MD 1, or becomes entitled to make an allocation within a wholly-owned group in accordance with section MB 33, the refund to be paid to the company or the allocation to be made in accordance with section MB 33 must not exceed the credit balance (if any) of the company’s imputation credit account at the later of— (a) (b) the end of the most recently ending imputation year; or the last day of any period for which the company fur- nishes an imputation return under section 70(3) of the Tax Administration Act 1994; or the last day of any period for which the company is required by the Commissioner to furnish an imputation (c) 1956 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MD 2 return under section 70(1) of the Tax Administration Act 1994.
(2) (1A) Despite subsection (1)(a), an imputation credit account com- pany that furnishes its imputation return for an imputation year before the end of the next imputation year within the time al- lowed under an extension of time for furnishing the imputation return may be refunded income tax in accordance with section MD 1 or make an allocation in accordance with section MB 33 if the total amount that is refunded or allocated does not exceed the credit balance (if any) of the company’s imputation credit account on the last day of the imputation year for which the imputation return was furnished.
If a company that has ceased to be an imputation credit ac- count company becomes entitled to a refund of income tax in accordance with section MD 1 or becomes entitled to make an allocation within a wholly-owned group in accordance with section MB 33 in respect of any tax year during which it was an imputation credit account company, the total amount that is refunded or allocated must not exceed the credit balance (if any) of the company’s imputation credit account that arose as a debit under section ME 5(1)(k) immediately before the com- pany ceased to be an imputation credit account company.
For the purposes of subsections (1), (1A), and (2), a credit bal- ance referred to in those subsections is treated as being reduced by a refund under section MD 1, or an allocation under sec- tion MB 33, that is made earlier in the same imputation year if, under this section or section NH 4, the refund or allocation may not exceed the credit balance.
For the purposes of subsections (1), (1A), and (2), if the re- fund or allocation referred to in those subsections is a refund of income tax for a tax year made under section MD 1 or an allocation for a tax year under section MB 33, the credit bal- ance referred to in those subsections must be treated as being increased by an amount equal to any debit to the company’s imputation credit account that, under section ME 5(1)(i), arose after a credit is made to that company’s imputation credit ac- count for amounts that have satisﬁed the company’s income tax liability for that tax year, and before the date on which the (3) (4) 1957 Part M s MD 2 Income Tax Act 2004 Reprinted as at 29 August 2011 (5) credit balance is to be determined in accordance with subsec- tion (1), (1A), or (2).
If an effect of subsection (1), (1A), or (2) is that income tax paid in excess by a company is not refunded to the company or not allocated within a wholly-owned group by the company, the income tax that is neither refunded nor allocated— (a) must be credited in payment of any income tax or pro- visional tax that is payable by the company for— (i) the tax year during which the company would, but for subsection (1), (1A), or (2), have become entitled to receive a refund or make an allocation: a tax year that commences after 31 March 1988, whether before or after the income year referred to in subparagraph (i): (ii) (b) to the extent that it cannot be credited in accordance with paragraph (a), whether by reason of the company being liquidated or for any other reason, is retained by the Commissioner.
(5A) Despite subsection (5), the income tax not refunded or allo- cated within a wholly-owned group in accordance with section MB 33 may be credited on a provisional tax instalment date if residual income tax is treated as being payable on the date spe- ciﬁed in Part 7 of the Tax Administration Act 1994.
For the purposes of section MD 1, every company that has paid further income tax under section ME 9 is deemed not to have paid tax in excess of the amount properly payable to the extent that any tax paid in excess is referable to the further income tax paid by the company.
(6) (7) Nothing in this section limits the amount of tax overpaid by a qualifying company that may be refunded to the company or allocated by the company unless— (a) the tax was overpaid as part of or under an arrangement to secure a tax advantage of any of the kinds referred to in section GC 22(1), or otherwise to avoid the liability of any shareholder in the company to tax under this Act; and the arrangement, or any element of the arrangement, was based on the ability of the company to obtain a (b) 1958 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MD 2 refund of tax that, but for this subsection, would not be obtainable by virtue of subsection (1), (1A), or (2).
(8) Where an amalgamating company ceases to exist upon a quali- fying amalgamation, this section applies with effect from the time of the amalgamation, with any necessary modiﬁcations, in respect of any tax paid by the amalgamating company as if it and the amalgamated company were a single company.
(9) Where a consolidated group ceases to exist on a qualifying amalgamation which involves all members of the consolidated group amalgamating (whether or not also amalgamating with any company outside the group), this section applies with ef- fect from the time of the amalgamation, with any necessary modiﬁcations, in respect of any tax paid by the consolidated group as if it and the amalgamated company were a single company.
(10) Nothing in this section applies to limit the amount of any re- fund of tax paid by a company in respect of income derived by the company in the 1987-88 or any earlier tax year or any refund of tax paid in relation to which no credit arose to the company’s imputation credit account by virtue of section ME 4(1)(a).
Compare: 1994 No 164 s MD 2 Section MD 2(1): amended, on 1 October 2007, by section 139(1)(a) of the Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).

Section MD 2(1A): amended, on 1 October 2007, by section 139(1)(a) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section MD 2(2): amended, on 1 October 2007, by section 139(1)(a) of the Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).

Section MD 2(3): amended, on 1 October 2007, by section 139(1)(a) of the Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).
Section MD 2(4): amended, on 1 October 2007, by section 139(1)(a) of the Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).
Subsection (4) was amended, as from 1 April 2005, by section 129 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “after a credit is made to that company’s imputation credit account for amounts that have satisﬁed the company’s income tax liability for that tax year,” for “after the date of payment of the ﬁrst instalment of provisional tax for that tax year”.
1959 Part M s MD 2A Income Tax Act 2004 Reprinted as at 29 August 2011 Section MD 2(5A): amended, on 1 October 2007, by section 139(1)(a) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MD 2A Limits on refunds of tax for certain qualifying unit trusts and group investment funds (1) A refund of income tax to which a qualifying unit trust or group investment fund becomes entitled in accordance with section MD 1 is limited to the amount given by subsection (2) if the trust or fund— (a) goes into liquidation or chooses to become a portfolio investment entity; and at the time of the liquidation or election, the trust or fund has— (i) a credit balance in its supplementary available subscribed capital account; and a zero balance in its imputation credit account.
(ii) (b) (2) The refund of income tax may not be more than the amount calculated according to the formula— credit balance × maximum imputation ratio where— credit balance is the credit balance in the qualifying unit trust’s, or the group investment fund’s, supplementary avail- able subscribed capital account maximum imputation ratio is the amount that would be given by the formula set out in section ME 8(1) if the words “in which the dividend is paid” in the deﬁnition of item a were replaced by “in which the liquidation occurs or the election is made” Section MD 2A (except for the heading) was substituted, as from 18 December 2006, by section 130(1) Taxation (Savings Investment and Miscellaneous Pro- visions) Act 2006 (2006 No 81) with application for income years beginning on or after 1 April 2007.
MD 2B Limits on refunds of tax in relation to Maori authorities (1) A refund of income tax under section MD 1 to a Maori au- thority must not be more than the credit balance of the Maori authority’s Maori authority credit account at the later of— (a) unless subsection (1B) applies, the end of the most re- cently ending imputation year; or 1960 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MD 2B (b) (c) the last day of a period for which the Maori authority furnishes a Maori authority credit account return under section 70B(3) of the Tax Administration Act 1994; or the last day of a period for which the Maori authority is required by the Commissioner to furnish a Maori au- thority credit account return under section 70B(1) of the Tax Administration Act 1994.
(2) (b) (1B) Despite subsection (1)(a), a Maori authority that furnishes its Maori authority credit account return for an imputation year before the end of the next imputation year may be refunded income tax in accordance with section MD 1 if— (a) the Maori authority has furnished the Maori authority credit account return within an extension of time given by the Commissioner; and the amount of the refund does not exceed the credit bal- ance in the Maori authority’s Maori authority credit ac- count on the last day of the imputation year for which the Maori authority credit account return was furnished.
If a Maori authority has ceased being a Maori authority and becomes entitled to a refund of income tax in accordance with section MD 1 in respect of a tax year during which the Maori authority maintained a Maori authority credit account, the re- fund to be paid to the Maori authority must not be more than the credit balance of the Maori authority’s Maori authority credit account that arose as a debit under section MK 5(1)(i) immediately before the Maori authority ceased being a Maori authority.
For the purposes of subsections (1) and (2), if the refund is a refund of income tax, the credit balance referred to in those subsections is increased by the amount of a debit that arises to the Maori authority’s Maori authority credit account under section MK 5(1)(f) after the date of instalment B speciﬁed in schedule 13, part A, for the authority’s income year that cor- responds to the tax year and before the date upon which the credit balance is determined under subsection (1) or (2).
(4) Unless subsection (4B) applies, if income tax paid in excess is not refunded to a Maori authority by reason of subsection (1) or (2), the income tax not refunded— (3) 1961 Part M s MD 3 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) must be credited in payment of income tax or provi- sional tax that is payable by the Maori authority for the tax year in which the entitlement to the refund arose, or for the 2004-05 or a later tax year, whether before or after the tax year in which the entitlement arose; and to the extent that the income tax not refunded cannot be credited under paragraph (a), must be retained by the Commissioner.
(b) (5) (4B) Despite subsection (4), the income tax not refunded may be credited on a provisional tax instalment date if residual income tax is treated as being payable on the date speciﬁed in Part 7 of the Tax Administration Act 1994.

For the purposes of section MD 1, further income tax paid under section MK 8 by a Maori authority is treated as not being tax paid in excess of the amount properly payable.
This section does not apply to limit the amount of a refund of tax paid— (a) (6) by a Maori authority in respect of income derived by the Maori authority in the 2003-04 or an earlier tax year; or for which a credit did not arise to the Maori author- ity’s Maori authority credit account under section MK 4(1)(a).
(b) Compare: 1994 No 1964 s MD 2B Subsection (1)(a) was amended, as from 1 October 2005, by section 226(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “unless subsection (1B) applies, the end” for “the end”.

Subsection (1B) was inserted, as from 1 October 2005, by section 226(2) Taxa- tion (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Section MD 2B(3): amended, on 1 October 2007, by section 140(1) of the Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).

Subsection (4) was amended, as from 1 October 2005, by section 226(3) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “Unless subsection (4B) applies, if income” for “If income”.
Subsection (4B) was inserted, as from 1 October 2005, by section 226(4) Taxa- tion (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
MD 3 Refund of income tax not to exceed amount of credit balance (1) Where a policyholder credit account person becomes entitled at any time to a refund of income tax in accordance with sec- 1962 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MD 3 tion MD 1, the refund to be paid to the person must not exceed the credit balance (if any) of the person’s policyholder credit account at the later of— (a) the end of the most recently ending tax year of the per- son; or the last day of any period (being a period ending before the date upon which the refund is payable) for which the person furnishes a policyholder credit account return under section 66(5) of the Tax Administration Act 1994; or the last day of any period (being a period ending before the date upon which the refund is payable) for which the person is required by the Commissioner to furnish a policyholder credit account return under section 66(4) of the Tax Administration Act 1994.
(b) (c) (2) Where a person who has ceased to be a policyholder credit account person becomes entitled to a refund of income tax in accordance with section MD 1 in respect of any tax year dur- ing which the person was a policyholder credit account person, the refund to be paid to the person does not exceed the credit balance (if any) of the person’s policyholder credit account im- mediately before the person ceased to be a policyholder credit account person.
For the purposes of subsections (1) and (2), any credit balance referred to in those subsections is deemed to be reduced by any earlier refund paid to the person during the same tax year, being a refund of income tax that may not, under this section, exceed that credit balance.
(3) (4) Where income tax paid in excess is not refunded to a person by reason of subsection (1) or (2), the income tax not refunded— is credited in payment of any income tax or provisional (a) tax payable by the person for the tax year during which the entitlement to the refund arose, or for any tax year commencing after 31 March 1990, whether before or after the tax year in which the entitlement to the refund arose: to the extent that it cannot, for any reason, be credited in accordance with paragraph (a), is retained by the Com- missioner.
(b) 1963 Part M s MD 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (5) Nothing in this section applies to limit the amount of any re- fund of tax paid by a person in respect of income derived by the person in the 1989-90 or any earlier tax year.
Compare: 1994 No 164 s MD 3 MD 5 No credits or debits for excess income tax or dividend withholding payments not refunded or allocated No credit or debit arises in an imputation credit account or dividend withholding payment account of a company from an amount of tax paid in excess by the company, or dividend with- holding payment made by the company, that is— (a) credited under section MD 2 against an amount of in- come tax or provisional tax that is payable by the com- pany: credited under section NH 4(2)(b) or NH 5(5)(b) in pay- ment of a dividend withholding payment that is payable by the company.
(b) Compare: 1994 No 164 s MD 5 Subpart ME—Imputation credit accounts Contents Imputation credit accounts: general ME 1 Companies required to maintain imputation credit account ME 1A Companies electing to maintain imputation credit account ME 1B Amount of dividend for imputation rules if paid in Australian currency Imputation credit account ME 2 Balance of imputation credit account ME 3 ME 4 Credits arising to imputation credit account ME 5 Debits arising to imputation credit account ME 6 Company may attach imputation credit to dividend ME 6B Share user may attach imputation credit to replacement payment Page 1967 1968 1970 1971 1971 1972 1979 1989 1993 ME 7 Transfer by life insurance company of credit balance to 1993 policyholder credit account ME 8 Allocation rules for imputation credits 1995 1964 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MD 5 ME 9 Further tax payable where end of year debit balance, or when company ceases to be imputation credit account company 1997 ME 9B Imputation credit account company leaving wholly-owned 2000 group ME 9C Imputation credit account company joining wholly-owned 2003 group Consolidated imputation groups ME 10 Consolidated imputation group to maintain separate imputation credit account ME 11 Credits arising to imputation credit account of group ME 12 Debits arising to imputation credit account of group ME 13 Debiting and crediting between consolidated imputation group and individual companies ME 14 Application of speciﬁc imputation provisions to consolidated imputation groups Policyholder credit accounts ME 15 Resident life insurance companies to maintain policyholder credit account ME 16 Calculation of balance of policyholder credit account ME 17 Policyholder credit account of company ME 18 Credits and debits arising to policyholder credit account of company 2006 2007 2013 2020 2022 2026 2026 2026 2027 ME 19 Election to use credit balance as credit against policyholder 2030 base income tax liability or as credit in imputation credit account ME 19A Credit
 balance may be transferred on transfer of life 2031 insurance business ME 20 Determinations by Commissioner as to credits and debits 2032 arising to policyholder credit account ME 21 Person may elect to maintain policyholder credit account ME 22 Policyholder credit account of person ME 23 Credits and debits arising to policyholder credit account of person ME 24 Use of credit balance to reduce income tax Policyholder credit accounts: consolidated groups ME 25 Policyholder credit accounts and consolidated groups ME 26 Credits and debits arising to group policyholder credit account ME 27 Debiting and crediting between group and individual policyholder credit accounts 2033 2034 2035 2037 2038 2038 2040 1965 Income Tax Act 2004 Reprinted as at 29 August 2011 ME 28 Application of policyholder credit account provisions to 2041 consolidated group Imputation credit accounts and policyholder credit accounts: amalgamated companies ME 29 Debits and credits arising to imputation credit account or 2042 policyholder credit account on amalgamation Imputation credit accounts: statutory producer boards ME 30 Statutory producer board may determine to attach imputation credit to certain distributions ME 31 Amount of imputation credit to be attached to cash 2044 2045 distribution ME 32 Amount of imputation credit to be attached to notional 2046 distribution ME 33 Notional distribution deemed to be dividend ME 34 Statutory producer boards and dividend withholding 2048 2049 payments Imputation credits: co-operative companies ME 35 Co-operative company may make annual determination to 2050 attach imputation credit to certain distributions ME 36 Amount of imputation credit to be attached to cash 2051 distribution ME 37 Amount of imputation credit to be attached to notional 2052 distribution ME 38 Notional distribution deemed to be dividend or taxable 2052 Maori authority distribution ME 39 Co-operative companies and dividend withholding 2053 payments Imputation credit accounts: credits
 and debits incorrectly recorded ME 40 Determinations by Commissioner as to credits and debits 2054 arising to imputation credit account Imputation credit accounts: unit trusts and group investment funds ME 41 Special debits arising to imputation credit account of unit 2055 trust or group investment fund 1966 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 1 Imputation credit accounts: general ME 1 Companies required to maintain imputation credit (1) account Except as provided in subsection (2), every company that is resident in New Zealand must establish and maintain an im- putation credit account for each imputation year.
(2) A company must not establish and maintain an imputation credit account in respect of any imputation year, or any period within an imputation year, if, during the whole of that imput- ation year or that period, the company is— (a) a company resident in New Zealand which, under a dou- ble tax agreement, is treated as not being resident in New Zealand for the purposes of the double tax agree- ment; or a company acting only in the capacity of trustee (not being a company that is a group investment fund that derives category A income); or a company whose constitution prohibits it from making any distribution of any kind to any proprietor, member, or shareholder of the company; or a company which derives only exempt income (not be- ing exempt income under any of sections CW 9 to CW 11); or a local authority; or a Crown Research Institute; or a subsidiary company of the Accident Compensation Corporation to which section 334(1) of the Accident In- surance Act 1998 or section 266 of the Injury Preven- tion, Rehabilitation, and Compensation Act 2001 ap- plies; or a Maori authority; or a portfolio tax rate entity.
(b) (c) (d) (e) (f) (g) (i) (j) (k) (3) Where a company that acts in the capacity of trustee is re- quired to establish and maintain an imputation credit account by virtue of also engaging in other activities, no debits or credits arise to the account in respect of any activities of the company in its capacity as trustee.
Compare: 1994 No 164 s ME 1 1967 Part M s ME 1A Income Tax Act 2004 Reprinted as at 29 August 2011 Subsection (2)(a) was substituted, as from 1 October 2005, by section 227 Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from the income year corresponding to the 2005–06 income year.
Subsection (2)(a) was repealed, as from 1 October 2005, by section 141(1) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3) with application as from the income year corres- ponding to the 2005–06 tax year.

Subsection (2)(b) was substituted, as from 17 May 2006, by section 131(1) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application for income years beginning on or after 1 October 2007.
Section ME 1(2)(i): amended (with effect from 1 April 2005), on 19 December 2007, by section 154 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section ME 1(2)(j): amended, on 1 October 2007, by section 131(2) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Section ME 1(2)(k): added, on 1 October 2007, by section 131(2) of the Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
ME 1A Companies electing to maintain imputation credit account (1) A company that is not required under section ME 1 to establish and maintain an imputation credit account is eligible under this section to have an imputation credit account if the company is— (a) (b) resident in Australia; and not a company referred to in section ME 1(2)(c) to (k); and not treated as being resident in a country other than Aus- tralia under and for the purposes of an agreement that— (i) is between Australia and the other country; and (ii) would be a double tax agreement if negotiated (c) between New Zealand and the other country.
(2) A company that is eligible under this section to have an im- putation credit account may make an election under this sub- section by giving notice to the Commissioner in a form that is acceptable to the Commissioner.
The Commissioner may decline to accept a notice under sub- section (2) from a company if— (3) 1968 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 1A (a) (b) an election by the company under this section has been revoked previously by the Commissioner; and the company does not satisfy the Commissioner that the company has taken adequate steps to prevent the occurrence of situations of the type that gave rise to the revocation.
(4) A notice under subsection (2) that is accepted by the Commis- sioner is effective— (a) for the purpose of section ME 6, from— (i) (ii) (iii) (iv) the date that is 30 days after the date on which the Commissioner receives the notice, if none of subparagraphs (ii) to (iv) apply; or 1 October 2003, if the Commissioner receives the notice before 1 April 2004 and notiﬁes the com- pany that the notice is effective from 1 October 2003; or 1 April 2004, if the Commissioner receives the notice before 1 April 2005 and notiﬁes the com- pany that the notice is effective from 1 April 2004; or the beginning of the imputation year in which the Commissioner receives the notice, if the com- pany is formed in the imputation year or becomes eligible under this section in the imputation year and the Commissioner notiﬁes the company that the notice is effective from the beginning of the imputation year: (b) for the purposes of the other provisions in the imput- ation rules, from the beginning of the imputation year that contains the date on which the Commissioner re- ceives the notice.
(5) A company that makes an effective election under subsection (2) in an imputation year must establish and maintain an im- putation credit account— (a) until the date on which the company ceases to be eligible under subsection (1) or on which the election is revoked, for the purposes of section ME 6: for the imputation year and for each subsequent imput- ation year at the beginning of which the company is eli- (b) 1969 Part M s ME 1B Income Tax Act 2004 Reprinted as at 29 August 2011 gible under subsection (1) and the election has not been revoked, otherwise.
(6) A company that is in a wholly-owned group of companies with a company that makes an election under subsection (2), and is not prohibited by an independent regulatory body from having such liability, is jointly and severally liable with that company for further income tax, civil penalties, and interest under Part 7 of the Tax Administration Act 1994 that arise from a breach of the imputation rules by the company that makes the election.
(7) A company that makes an election under subsection (2) may revoke the election by giving a notice to the Commissioner.

(8) A notice under subsection (7) is effective— (a) (b) from the date that the Commissioner receives the notice, for the purposes of section ME 6: from the end of the imputation year in which the Com- missioner receives the notice, otherwise.

(9) The Commissioner may give to a company a notice that re- vokes an election under subsection (2) by the company.
(10) A notice under subsection (9) is effective— (a) (b) from the date given in the notice, for the purposes of section ME 6: from the end of the imputation year in which the date of the notice falls, otherwise.

(11) The revocation of an election does not affect the obligations of a company that arise while the company is an imputation credit account company.
Compare: 1994 No 164 s ME 1B Section ME 1A(1): substituted, on 19 December 2007, by section 155(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsection (4)(a) was substituted, as from 1 October 2005, by section 228 Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
ME 1B Amount of dividend for imputation rules if paid in Australian currency For the purposes of the imputation rules, the amount of a divi- dend that is paid in Australian currency by an Australian im- putation credit account company is given by— a × b 1970 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 3 where— (a) (b) is the amount of the dividend expressed in Australian currency is the close of trading spot exchange rate for the Aus- tralian dollar— (a) for the date on which the dividend is declared, if that date precedes the date of the payment of the dividend by 3 months or less: for the date on which the dividend is paid, if that date follows the date of the declaration of the dividend by more than 3 months.
(b) Compare: 1994 No 164 s ME 1C The formula was substituted, as from 1 October 2005, by section 229 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
ME 2 Balance of imputation credit account For the purposes of the imputation rules, the balance of an im- putation credit account at any time is ascertained by calculat- ing the difference in amount between the aggregate of credits and the aggregate of debits to the account at that time, and the account has— (a) (b) Compare: 1994 No 164 s ME 2 a credit balance to the extent that credits exceed debits: a debit balance to the extent that debits exceed credits.
ME 3 Imputation credit account (1) (2) Every imputation credit account company must record in its imputation credit account for each imputation year— (a) the opening balance of the account for the imputation year, in accordance with subsection (2): credits as they arise in accordance with section ME 4: debits as they arise in accordance with section ME 5.
(b) (c) The opening balance of the imputation credit account for any imputation year is,— (a) for the imputation year during which the company ﬁrst becomes an imputation credit account company, nil: for any subsequent imputation year, the amount of the closing balance of the imputation credit account for the preceding imputation year, and such amount is— (b) 1971 Part M s ME 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) a credit arising to the imputation credit account where the closing balance is a credit balance: a debit arising to the imputation credit account where the closing balance is a debit balance.
Compare: 1994 No 164 s ME 3 ME 4 Credits arising to imputation credit account (1) There arise as credits to be recorded in a company’s imputation credit account for any imputation year the following amounts: the amount of any income tax paid by the company dur- (a) ing the imputation year to meet a provisional tax obli- gation under the provisional tax rules or to satisfy an in- come tax liability under sections BC 9 and BC 10, other than— (i) in the case of a company acting in the capacity of trustee, income tax paid by the company in re- spect of its activities when acting in the capacity of trustee: in the case of a company carrying on a business of providing life insurance, income tax paid to the extent that that income tax does not exceed the company’s policyholder base income tax liability for the imputation year: in the case of a company that is a group invest- ment fund deriving category B income, income tax paid in respect of the income: in the case of a company that becomes an im- putation credit account company during the im- putation year, income tax paid to the extent that that income tax does not exceed the amount that would have been the company’s income tax li- ability for the imputation year, if the imputation year ended on the day immediately preceding the day on which the company became an imputation credit account company: income tax paid by way of crediting under sub- part LE: income tax that is paid by way of a crediting of further income tax under section ME 9(5): (ii) (iii) (iv) (v) (vi) 1972 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 4 (vii) income tax paid by way of crediting under section LB 2(2) or LD 8(1): (viii) income tax paid in relation to the income tax (ix) (x) payable for the 1987-88 or any earlier tax year: income tax paid by way of crediting under sec- tion MF 5 the company’s branch equivalent tax account: a payment that is made by means of a transfer from a tax pooling account to the company’s ac- count with the Commissioner: (aab) the amount that results
 from multiplying the basic rate of income tax, expressed as a percentage, stated in schedule 1, part A, clause 5 by the amount of expend- iture transferred to the company, being a master fund, in accordance with sections DV 5 to DV 7: (ac) (ae) (ad) (ab) 49.25% of an amount attributed in accordance with sec- tion GC 14D, but not if the company is a qualifying company: the amount of any payment that is made by an inter- mediary into a tax pooling account from funds that are supplied by the company for that purpose: the amount of any transfer by an intermediary to the company of an entitlement to funds that are held in a tax pooling account: the amount of any qualifying company election tax paid by the company for the imputation year: the amount of any tax deemed to be paid by the company under section MB 9(5): the amount of any further income tax paid by the com- pany during the imputation year under section ME 9: the amount of any credit arising in the imputation credit account as a result of an election under section ME 9B(2)(a)(ii): the amount of any payment of additional income tax for which the company is liable under section ME 9B(6): the amount of any payment of additional income tax for which the company is liable under section ME 9C(7) (cd) (cb) (cc) (b) (c) 1973 Part M s ME 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) (da) the amount of any imputation credit attached to a divi- dend that is paid to the company during the imputation year: the amount calculated according to the formula— credit balance x maximum imputation ratio where— credit balance maximum imputation ratio is all or part of the credit balance of the supplementary available subscribed capital account that the qualifying unit trust or group investment fund elects to use under section MJ 6 is the formula set out in section ME 8(1), as if the words “in which the dividend is paid” in item “a” were read as “to which the election made under section MJ 6 relates”: (e) (ea) (eb) (ec)
 (ed) the amount of any dividend withholding payment credit attached to a dividend paid to the company during the imputation year at a time when the company is not a dividend withholding payment account company: the amount of a Maori authority credit attached to a dis- tribution that is made to the company during the imput- ation year: the amount of any imputation credit attached under sec- tion ME 6B to a replacement payment paid under a share-lending arrangement to the company during the imputation year: the amount of any imputation credit treated under sec- tion NF 8B as being attached to a replacement payment paid under a share-lending arrangement to the company during the imputation year: the amount of imputation credit shown in a credit trans- fer notice that the company is issued with during the imputation year: 1974 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 4 (ee) (f) (g) (h) (i) (j) (k) the amount of any imputation credit allocated under sec- tion HL 27(7)(b) to the company by a portfolio tax rate entity during the imputation year: subject to subsection (3), the amount of any dividend withholding payment paid by the company during the imputation year at a time when the company is not a dividend withholding payment account company: any amount forming all or part of an end of year credit balance in the company’s dividend withholding pay- ment account that the company elects in accordance with section MG 11 to be a credit to the company’s im- putation credit account: an amount equal to any amount of a debit arising to the imputation credit account under section ME 5(1)(j) (which relates to debits arising in respect of imputation credits determined to have been the subject of an ar- rangement to obtain a tax advantage), to the extent that it is subsequently established that the relevant imput- ation credit should not have been determined to be the subject of such an arrangement: the amount of any resident withholding tax deduction deemed,
 under section NF 12(b), to have been derived by the company during the imputation year: any amount forming all or part of a credit balance in the company’s policyholder credit account that the com- pany elects in accordance with section ME 19 to be a credit to the company’s imputation credit account: in the case of a company that stops maintaining a Maori authority credit account during the imputation year, the amount of the credit balance in the Maori authority credit account on the date that the account is closed.
(1A) If a company has been required by section ME 5(1)(i) to record in the company’s imputation credit account an imputation debit that has the effect of cancelling a credit that arose from a deposit by the company into a tax pooling account, a credit that is equal to the imputation debit arises to be recorded in the company’s imputation credit account if— 1975 Part M s ME 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) (ii) a further debit arises in the imputation credit account, on a date that is after the date on which the imputation debit under section ME 5(1)(i) arose, in relation to— (i) a refund to the company of the amount of the deposit: a transfer to another taxpayer of the company’s entitlement to the amount of the deposit: the amount of the deposit is transferred to the com- pany’s account with the Commissioner with an effective date under section MBA 6 that is after the date on which the imputation debit arose.
(1B) There arise as credits to be recorded by an Australian im- putation credit account company in the imputation credit ac- count of the company for any imputation year the following amounts: (a) (b) (c) non-resident withholding tax that, under section NG 2, the company pays on non-resident withholding income: a payment of the Income Tax tax made under (Withholding Payments) Regulations 1979 from a withholding payment made to the company as a non-resident contractor: a payment of tax to meet the schedular income tax liabil- ity of the company for schedular income that the com- pany derives under any of sections FC 13, FC 14, FC 18, and FC 21 in the income year corresponding to the imputation year.
(1C) No amount may create more than 1 credit under subsections (2) (1) and (1B).
The credits referred to in subsection (1) arise,— (a) in the case of the credits referred to in subsection (1)(a) and (c), on the date the relevant tax is paid: (ab) (aab) in the case of a credit referred to in subsection (1)(aab), on 31 March of the income year in which the expend- iture is deducted: in the case of a credit referred to in subsection (1)(ab), on 31 March of the income year in which the amount is attributed: in the case of a credit referred to in subsection (1)(ac), on the date of the payment into the tax pooling account: (ac) 1976 Reprinted as at 29 August 2011 (ad) (ae) (b) (bb) (bc) (bd) (c) (ca) (cb) (cc) (cd) (ce) Income Tax Act 2004 Part M s ME 4 in the case of a credit referred to in subsection (1)(ad),— if the funds to which the entitlement relates are (i) transferred to the company’s account with the Commissioner, on the effective date under sec- tion MBA 6 of the transfer: if the funds to which the entitlement relates are refunded to the company or the entitlement to the funds is transferred to another taxpayer, on the date of the refund or transfer: (ii) in the case of a credit referred to in subsection (1)(ae), on the date the qualifying company election tax is paid: in the case of a credit referred to in subsection (1)(b), on the date on which notice of the allocation of the tax referred to in section MB 9(4) is given to the Commis- sioner: in the case of a credit referred to in subsection (1)(cb), on the date on which the leaving company ceases to be a member of the wholly-owned group of companies: in the case of a credit referred to in subsection (1)(cc), on the date on which the company makes the payment to the Commissioner: in the case of a credit referred to in subsection (1)(cd), on the date on which the company makes the payment to the Commissioner: in the case of the credits referred to in subsection (1)(d) and (e), on the date the relevant dividend is paid: in the case of a credit referred to in subsection (1)(da), on the date that a debit arises in the qualifying unit
 trust’s or group investment fund’s supplementary avail- able subscribed capital account under section MJ 6: in the case of a credit referred to in subsection (1)(ea), on the date that the distribution is made: in the case of the credits referred to in subsection (1)(eb) and (ec), on the date the replacement payment is paid: in the case of the credit referred to in subsection (1)(ed), on the date the credit transfer notice is issued: in the case of a credit referred to in subsection (1)(ee), on the date the credit is allocated: 1977 Part M s ME 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (f) (e) (g) (d) in the case of a credit referred to in subsection (1)(f), on the date the dividend withholding payment is paid: in the case of a credit referred to in subsection (1)(g), on the date that the amount of the credit arises as a debit to the company’s dividend withholding payment account under section MG 5(2)(c): in the case of a credit referred to in subsection (1)(h), on the date that the relevant debit arose under section ME 5(2)(i): in the case of a credit referred to in subsection (1)(i), on the date that the resident withholding tax is deducted from the resident withholding income: in the case of a credit referred to in subsection (1)(j), on the date that the amount of the credit arises as a debit to the company’s policyholder credit account under sec- tion ME 19: in the case of a credit referred to in subsection (1)(k), on the date that the amount of the credit arises as a debit to the Maori authority credit account under section MK 5.
(2A) A credit referred to in subsection (1A) arises on the date of the (h) (i) refund or transfer.

(2B) The credits referred to in subsection (1B) arise— (c) (a) (b) in the case of a credit referred to in subsection (1B)(a), on the date that the non-resident withholding tax is paid: in the case of a credit referred to in subsection (1B)(b), on the date that the tax is paid: in the case of a credit referred to in subsection (1B)(c), on the date that the schedular income tax is paid.
For the purposes of subsection (1)(f), a credit does not arise to the extent that, in accordance with section NH 3(2) or (3), payment of all or part of a dividend withholding payment is satisﬁed by reducing a net loss.

Compare: 1994 No 164 s ME 4 Section ME 4(1)(a)(ii): amended (with effect on 1 April 2005), on 7 December 2009, by section 160 of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section ME 4(1)(ae): inserted (with effect from 17 May 2007), on 19 Decem- ber 2007, by section 156(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

(3) 1978 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 5 Subsection (1)(cb) to (cd) was inserted, as from 1 October 2005, by section 75(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
Subsection (1)(eb) to (ed) was inserted, as from 1 July 2006, by section 142(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Section ME 4(1)(ee): inserted (with effect on 1 October 2007), on 6 October 2009, by section 823(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ME 4(2)(ae): inserted (with effect from 17 May 2007), on 19 Decem- ber 2007, by section 156(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsection (2)(bb) to (bd) was inserted, as from 1 October 2005, by section 75(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
Subsection (2)(cc) and (cd) was inserted, as from 1 July 2006, by section 142(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Section ME 4(2)(ce): inserted (with effect on 1 October 2007), on 6 October 2009, by section 823(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
ME 5 Debits arising to imputation credit account (1) (ac) (ab) There arise as debits to be recorded in a company’s imputation credit account for any imputation year the following amounts: the amount of any imputation credit attached to a divi- (a) dend paid by the company during the imputation year: the amount of any imputation credit attached under sec- tion ME 6B to a replacement payment paid under a share-lending arrangement by the company during the imputation year: the amount of any imputation credit attached to a divi- dend that is paid to the company during the imputation year as a share user in a returning share transfer that is not a share-lending arrangement: the amount of any imputation credit attached to a divi- dend that is paid to the company during the imputation year, if the imputation credit is shown in a credit trans- fer notice issued by the company: in the case of a company carrying on a business of pro- viding life insurance to which the life insurance rules apply, the amount of any credit balance of the com- pany’s imputation credit account which the company (ad) (b) 1979 Part M s ME 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) elects in accordance with section ME 7 is a credit to the company’s policyholder credit account: in the case of any on-market cancellation by the com- pany of a share in the company, the amount (not being less than nil) calculated in accordance with the follow- ing formula: where— a is the amount distributed upon the on-market cancellation to the extent that it exceeds the avail- able subscribed capital per share calculated under the ordering rule b is the rate of resident withholding tax, expressed as a percentage, stated in schedule 14, clause 2 and applying at the time the acquisition occurs: the amount of any provisional tax allocated by the com- pany under section MB 33 to an underpaid company (as referred to in that section): the amount of any refund of income tax paid to the com- pany during the imputation year except to the extent that— (i) the
 refund is in respect of income tax paid in relation to the 1987-88 or any earlier tax year; or the refund is in respect of income tax paid that was applied in satisfaction of an income tax li- ability for an income year— (A) (ii) (B) during which the company was not an im- putation credit account company; or during only part of which the company was an imputation credit account com- pany, in which case the debit to the com- pany’s imputation credit account is the amount calculated in accordance with the following formula: (d) (e) 1980 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 5 (iii) where— a is the number of days in the in- come year during which the com- pany was an imputation credit ac- count company b is the amount of the refund; or the amount of the refund does not exceed the amount of a debit arising under paragraph (i) if— the refund is in respect of income tax paid (A) prior to the date that the debit arose; and in the case of a refund arising by virtue of subpart LE, the supplementary dividend paid by the company giving rise to the re- fund was paid before the date that the debit arose under paragraph (i): (B) (ea) (eb) (f) (fb) (g) (h) (i) the amount of any refund that is made to the company by an intermediary from funds in a tax pooling account for which the company has received a credit under section ME 4(1)(ac) or (ad): the amount of the funds involved in any transfer from the company to another taxpayer by an intermediary of an entitlement to funds in a tax pooling account for which the company has received a credit under section ME 4(1)(ac) or (ad): the amount of any allocation debit arising in respect of the imputation year under section ME 8(4): the amount of any debit arising in the imputation credit account as a result of an election under section ME 9B(2)(a)(i): the amount of any refund of dividend withholding pay- ment paid to the company during the imputation year at a time when the company is not a dividend withholding payment
 account company: the amount of any credit of tax refunded to the company under section LD 8(1)(c) at a time when the company is not a dividend withholding payment account company: the amount of any particular credit in the company’s imputation credit account at any time (in this paragraph referred to as the speciﬁed time), not being a credit 1981 Part M s ME 5 Income Tax Act 2004 Reprinted as at 29 August 2011 which has before the speciﬁed time been cancelled out by a prior or subsequent debit, unless there is a group of persons— (i) the aggregate of whose minimum voting interests in the company in the period from the date upon which the credit arose until the speciﬁed time is equal to or greater than 66%; and in any case where at any time during that period a market value circumstance exists in respect of the company, the aggregate of whose minimum mar- ket value interests in the company in the period is equal to or greater than 66%: (ii) (ia) (j) (ja) (k) (ka) (l) the amount of a credit in the company’s imputation credit account arising under section ME 4(1)(ab) if the company’s ﬁnancial statements are adjusted to reﬂect an amount attributed in accordance with section GC 14D: the amount of any further debit arising to the imputation credit account under section GC 22 in relation to an im- putation credit determined to be the subject of an ar- rangement to obtain a tax advantage: the amount that results from multiplying the basic rate of income tax, expressed as a percentage, stated in schedule 1, part A, clause 5 by the amount of expend- iture transferred by the company, being a member fund, to a master fund in accordance with sections DV 5 to DV 7: the amount of credit balance, if any, of the imputation credit account where, during the imputation year, the company ceases to be an imputation credit account com- pany: the amount of credit balance of the imputation credit account if, during the imputation year, the company es- tablishes a Maori authority credit
 account: the amount of any overpaid income tax that the Com- missioner applies towards the satisfaction of an amount (other than an income tax liability or an instalment of provisional tax) that is due and payable under any pro- vision of this Act or any other of the Inland Revenue Acts, except to the extent that the amount applied— 1982 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 5 (i) (ii) is in respect of income tax paid before the date that a debit arises under paragraph (i); and does not exceed the amount of the debit that arises on that date: (m) (n) the amount of any overpaid dividend withholding pay- ment that the Commissioner applies, at a time when the company is not a dividend withholding payment ac- count company, towards the satisfaction of an amount (other than a dividend withholding payment or an in- come tax liability or an instalment of provisional tax) that is due and payable under this Act or any other of the Inland Revenue Acts: the amount of any overpaid income tax or dividend withholding payment that the Commissioner applies, at a time when the company is not a dividend withholding payment account company, in satisfaction of income tax that is due and payable in respect of the 1987-88 or any earlier tax year, except to the extent that the amount ap- plied— (i) is in respect of income tax or dividend withhold- ing payment paid before the date that a debit arises under paragraph (i); and does not exceed the amount of the debit that arises on that date: (ii) (o) the amount calculated under subsection (6) or (7) for an income year and transferred to the company’s dividend withholding payment account on account of net foreign attributed income.
(1A) There arise as debits to be recorded by an Australian im- putation credit account company in the imputation credit account of the company for any imputation year the following amounts: (a) any refund arising from an amount— (i) that is an overpayment of non-resident withhold- ing tax on non-resident withholding income; and for which the company has received a credit under section ME 4(1B)(a): (ii) (b) any refund arising from an amount— 1983 Part M s ME 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) that is an overpayment of tax under the Income Tax (Withholding Payments) Regulations 1979 from a withholding payment made to the com- pany as a non-resident contractor; and for which the company has received a credit under section ME 4(1B)(b): (c) any refund of tax arising from an amount— (i) that is an overpayment of the company’s schedu- lar income tax liability for schedular income that the company derived under any of sections FC 13, FC 14, FC 18, and FC 21 in the income year corresponding to the imputation year; and for which the company has received a credit under section ME 4(1B)(c).
(ii) The debits referred to in subsection (1) arise,— (a) (ab) (ac) (b) (c) (d) (e) (ea) (eb) in the case of a debit referred to in subsection (1)(a), on the date the dividend is paid: in the case of a debit referred to in subsection (1)(ab), on the date the replacement payment is paid: in the case of a debit referred to in subsection (1)(ac) or (ad), on the date the relevant dividend is paid: in the case of a debit referred to in subsection (1)(b), on the date the company makes the election in accordance with section ME 7: in the case of a debit referred to in subsection (1)(c), on the date the acquisition occurs: in the case of a debit referred to in subsection (1)(d), on the date the company gives to the Commissioner notice of the allocation of tax under section MB 33: in the case of a debit referred to in subsection (1)(e) or (h), on the date the refund is paid: in the case of a debit referred to in subsection (1)(ea) or (eb) arising for a qualifying company, on the date on which the refund or transfer is made: in the case of a debit referred to in subsection (1)(ea) or (eb) arising for a company that is not a qualifying company,— (i) on the last day of the imputation year that im- mediately precedes the imputation year in which (2) 1984 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 5 (ii) (iii) the refund or transfer is made, to the extent that the debit does not exceed the credit balance in the company’s imputation credit account on that date: on the date on which the refund or transfer is made, to the extent that, after the application of subparagraph (i), the amount of the debit that is not assigned a date under subparagraph (i) does not exceed the credit balance in the company’s imputation credit account on the date of the re- fund or transfer: on the last day of the imputation year that imme- diately precedes the imputation year in which the refund or transfer is made, to the extent that the debit is not assigned a date under subparagraphs (i) and (ii): (f) (fb) (g) (h) (ha) (i) (ia)
 (j) in the case of a debit referred to in subsection (1)(f), at the end of the imputation year in respect of which the allocation debit arises: in the case of a debit referred to in subsection (1)(fb), on the date on which the leaving company ceases to be a member of the wholly-owned group of companies: in the case of a debit referred to in subsection (1)(g), on the date the refund is paid: in the case of a debit referred to in subsection (1)(i), at the speciﬁed time referred to in that paragraph: in the case of a debit referred to in subsection (1)(ia), on 31 March of the income year in respect of which the company’s ﬁnancial statements are adjusted: in the case of a debit referred to in subsection (1)(j), at the end of the imputation year in respect of which it is determined under section GC 22 that the arrangement to obtain a tax advantage occurred or commenced: in the case of a debit referred to in subsection (1)(ja), on 31 March in the income year in which the expenditure is transferred: in the case of a debit referred to in subsection (1)(k), immediately before the company ceases to be an imput- ation credit account company: 1985 Part M s ME 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (ja) (k) (l) in the case of a debit referred to in subsection (1)(ka), immediately before the company becomes a Maori au- thority: in the case of a debit referred to in subsection (1)(l) or (m) or (n), on the date that the Commissioner applies the amount of overpaid income tax or dividend withholding payment in satisfaction of the amount that is referred to in those paragraphs as due and payable: in the case of a debit to which subsection (1)(o) ap- plies,— (i) on the last day of the imputation year that corres- ponds to the income year, to the extent that the debit does not exceed the amount of provisional tax payments made in relation to the income year on or before that day; and to the extent that subparagraph (i) does not apply, on the date the company ﬁles the return
 of income for the income year.
(ii) (2A) A debit referred to in subsection (1A) arises on the date on which the refund is paid.
Subject always to the express provisions of this Act, subsec- tion (1)(i) is intended to limit the circumstances in which a taxpayer, being a company, may carry forward an imputation account credit for subsequent utilisation to those where the tax beneﬁt arising from such utilisation is obtained or available to be obtained (directly or indirectly), at least to the extent of 66%, only by the same natural persons holding (directly or in- directly) rights in relation to the company who— (a) by virtue of holding (directly or indirectly) such rights, bore the tax liability giving rise to the imputation ac- count credit; or held (directly or indirectly) such rights at the time of the event giving rise to the imputation account credit.
(b) For the purposes of subsection (1)(i),— (a) in respect of any period referred to in that paragraph, the minimum voting interest or market value interest of any person in the company in the period is equal to the lowest voting interest or market value interest (as the (3) (4) 1986 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 5 (b) (c) (d) (e) case may be) which that person holds in the company during the period; and section ME 3(2)(b) does not apply and any credit in the company’s imputation credit account is treated as con- tinuing to exist until treated as being cancelled out by a prior or subsequent debit in accordance with paragraph (c); and in determining whether any credit in the company’s im- putation credit account has been cancelled out by any prior or subsequent debit,— (i) any amount of debit may be taken into account only once for the purpose of ascertaining whether any credit has been so cancelled out; and the amount of any debit is offset against the amount of any credit in the order in which the credits arise; and (ii) any credit arising on or before 16 December 1988 is deemed to have been cancelled out by a subsequent debit before the speciﬁed time referred to in that para- graph; and in the case of any credit arising after 16 December 1988 and before 1 April 1992 (not being a credit cancelled out before 1 April 1992 by a subsequent debit), the credit is deemed ﬁrst to arise in the company’s imputation credit account on 1 April 1992, but a debit is deemed to arise in accordance with subsection (1)(i) in respect of that credit at any time if and to the extent that, at that speciﬁed time, that credit still exists and a debit would have arisen in respect of that credit in accordance with section 394E(2)(g) of the Income Tax Act 1976 as that paragraph applied before its repeal and replacement by section 51 of the Income Tax Amendment Act (No 2) 1992, had that paragraph continued to apply but with the ﬁgure “75” omitted and the ﬁgure “66” substituted.
(5) Where— (a) a share in a company is acquired by any person (referred to in this subsection as the associated person) associ- ated with the company; and 1987 Part M s ME 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) the acquisition would have been an on-market cancella- tion if the associated person had been the company; and in the opinion of the Commissioner, the acquisition oc- curs under an arrangement between the company and the associated person for the associated person to make the acquisition in lieu of the company,— then, for the purposes of subsections (1)(c) and (2)(c) and sec- tion CD 32(22), the acquisition is deemed to be an on-market cancellation by the company.
If a dividend withholding payment account company is also a conduit tax relief company for the whole of the imputation year corresponding with the income year, and at the time of ﬁling the return, the amount to be transferred under subsec- tion (1)(o) from the company’s imputation credit account to the company’s dividend withholding payment account is cal- culated by applying sections KH 1 and KH 2 (as if the amount were conduit tax relief for the imputation year) but substituting the percentage of resident shareholders for the quantity NRS in section KH 1(2) and (3) and calculating the percentage of resident shareholders by deducting NRS from 100%.
If a dividend withholding payment account company for the whole of the imputation year corresponding with the income year is not a conduit tax relief company for the whole of the imputation year corresponding with the income year and at the time of ﬁling the return, the amount to be transferred under subsection (1)(o) is calculated under section KH 1 as if the company were a conduit tax relief company and the quantity NRS were 100%.
If neither subsection (6) nor (7) applies, no amount is trans- ferred under subsection (1)(o).

Compare: 1994 No 164 s ME 5 Subsection (1)(ab) to (ad) was inserted, as from 1 July 2006, by section 143(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Subsection (1)(ac) was amended, as from 1 July 2006, by section 132(1) Tax- ation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by omitting “or as a person associated with a share user,” with application as from the 2005–06 income year.

Section ME 5(1)(d): amended, on 1 October 2007, by section 143(2) of the Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).
(6) (7) (8) 1988 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 6 Subsection (1)(fb) was inserted, as from 1 October 2005, by section 76(1) Taxa- tion (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
Subsection (1)(h) was amended, as from 1 April 2005, by section 76(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “section LD 8(1)(c)” for “section LD 8(1)(a)” with application as from the 2005–06 income year.

Subsection (2)(ab) and (ac) was inserted, as from 1 July 2006, by section 143(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section ME 5(2)(d): amended, on 1 October 2007, by section 143(4) of the Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).

Subsection (2)(fb) was inserted, as from 1 October 2005, by section 76(3) Taxa- tion (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
Subsection (2)(ia) was amended, as from 1 April 2005, by section 143(5) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3) by substituting “subsection (1)(ja)” for “sub- section (1)(jb)” with application as from the income year corresponding to the 2005–06 tax year.

ME 6 Company may attach imputation credit to dividend (1) An imputation credit account company may, on payment of a dividend by the company, attach an imputation credit to that dividend.
(1B) Notwithstanding subsection (1), an imputation credit account company is not allowed to 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 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 a return of income made by the company to the Australian Federal Commissioner of Taxation.
(b) (c) (1C) Subsection (1B) does not apply in relation to a share issued before 21 July 2005 if, when the dividend is paid,— (a) the shareholder and the imputation credit account com- pany are not in the same group of companies: the shareholder and the imputation credit account com- pany are— (b) 1989 Part M s ME 6 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) in the same wholly-owned group of companies; and not resident in New Zealand.
(1D) Subsection (1B) does not apply in relation to a share issued (ii) before 21 July 2005 if— (a) (b) the shareholder and the imputation credit account com- pany are in the same group of companies; and the shareholder acquired the share— (i) (ii) as part of a business of sharebroking: as an investment held by the shareholder as part of a business of insurance: 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 in the same group of companies as the shareholder: for reasons not including the fact that the share- holder and the imputation credit account com- pany were members of the same group of com- panies.
(iii) (iv) (v) (2) Notwithstanding subsection (1), a company may retrospect- ively attach an imputation credit to a dividend arising from a transfer pricing adjustment or under subpart FCB if— (a) the company is an imputation credit account company that— (i) (ii) pays a non-cash dividend; and is subject to an adjustment under section GD 13(3) or (4) in respect of the arrangement giving rise to the dividend: (b) the company is an emigrating company that— (i) is an imputation credit account company imme- diately before the emigration time; and is treated under section FCB 2 as paying a distri- bution to shareholders.
(ii) The amount of imputation credit able to be attached retro- spectively under subsection (2)(a) must not (when aggregated with all other imputation credits retrospectively attached by the company to dividends paid in the same imputation year) exceed the least of— (3) 1990 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 6 (a) (b) the credit balance, if any, in the company’s imputation credit account at the end of the imputation year in which the dividend is paid; and the credit balances, if any, in the company’s imputation credit account at the end of each imputation year after the year in which the dividend is paid and before the year in which the company makes the retrospective at- tachment.
(3B) The amount of imputation credit attached retrospectively under subsection (2)(b) must not exceed the credit balance, if any, in the company’s imputation credit account immediately before the emigration time.
(4) Where a company has determined to attach an imputation credit to a dividend under subsection (2),— (a) the amount of the imputation credit is, for the purposes of section ME 5, a debit to the company’s imputation credit account arising on the date the company paid the dividend; and the company dividend statement to be completed in ac- cordance with section 67 of the Tax Administration Act 1994 must be completed at the time the company makes the determination under subsection (2); and the shareholder dividend statement to be given by the company in accordance with section 29 of the Tax Administration Act 1994 must be given at the time the company makes the determination under subsection (2).
a company has determined to attach an imputation credit to a dividend under subsection (2)(a); and an amount of income tax paid by the company is at- tributable to the relevant adjustment under section GD 13(3) or (4); and the company would not, without application of imput- ation penalty tax, be able to attach the imputation credit; and the company notiﬁes the Commissioner with the com- pany dividend statement completed under subsection (4)(b),— (b) (c) (b) (c) (d) (5) If and to the extent that— (a) 1991 Part M s ME 6 Income Tax Act 2004 Reprinted as at 29 August 2011 the amount of income tax is treated for the purposes of this sub- part as if it were paid on the date the dividend was paid and the company is not liable for any failure to have furnished a correct imputation return under section 69 of the Tax Administration Act 1994 to the extent the return is rendered incorrect solely as a result of this subsection.
If an amount of tax paid by an emigrating company is at- tributable to income derived before the emigration time by the emigrating company or to the application of subpart FCB to the emigrating company, the amount of tax is treated for the purposes of this subpart as being paid immediately before the emigration time if— (a) the company determines under subsection (2)(b) to at- tach an imputation credit to a dividend; and the imputation credits that the company attaches are not less than the amount of tax; and the company notiﬁes the Commissioner when providing the company dividend statement required by subsection (4)(b).
(b) (c) Compare: 1994 No 164 s ME 6 Subsections (1B) to (1D) were inserted, as from 21 July 2005, by section 144(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for a dividend that is paid by an imputation credit account company to a shareholder: in relation to a share issued on or after 21 July 2005; on or after 1 April 2006 in relation to a share issued before 21 July 2005, if, when the dividend is paid, the shareholder is in the same group of companies as the imputation credit account company.
Subsection (2) was substituted, as from 3 April 2006, by section 144(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the 2005–06 imputation year.
Subsection (3) was amended, as from 3 April 2006, by section 144(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “subsection (2)(a)” for “subsection (2)” with application as from the 2005–06 imputation year.
Subsection (3B) was inserted, as from 3 April 2006, by section 144(4) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the 2005–06 imputation year.
Subsection (5)(a) was amended, as from 3 April 2006, by section 144(5) Taxa- tion (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3) by substituting “subsection (2)(a)” for “subsection (2)” with application as from the 2005–06 imputation year.
Subsection (6) was inserted, as from 3 April 2006, by section 144(6) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the 2005–06 imputation year.
(6) 1992 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 7 ME 6B Share user may attach imputation credit to replacement payment A share user under a share-lending arrangement may, on mak- ing a replacement payment, attach to the replacement payment an imputation credit of an amount less than or equal to the amount of any imputation credits attached to dividends— (a) received by the share user before the replacement pay- ment is made; and to which the replacement payment relates.
(b) Section ME 6B was inserted, as from 1 July 2006, by section 145 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
ME 7 Transfer by life insurance company of credit balance to policyholder credit account (1) Where an imputation credit account company is also a policy- holder credit account company, the company may elect that all or any part of the credit balance (if any) in the company’s im- putation credit account at the time of election is to be a credit to the company’s policyholder credit account and a debit to its imputation credit account.
(2) A company makes an election under this section by recording the amount in respect of which the election is made— (a) as a debit in the company’s imputation credit account; and as a credit in its policyholder credit account.
(b) (3) Where a company that may make an election under subsection (1) furnishes a return of income under section 38 of the Tax Administration Act 1994 for a non-standard accounting year, then,— (a) where and to the extent to which, in respect of any im- putation year,— (i) any credit has arisen to the company’s imput- ation credit account in accordance with section ME 4(1)(a) on or before the last day of that im- putation year and during the accounting year in which the last day of that imputation year falls, by virtue of any amount of provisional tax paid by 1993 Part M s ME 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) (iii) the company in accordance with the provisional tax rules; and the amount of that credit has not, on or before the last day of that imputation year, been can- celled out by any subsequent debit arising in ac- cordance with section ME 5(1)(e), by virtue of any refund of provisional tax paid during that ac- counting year; and the company has not, on or before the last day of that imputation year, elected in accordance with this section that the amount of that credit is to be transferred to the company’s policyholder credit account,— the company is deemed to have so elected on the last day of that imputation year: (b) where and to the extent to which, in respect of any im- putation year,— (i) any credit has arisen to the company’s imput- ation credit account in accordance with section ME 4(1)(f) on or before the last day of that im- putation year and during the accounting year in which the last day of that imputation year falls; and the amount of that credit has not, on or before the last day of that imputation year, been can- celled out by any subsequent debit arising in ac- cordance with section ME 5(1)(g), by virtue of any refund of dividend withholding payment paid during that accounting year; and the company has not, on or before the last day of that imputation year, elected in accordance with this section that the amount of that credit is to be transferred to the company’s
 policyholder credit account,— (ii) (iii) the company is deemed to have so elected on the last day of that imputation year: (c) where and to the extent to which in any imputation year any credit has arisen to the company’s imputation credit account in accordance with section ME 4(1)(d) or (e), then, notwithstanding any provision of this section the 1994 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 8 company may not elect that any part of that credit is to be transferred to that company’s policyholder credit account on any day falling after the last day of that im- putation year and during the accounting year in which the last day of that imputation year falls.
(4) For the purposes of subsection (3)(a)(ii) and (b)(ii), the amount of any debit referred to in those paragraphs is offset against the amount of any credits referred to in those paragraphs in the order in which the credits arise.
Compare: 1994 No 164 s ME 7 ME 8 Allocation rules for imputation credits (1) A company must not attach to a dividend an imputation credit of such an amount that the imputation ratio of the dividend would exceed the ratio calculated in accordance with the fol- lowing formula: where— a is the basic rate of income tax for companies, ex- pressed as a percentage, stated in schedule 1, part A, clause 5 and applying in respect of the income year in which the dividend is paid.
(2) Where an imputation credit account company has paid a benchmark dividend in any imputation year, the company must, unless it makes a ratio change declaration in accord- ance with subsection (3), ensure that the imputation ratio of every subsequent dividend paid by the company during that imputation year is the same as the imputation ratio of the benchmark dividend; and for the purposes of this subsection any benchmark dividend with an imputation ratio exceeding the ratio speciﬁed in subsection (1) is deemed to have the ratio so speciﬁed.
The imputation ratio of a subsequent dividend may differ from that of a benchmark dividend if— (a) an ofﬁcer of the company declares, in a ratio change declaration in the prescribed form, that the subsequent dividend is not being paid as part of an arrangement to (3) 1995 Part M s ME 8 Income Tax Act 2004 Reprinted as at 29 August 2011 obtain a tax advantage, and provides such further infor- mation as may be prescribed; and the ratio change declaration is delivered to the Com- missioner before the date of payment of the subsequent dividend, or before such later date as the Commissioner may allow in any case or class of cases; and the subsequent dividend is not paid as part of an arrange- ment to obtain a tax advantage.
(b) (c) (4) Where the imputation ratio of a subsequent dividend differs from the imputation ratio of a benchmark dividend in contra- vention of subsection (2), there arises an allocation debit of an amount calculated in accordance with the following formula: (a x b) – c where— a is the aggregate of the amount of all dividends paid by the company during the imputation year (exclusive of any imputation credit or withholding payment credit attached to those dividends) b is the lesser of— (i) (ii) the imputation ratio of the dividend with the greatest imputation ratio of all dividends paid by the company during the imputation year; or the ratio calculated in accordance with the for- mula stated in subsection (1) c is the aggregate of all imputation credits attached to dividends paid by the company during the imputation year.
(5) Nothing in this section applies to a dividend that is the subject of a determination made by a statutory producer board or a cooperative company in accordance with section ME 30 or ME 35.

(6) Nothing in subsections (2) to (4) applies to an imputation credit account company in relation to a dividend to which the imputation credit account company is not allowed to attach an imputation credit.
[Repealed] Compare: 1994 No 164 s ME 8 (7) 1996 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 9 Section ME 8(1): amended (with effect from 1 October 2007), on 19 Decem- ber 2007, by section 157(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subsection (6) was inserted, as from 21 July 2005, by section 146 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Section ME 8(7): repealed (with effect on 1 October 2007), on 6 October 2009, by section 824 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section ME 8(7): added (with effect from 1 October 2007), on 19 December 2007, by section 157(2) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
ME 9 Further tax payable where end of year debit balance, or when company ceases to be imputation credit account company (1) Where there is a debit balance in a company’s imputation credit account at the end of any imputation year, and the com- pany is not a company that is liable to pay further income tax under subsection (3), then, subject to subsections (7) and (9), the company is liable to pay to the Commissioner an amount of tax by way of further income tax of an amount equal to that debit balance.
(1A) Subsection (1) does not apply if the debit balance in the com- pany’s imputation credit account arises solely because of a debit amount that is recorded in the account after applying sec- tion ME 5(1)(jb).

(2) A company must pay any further income tax for which it is liable under subsection (1) not later than the 20 June following the end of the imputation year for which there was the debit balance.
(3) Where there is a debit balance in a company’s imputation credit account immediately before the company ceases to be an imputation credit account company, then, subject to sub- section (7), the company is liable to pay to the Commissioner an amount of tax by way of further income tax of an amount equal to that debit balance.
(4) A company must pay any further income tax to which it is liable under subsection (3)— 1997 Part M s ME 9 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) not later than the last day on which the company is still an imputation credit account company, if paragraph (b) does not apply; or by the end of the imputation year in which the company ceases to be an imputation credit account company, if the company ceases to be an imputation credit account company because it becomes a portfolio investment en- tity.
If a company pays an amount of further income tax for which the company is liable under this section, the company may elect that the amount of the payment be also credited— (a) in payment of a liability of the company to pay income tax, which may include a liability to pay provisional tax, in relation to an income year that corresponds to an im- putation year in which the company was an imputation credit account company: (b) with effect on the date on which the Commissioner re- ceives the payment of further income tax.
If a company is liable under this section to pay further income tax in relation to an imputation year and, after the end of the imputation year, pays an amount of income tax in relation to an income year that corresponds to an imputation year in which the company was an imputation credit account company, the company may elect that the amount of the payment of income tax be also credited— (a) in payment of the liability of the company to pay the further income tax: (b) with effect on the date on which the Commissioner re- ceives the payment of income tax.
If an Australian imputation credit account company pays in an income year further income tax to which it is liable under this section and, at the time of the payment, there is no possibility that the company will have in the future an income tax liability against which the payment may be credited, the company may elect that the payment be treated for the income year, and for a company in the same wholly-owned group, as being an avail- able net loss of an amount given by the following formula: (5) (5A) (5B) 1998 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 9 where— a b is the amount of further income tax that is paid by the company and not credited against an income tax liability is the basic rate of income tax, expressed as a percent- (6) (7) age, stated in schedule 1, part A, clause 5. to this section, and section 101 of the Tax Subject Administration Act 1994, the other provisions of this Act and of the Tax Administration Act 1994 (other than the imputation rules), so far as they are applicable and with any necessary modiﬁcations, apply with respect to any further income tax for which a company is chargeable under this section as if it were income tax.
If— (a) a qualifying company that is an imputation credit ac- count company has been paid a refund of an amount of income tax; and the amount of that refund has in any imputation year arisen as a debit to the company’s imputation credit ac- count,— (b) any amount that the company would otherwise be liable to pay by way of further income tax under subsection (1) or (3) is reduced (so far as it extends) by an amount calculated in accordance with the following formula: a – b where— a is the sum of all such refunds of amounts of income tax paid to the company on or before the date on which the relevant debit balance giving rise to the liability for further income tax is determined b is the sum of any credits arising in accordance with sections ME 3(2)(b)(i) and ME 4(1) in the company’s imputation credit account during the imputation year in which the amount of any such refund ﬁrst arose as a debit to the company’s imputation credit account and during any subsequent imputation year.
1999 Part M s ME 9B Income Tax Act 2004 Reprinted as at 29 August 2011 (8) A company that has a debit balance in the company’s imput- ation credit account at the end of an imputation year may re- quest the Commissioner, by notice, for a reduction of the com- pany’s liability for further income tax relating to the imput- ation year if— (a) the company had a debit balance in the company’s im- putation credit account at the end of the immediately preceding imputation year; and the debit balance referred to in paragraph (a) exceeds the total of the credits that have arisen in the company’s imputation credit account during the imputation year.
(b) (9) If the Commissioner receives a notice under subsection (8) from a company, the company’s liability for further income tax relating to the imputation year is reduced by an amount that equals the difference between— (a) the debit balance in the company’s imputation credit ac- count at the end of the immediately preceding imput- ation year; and the total of the credits that have arisen in the company’s imputation credit account during the imputation year.
(b) Compare: 1994 No 164 s ME 9 Section ME 9(4): substituted (with effect from 1 October 2007), on 19 De- cember 2007, by section 158 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
ME 9B Imputation credit account company leaving wholly-owned group This section applies to an imputation credit account company (called the leaving company) if, at a time in the income year of the leaving company that corresponds to a tax year,— (a) there is a change in the ultimate owners of the leaving company; and as a result of the change, the leaving company ceases to be a member of a wholly-owned group of companies (called the former group); and the total amount of the available net losses from the previous tax year for the members of the former group exceeds $1,000,000.
(b) (c) (1) 2000 (ii) (ii) Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 9B (2) If the leaving company at the time has a debit balance in its imputation credit account, the leaving company— (a) may elect that an amount that is not more than the debit balance be— (i) a debit in the imputation credit account of an- other imputation credit account company that is a member of the former group and for which there is no change in ultimate owners at the time; and a credit in the imputation credit account of the leaving company: (b) may elect to pay an amount of tax by way of additional income tax that is equal to— (i) the amount of the debit balance, if the leaving company makes no election under paragraph (a): the amount by which the debit balance exceeds the amount that is subject to the election under paragraph (a).
(3) If the leaving company at the time is entitled to an amount in a pooling account or would be entitled, in the absence of section MD 2, to a refund under section MD 1 of an amount of excess tax, subsection (4) applies to the following amount (called the excess entitlement): (a) zero, if at the time the credit balance in the imputation credit account of the leaving company equals or exceeds the total of the following amounts: (i) the amount that would be the entitlement under section MD 1: the amount in a tax pooling account that has been provided by or for the beneﬁt of the leaving com- pany and would exceed the liability at the time of the leaving company to pay income tax or provi- sional tax: (ii) (b) (c) the total of the amounts referred to in paragraph (a)(i) and (ii), if at the time there is no credit balance in the imputation credit account of the leaving company: the amount by which the credit balance in the imput- ation credit account of the leaving company at the time is exceeded by the total of the amounts referred to in 2001 Part M s ME 9B Income Tax Act 2004 Reprinted as at 29 August 2011 paragraph (a)(i) and (ii), if neither of paragraphs (a) and (b) applies.
(4) If the leaving company at the time has an excess entitlement, the leaving company— (a) may elect that an amount that is not more than the excess tax payment for the company be— (i) treated as having been paid, as income tax or provisional tax, on behalf of another imputation credit account company that is a member of the former group and for which there is no change in ultimate owners at the time; and not treated as having been paid as income tax or provisional tax by the leaving company: (b) may elect to pay an amount of tax by way of additional income tax equal to— (i) the amount of the excess entitlement, if the leav- ing company makes no election under paragraph (a); or the amount, by which the excess tax payment exceeds the amount that is subject to the election under paragraph (a).
(ii) (ii) (6) (5) A leaving company or a former group may satisfy a liability to pay additional income tax under subsection (2) or (4) by treating an excess tax payment of the leaving company or the former group as a payment towards the satisfaction of the li- ability.
If the leaving company elects to pay an amount of additional income tax under subsection (2)(b) or (4)(b) that exceeds the amount of any payment under subsection (5), the additional income tax must be paid to the Commissioner by the 20th day of the month following the month in which the leaving com- pany leaves the former group.

The former group is jointly liable with the leaving company for additional income tax payable under subsection (6).
(8) A payment of additional income tax under subsection (2) or (4) does not satisfy any other liability of the leaving company or the former group.
(7) (9) An election under subsection (2) or (4) must be— 2002 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 9C in a form the Commissioner may require; and (a) (b) made by the leaving company; and (c) accompanied by notice of agreement from the company who receives the debit under subsection (2) or is treated under subsection (4) as having the beneﬁt of the excess tax payment; and be made before the company leaves the group or within a further period that the Commissioner may allow if satisﬁed that the company had insufﬁcient information to make an appropriate election at the time the company left the group.
(d) (10) In this section,— (a) an ultimate owner of a company means a person— (i) who has an ownership interest in the company, calculated under section FG 2; and in whom no ownership interest, as calculated under section FG 2, is held by a person who holds an ownership interest in the company, calculated under section FG 2, of 50% or more: (ii) (b) excess tax payment, for a company at a time, means the amount at the time by which payments made by or on behalf of the company to the Commissioner for income tax or provisional tax exceed the liability at the time of the company to pay income tax and provisional tax.
Sections ME 9B and ME 9C were inserted, as from 1 October 2005, by sec- tion 77(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application for a company that leaves a wholly-owned group on or after 16 November 2004.
ME 9C Imputation credit account company joining (1) wholly-owned group This section applies to an imputation credit account company (called the joining company) if, at a time in the income year of the joining company that corresponds to a tax year,— (a) the joining company becomes a member of a wholly- owned group of companies (called the new group); and the joining company was formerly a member of a wholly-owned group (called the former group) having ultimate owners that differed from the ultimate owners of the new group; and (b) 2003 Part M s ME 9C Income Tax Act 2004 Reprinted as at 29 August 2011 (c) the total amount of the available net losses from the previous tax year for the members of the former group exceeds $1,000,000.
(b) Subsection (3) applies to the joining company if— (a) the joining company at the time has a debit balance in its imputation credit account; and the debit balance includes debits (called the former group debits)— (i) that arose in the imputation credit account when the joining company was a member of the former group; and upon which additional income tax under section ME 9B(2) was not paid by the joining company or former group.
(ii) The joining company must pay an amount of tax by way of additional income tax that is equal to the amount of the former group debits.
If the joining company at the time is entitled to an amount in a pooling account or would be entitled, in the absence of section MD 2, to a refund under section MD 1 of an amount of excess tax relating to a time when the joining company was in the former group, subsection (5) applies to the following amount (called the excess entitlement): (a) zero, if at the time the credit balance in the imputation credit account of the joining company equals or exceeds the total of the following amounts: (i) the amount that would be the entitlement under section MD 1: the amount in a tax pooling account that has been provided by or for the beneﬁt of the joining com- pany and would exceed the liability at the time of the joining company to pay income tax and pro- visional tax: (ii) (b) (c) the total of the amounts referred to in paragraph (a)(i) and (ii), if at the time there is no credit balance in the imputation credit account of the joining company: the amount by which the credit balance in the imput- ation credit account of the joining company at the time is exceeded by the total of the amounts referred to in (2) (3) (4) 2004 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 9C paragraph (a)(i) and (ii), if neither of paragraphs (a) and (b) applies.
(5) If the joining company at the time has an excess entitlement, the joining company must pay an amount of tax by way of additional income tax equal to the amount of the excess en- titlement.

(7) (6) A joining company or a new group may satisfy a liability to pay additional income tax under subsection (3) or (5) by treating an excess tax payment of the joining company or the new group as a payment towards the satisfaction of the liability.
If the joining company must pay an amount of additional in- come tax under subsection (3) or (5) that exceeds the amount of any payment under subsection (6), the additional income tax must be paid to the Commissioner by the 20th day of the month following the month in which the joining company joins the new group.

The new group is jointly liable with the joining company for additional income tax payable under subsection (3) or (5).
(8) (9) A payment of additional income tax under subsection (3) or (5) does not satisfy any other liability of the joining company or the new group.
In this section,— (a) an ultimate owner of a company means a person— (i) (10) (ii) who has an ownership interest in the company, calculated under section FG 2; and in whom no ownership interest, as calculated under section FG 2, is held by a person who holds an ownership interest in the company, calculated under section FG 2, of 50% or more: (b) excess tax payment, for a company at a time, means the amount at the time by which payments made by or on behalf of the company to the Commissioner for income tax or provisional tax exceed the liability at the time of the company to pay income tax and provisional tax.
Sections ME 9B and ME 9C were inserted, as from 1 October 2005, by sec- tion 77(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application for a company that leaves a wholly-owned group on or after 16 November 2004.
2005 Part M s ME 10 Income Tax Act 2004 Reprinted as at 29 August 2011 Consolidated imputation groups ME 10 Consolidated imputation group to maintain separate (1) (1A) (1B) imputation credit account Every consolidated imputation group must for each imputation year establish and maintain in accordance with this section and sections ME 11 to ME 14 an imputation credit account, separate from the imputation credit account of each company that is a member of that consolidated imputation group.
If the members of a consolidated group that is a consolidated imputation group elect to form an imputation group that in- cludes no company that is a member of another consolidated group, the imputation group must, for the purposes of subsec- tion (1), continue to use and maintain the imputation credit account formerly used by the consolidated group.
If the members of a consolidated group that is a consolidated imputation group elect to form or join an imputation group that includes the members of another consolidated group, the imputation group that results from the election must record in its imputation credit account— (a) all the debits and credits that, immediately before the election takes effect, are recorded in the imputation credit account of the consolidated group; and all the debits and credits that, when or after the election takes effect, arise from transactions involving a member of the imputation group.
(b) (1C) The resident imputation subgroup that is associated with a trans-Tasman imputation group must record in its imputation credit account all the debits and credits that— (a) (b) are recorded in the imputation credit account of the trans-Tasman imputation group; and arise in relation to a company that, at the time the debit or credit arises— (i) will be a member of the resident imputation sub- group, if the debit or credit arises before the for- mation of the resident imputation subgroup: is a member of the resident imputation subgroup, if the debit or credit arises at or after the forma- tion of the resident imputation subgroup.
(ii) 2006 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 11 (1D) (2) If the members of an imputation group elect to cease to be an imputation group and to form a consolidated group that is a consolidated imputation group, the consolidated group must, for the purposes of subsection (1), continue to use and maintain the imputation credit account formerly used by the imputation group.
The opening balance of the imputation credit account of a con- solidated imputation group for any imputation year is— (a) nil, if the consolidated imputation group is formed dur- ing the imputation year and is not formed from the members of a consolidated imputation group that exists immediately before the time of the formation: the amount given by the application of subsection (1A), (1B), or (1C), if the consolidated imputation group is formed during the imputation year and is formed from the members of a consolidated imputation group that exists immediately before the time of the formation: the amount of the closing balance of the imputation credit account for the preceding imputation year (being a credit or debit, as the case may be), in any other case.
(aa) (b) Compare: 1994 No 164 s ME 10 Subsection (1C)(b) was substituted, as from 1 October 2005, by section 230 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
ME 11 Credits arising to imputation credit account of group (1) There arise as credits to be recorded in the imputation credit account of a consolidated imputation group for any imputation year the following amounts: (a) the amount of any income tax paid during that imput- ation year by that consolidated imputation group that is to be applied in satisfaction of the income tax liability (if any) of the group except to the extent that such in- come tax— (i) would not, if the group were a single company, give rise to a credit by virtue of section ME 4(1)(a)(i) to (viii) and (x); or is paid by way of a crediting of further income tax under section ME 13(6): (ii) 2007 Part M s ME 11 Income Tax Act 2004 Reprinted as at 29 August 2011 (aa) (ab) (b) (c) (d) (e) the amount of any payment that is made by an inter- mediary into a tax pooling account from funds that are supplied by the group for that purpose: the amount of any transfer by an intermediary to the group of an entitlement to funds that are held in a tax pooling account: the amount of any income tax deemed under section MB 33 to be paid during the imputation year by the consolidated imputation group: the amount of any further income tax paid in respect of the consolidated imputation group during the imput- ation year under section ME 14(3): the amount of any imputation credit attached to a divi- dend paid during the imputation year to any company which is at the time of payment a member of the con- solidated imputation group: the amount of any dividend withholding payment credit that is attached to a dividend paid during the imputation year to a company, if, at the time of the payment, the company is a member of the consolidated imputation group and— (i) is a member of a consolidated group that does not have a dividend withholding payment account; or is not a member of a consolidated group and does not have a dividend withholding payment account: (ii) (eb) (ec) (ed) the amount of any imputation credit attached under sec- tion ME 6B to a replacement payment paid
 under a share-lending arrangement to a company that is at the time of the payment a member of the consolidated im- putation group: the amount of any imputation credit treated under sec- tion NF 8B as being attached to a replacement payment paid under a share-lending arrangement to a company that is at the time of the payment a member of the con- solidated imputation group: the amount of imputation credit shown in a credit trans- fer notice a company is issued with, if the company is 2008 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 11 (f) (fb) (g) a member of the consolidated imputation group at the time the credit transfer notice is issued: the amount of any dividend withholding payment that is made during the imputation year by a company that is a member of the consolidated imputation group at the time of the payment, if— (i) the company at the time of the payment— (A) is a member of a consolidated group that does not have a dividend withholding pay- ment account; or is not a member of a consolidated group and does not have a dividend withholding payment account; and (B) (ii) the company does not satisfy the obligation to make the dividend withholding payment by re- ducing a net loss under section NH 5(4): an amount forming all or part of a credit balance in the dividend withholding payment account of a com- pany that is a member of the consolidated imputation group, if the company elects under section MG 11 that the amount be a credit to the imputation credit account of the consolidated imputation group: an amount forming all or part of a credit balance in the dividend withholding payment account of a consoli- dated group, if— (i) the nominated company of the consolidated group elects under section NH 6(6) during the imputation year that the amount be a credit to the imputation credit account of the consolidated imputation group; and the members of the consolidated group are mem- bers of the consolidated imputation group at the time of the
 election: (ii) (i) an amount equal to the amount of a debit arising to the imputation credit account under section ME 12(1)(i) during the imputation year, to the extent that it is sub- sequently established that the relevant imputation credit should not have been determined to be the subject of an arrangement to which that subsection applies: 2009 Part M s ME 11 Income Tax Act 2004 Reprinted as at 29 August 2011 (j) (jb) (k) the amount of any resident withholding tax deduction deemed under section NF 12(b) to have been derived by any company during the imputation year where the company is at the time of derivation a member of the consolidated imputation group: an amount forming all or part of a credit balance in the policyholder credit account of a company, if the com- pany elects under section ME 19(3)(a) during the imput- ation year that the amount be a credit to the imputation credit account of the consolidated imputation group: an amount forming all or part of a credit balance in the policyholder credit account of a consolidated group, if— (i) the nominated company of the consolidated group elects under section ME 28(3) during the imputation year that the amount be a credit to the imputation credit account of the consolidated imputation group; and the members of the consolidated group are mem- bers of the consolidated imputation group at the time of the election: (ii) (l) the amount of any credit arising during the imputation year to the imputation credit account under section ME 13(2).
If a group has been required by section ME 12(1)(h) to record in the group’s imputation credit account an imputation debit that has the effect of cancelling a credit that arose from a de- posit by the group into a tax pooling account, a credit that is equal to the imputation debit arises to be recorded in the group’s imputation credit account if— (a) a further debit arises in the imputation credit account, on a date that is after the date on which the imputation debit under section ME 12(1)(h) arose, in relation to— a refund to the group of the amount of the deposit: (i) a transfer to another taxpayer of the group’s en- (ii) titlement to the amount of the deposit: (b) the amount of the deposit is transferred to the group’s account with the Commissioner with an effective date (1A) 2010 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 11 under section MBA 6 that is after the date on which the imputation debit arose.
(1B) If a consolidated imputation group has a member that is an Australian imputation credit account company, there arise as credits to be recorded in the imputation credit account of the group for any imputation year the following amounts: (a) non-resident withholding tax that, under section NG 2, the company pays on non-resident withholding income derived by the company when the company is a member of the consolidated imputation group: a payment of the Income Tax tax made under (Withholding Payments) Regulations 1979 from a withholding payment made to the company as a non-resident contractor when the company is a member of the consolidated imputation group: a payment of tax to meet the schedular income tax liabil- ity of the company for schedular income that the com- pany derives— (i) under any of sections FC 13, FC 14, FC 18, and FC 21; and in the income year that corresponds to the imput- ation year; and (ii) (iii) when the company is a member of the consoli- dated imputation group.
(1C) No amount may create more than 1 credit under subsections (2) (1) and (1B).
The credits referred to in subsection (1) arise,— (a) in the case of the credits referred to in subsection (1)(a), (c), and (f), on the date the relevant tax or dividend withholding payment is paid: in the case of a credit referred to in subsection (1)(aa), on the date of the payment into the tax pooling account: in the case of a credit referred to in subsection (1)(ab),— if the funds to which the entitlement relates are (i) transferred to the group’s account with the Com- missioner, on the effective date under section MBA 6 of the transfer: if the funds to which the entitlement relates are refunded to the group or the entitlement to the (ii) 2011 (b) (c) (aa) (ab) Part M s ME 11 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) (cb) (cc) (d) (e) (eb) (f) funds is transferred to another taxpayer, on the date of the refund or transfer: in the case of the credit referred to in subsection (1)(b), on the date on which notice of the allocation of the tax referred to in section MB 33 is given to the Commis- sioner: in the case of the credits referred to in subsection (1)(d), (e), and (j), on the date the relevant dividend or interest is paid: in the case of the credits referred to in subsection (1)(eb) and (ec), on the date the replacement payment is paid: in the case of the credit referred to in subsection (1)(ed), on the date the credit transfer notice is issued: in the case of the credits referred to in subsection (1)(fb), (g) and (k), on the date the relevant credit arises as a debit to the relevant account: in the case of the credit referred to in subsection (1)(i), on the date the relevant debit arose under section ME 12(1)(i): in the case of the credit referred to in subsection (1)(jb), on the date the relevant debit arose under section ME 18(4)(b): in the case of the credit referred to in subsection (1)(l), immediately prior to the date the relevant debit referred to in section ME 13(2)(b) arose to the imputation credit account.
(2A) A credit referred to in subsection (1A) arises on the date of the refund or transfer.

(2B) The credits referred to in subsection (1B) arise— (a) (b) (c) in the case of a credit referred to in subsection (1B)(a), on the date that the non-resident withholding tax is paid: in the case of a credit referred to in subsection (1B)(b), on the date that the tax is paid: in the case of a credit referred to in subsection (1B)(c), on the date that the schedular income tax is paid.
Compare: 1994 No 164 s ME 11 Section ME 11(1)(b): amended, on 1 October 2007, by section 147(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

2012 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 12 Subsection (1)(eb) to (ed) was inserted, as from 1 July 2006, by section 147(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Subsection (1)(fb) was inserted, as from 1 October 2005, by section 231(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Subsection (1)(jb) was inserted, as from 1 October 2005, by section 231(2) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Section ME 11(2)(b): amended, on 1 October 2007, by section 147(3) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Subsection (2)(cb) and (cc) was inserted, as from 1 July 2006, by section 147(4) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Subsection (2)(d) was amended, as from 1 October 2005, by section 231(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “subsection (1)(fb), (g) and (k)” for “subsection (1)(g) and (k)”.
Subsection (2)(eb) was inserted, as from 1 October 2005, by section 231(4) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
ME 12 Debits arising to imputation credit account of group (1) There arise as debits to be recorded in the imputation credit account of a consolidated imputation group for any imputation year the following amounts: (a) (ab) (ac) the amount of any imputation credit attached to a divi- dend paid during the imputation year by any company which is at the time of payment a member of the con- solidated imputation group: the amount of any imputation credit attached under sec- tion ME 6B to a replacement payment paid under a share-lending arrangement during the imputation year by a company that is, at the time of the payment, a mem- ber of the consolidated imputation group: the amount of any imputation credit attached to a divi- dend that is paid during the imputation year to a com- pany, if— (i) at the time of the payment, the company is a member of the consolidated imputation group; and the dividend is paid to the company as a share user or as a person associated with a share user, (ii) 2013 Part M s ME 12 Income Tax Act 2004 Reprinted as at 29 August 2011 (ad) (b) (c) (d) (da) (db) in a returning share transfer that is not a share- lending arrangement: the amount of any imputation credit attached to a divi- dend that is paid during the imputation year to a com- pany that is, at the time of the payment, a member of the consolidated imputation group, if the imputation credit is shown in a credit transfer notice issued by the com- pany: an amount forming all or part of a credit balance in the imputation credit account of the consolidated imput- ation group, if the nominated company of the consoli- dated imputation group elects under section ME 14(1) during the imputation year that the amount be a credit to the policyholder credit account of the consolidated imputation group or of a member of the consolidated imputation group: the amount of any provisional tax allocated by the con- solidated imputation group under section MB 33 dur- ing the imputation year to an underpaid company (as referred to in that section): the
 amount of any refund of income tax paid to the con- solidated imputation group during the imputation year that was applied towards the satisfaction of an income tax liability of the consolidated imputation group or that was paid as an instalment of provisional tax of the con- solidated imputation group except to the extent that— the refund is in respect of income tax paid before (i) the date that a debit arises under paragraph (h); and the amount of the refund does not exceed the amount of the debit that arises on that date: the amount of any refund that is made to the group by an intermediary from funds in a tax pooling account for which the group has received a credit under section ME 11(1)(aa) or (ab): the amount of the funds involved in any transfer from the group to another taxpayer by an intermediary of an entitlement to funds in a tax pooling account for (ii) 2014 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 12 (e) (f) (h) (i) (j) (k) (l) which the group has received a credit under section ME 11(1)(aa) or (ab): the amount of any allocation debit arising in respect of the imputation year under section ME 8(4) in respect of any company which is at the time of payment of the relevant dividend a member of the consolidated imput- ation group: the amount of a refund of a dividend withholding pay- ment, or a refund of a credit of tax under section LD 8(1)(c), that is made in respect of a dividend that is de- rived during the imputation year by a member of the consolidated imputation group, if at the time of deriv- ation the member— (i) is a member of a consolidated group that does not have a dividend withholding payment account; or is not a member of a consolidated group and does not have a dividend withholding payment account: (ii) the amount of any debit which would arise under section ME 5(1)(i) if that provision were to apply, with any necessary modiﬁcations, to a consolidated imputation group and its imputation credit account as if it were a
 single company: the amount of any further debit arising during the imput- ation year to the imputation credit account under section GC 22 in relation to an imputation credit determined to be the subject of an arrangement to obtain a tax advan- tage: the amount of credit balance, if any, of the imputation credit account where, during the imputation year, the consolidated imputation group ceases to be a consoli- dated imputation group: the amount of any debit arising during the imputation year to the imputation credit account under section ME 13(5) (or under section ME 13(5) of the Income Tax Act 1994 or section 191SC(6) of the Income Tax Act 1976): the amount of any overpaid income tax paid by the con- solidated imputation group that the Commissioner ap- plies towards the satisfaction of an amount (other than 2015 Part M s ME 12 Income Tax Act 2004 Reprinted as at 29 August 2011 an amount of income tax) that is due and payable by a company that is a member of the consolidated imput- ation group under any provision of this Act or any other of the Inland Revenue Acts, except to the extent that the amount applied— (i) is in respect of income tax paid before the date that a debit arises under paragraph (h); and does not exceed the amount of the debit that arises on that date: (ii) (m) the overpaid amount of a dividend withholding payment that is made by a company in respect of a dividend de- rived by the company during the imputation year, if— the company at the time of derivation— (i) (A) is a member of a consolidated group that does not have a dividend withholding pay- ment account; or is not a member of a consolidated group and does not have a dividend withholding payment account; and (B) (ii) the Commissioner applies the overpaid amount in satisfaction of an amount that— (A) is due and payable under an Inland Rev- enue Act by a member of the consolidated group; and is not a dividend withholding payment or income tax; and (B) (n) (iii) the consolidated group does
 not have a dividend withholding payment account at the time of the application of the overpaid amount: the amount, calculated under subsection (3) or (4) for the income year corresponding to the imputation year, that is transferred on account of net foreign attributed income to the dividend withholding payment account of— (i) a consolidated group, the members of which are members of the consolidated imputation group; or 2016 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 12 (ii) a member of the consolidated imputation group that is not a member of a consolidated group and has a dividend withholding payment account.
(1A) If a consolidated imputation group has a member that is an Australian imputation credit account company, there arise as debits to be recorded in the imputation credit account of the group for any imputation year the following amounts: (a) any refund arising from an amount— (i) (b) (c) (ii) (ii) that is an overpayment of non-resident with- holding tax on non-resident withholding income that the company derives when the company is a member of the consolidated imputation group; and for which the consolidated imputation group has received a credit under section ME 11(1B)(a): any refund arising from an amount— (i) that is an overpayment of tax under the Income Tax (Withholding Payments) Regulations 1979 from a withholding payment made to the com- pany as a non-resident contractor when the com- pany is a member of the consolidated imputation group; and for which the consolidated imputation group has received a credit under section ME 11(1B)(b): any refund of tax arising from an amount— (i) that is an overpayment of the company’s schedu- lar income tax liability for schedular income that the company derives— (A) under any of sections FC 13, FC 14, FC 18, and FC 21; and in the income year that corresponds to the imputation year; and (B) (C) when the company is a member of the con- solidated imputation group; and (ii) for which the consolidated imputation group has received a credit under section ME 11(1B)(c).
(2) The debits referred to in subsection (1) arise,— (a) in the case of the debit referred to in subsection (1)(a), on the date the dividend is paid: 2017 Part M s ME 12 Income Tax Act 2004 Reprinted as at 29 August 2011 (ab) (ac) (b) (c) (d) (da) in the case of a debit referred to in subsection (1)(ab), on the date the replacement payment is paid: in the case of a debit referred to in subsection (1)(ac) or (ad), on the date the relevant dividend is paid: in the case of a debit referred to in subsection (1)(b), on the date the nominated company makes the election: in the case of a debit referred to in subsection (1)(c), on the date there is given to the Commissioner notice of the allocation of tax under section MB 9: in the case of the debits referred to in subsection (1)(d) and (f), on the date the refund is paid: in the case of a debit referred to in subsection (1)(da) or (db),— (i) on the last day of the imputation year that imme- diately precedes the imputation year in which the refund or transfer is made, to the extent that the debit does not exceed the credit balance in the group’s imputation credit account on that date: on the date of the refund or transfer, to the extent that, after the application of subparagraph (i), the amount of the debit that is not assigned a date under subparagraph (i) does not exceed the credit balance in the group’s imputation credit account on the date of the refund or transfer: on the last day of the imputation year that imme- diately precedes the imputation year in which the refund or transfer is made, to the extent that the debit is not assigned a date under subparagraphs (i) and (ii): (ii) (iii) (e) (g) (h) in the case of a debit referred to in subsection (1)(e), at the end of the imputation year in respect of which the allocation debit arises: in the case of a debit referred to in subsection (1)(h), at the speciﬁed time: in the case of a debit referred to in subsection (1)(i), at the end of the imputation year in respect of which it is determined that the arrangement to
 obtain a tax advantage occurred or commenced: 2018 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 12 (i) (j) (k) (l) in the case of a debit referred to in subsection (1)(j), immediately before the consolidated imputation group ceases to be a consolidated imputation group: in the case of a debit referred to in subsection (1)(k), at the time ﬁrst referred to in section ME 13(5) (or sec- tion ME 13(5) of the Income Tax Act 1994 or section 191SC(6) of the Income Tax Act 1976, as the case may be): in the case of a debit referred to in subsection (1)(l) or (m), on the date that the Commissioner applies the amount of overpaid income tax or dividend withholding payment in satisfaction of the other amount that is due and payable: in the case of a debit referred to in subsection (1)(n),— on the last day of the imputation year that corres- (i) ponds to the income year, to the extent that the debit is not more than the amount of provisional tax payments made for the income year on or be- fore that day; and to the extent that subparagraph (i) does not apply, on the date the return of income for the income year is ﬁled.
(ii) (2A) A debit referred to in subsection (1A) arises on the date that (3) the refund is paid.
If a consolidated group or a company that is not a member of a consolidated group maintains both a dividend withholding payment account and a conduit tax relief account for the im- putation year corresponding to the income year, the amount to be transferred under subsection (1)(n) is calculated for the consolidated group or company by applying sections KH 1 and KH 2, with any necessary modiﬁcations and as if the amount were conduit tax relief for the imputation year, but— (a) substituting the percentage of resident shareholders for the quantity NRS in section KH 1(2) and (3); and calculating the percentage of resident shareholders by deducting the quantity NRS from 100%.
(b) (4) If a consolidated group or a company that is not a member of a consolidated group maintains a dividend withholding payment account for the imputation year corresponding to the income 2019 Part M s ME 13 Income Tax Act 2004 Reprinted as at 29 August 2011 (5) year but does not maintain a group conduit tax relief account for the imputation year, the amount to be transferred under subsection (1)(n) is calculated for the consolidated group or company by applying section KH 1 as if each member of the group or the company were a conduit tax relief company and the quantity NRS were 100%.
If neither subsection (3) nor (4) applies, no amount is to be transferred under subsection (1)(n).

Compare: 1994 No 164 s ME 12 Subsection (1)(ab) to (ad) was inserted, as from 1 July 2006, by section 148(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Subsection (1)(b) was substituted, as from 1 October 2005, by section 232 Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Section ME 12(1)(c): amended, on 1 October 2007, by section 148(2) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Subsection (2)(ab) and (ac) was inserted, as from 1 July 2006, by section 148(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
ME 13 Debiting and crediting between consolidated imputation group and individual companies (1) Where— (a) (b) any credit arises to the imputation credit account of a consolidated imputation group in respect of any tax paid, payment into a tax pooling account, imputation credit attached to a dividend derived, dividend with- holding payment credit attached to a dividend derived, or dividend withholding payment paid; or any debit arises to the imputation credit account of a consolidated imputation group in respect of any tax re- funded, refund of funds in a tax pooling account, trans- fer of an entitlement to funds in a tax pooling account, imputation credit attached to a dividend paid, dividend withholding payment refunded, tax credit refunded, or allocation debit arising under section ME 8(4),— that credit or debit does not arise to the imputation credit ac- count of any individual company.
Subject to subsection (3), where and to the extent that at any time— (2) 2020 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 13 (a) (c) (b) a company which is at that time a member of a con- solidated imputation group has a credit in its individual imputation credit account (that credit being referred to in this subsection as the company credit); and a debit arises under section ME 12 to be recorded in the imputation credit account of the consolidated im- putation group; and that debit is not offset, determined by applying the procedure set out in section ME 5(4)(c), against any credit in the consolidated imputation group’s imput- ation credit account which arose before the date or on the same date upon which the company credit arose,— the company credit is, to the extent of that debit, credited to the imputation credit account of the consolidated imputation group, and that credit to the group’s imputation credit account is, for the purposes of section ME 12(1)(h), deemed to have been cancelled out by that debit notwithstanding section ME 5.
(3) Where at any time all or part of any credit in a company’s im- putation credit account is credited to the imputation credit ac- count of a consolidated imputation group, an amount equal to the credit so arising arises as a debit at that time to be recorded under section ME 5 in the company’s imputation credit ac- count.
(4) Where under subsection (2) credits in the individual imput- ation credit accounts of 2 or more members of a consolidated imputation group would, but for this subsection, be required to be credited to the group’s imputation credit account, those credits must be credited— (a) (b) in the order in which those credits arose, determined by applying the procedure set out in section ME 5(4)(c); and if 2 or more credits arose at the same time,— (i) in the order elected by the consolidated imput- ation group; or if no such election is made, on a pro rata basis,— so far as the relevant debit to the group’s imputation credit account extends and no further.
(ii) (5) Where and to the extent that at any time— 2021 Part M s ME 14 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) a debit would, but for this subsection, arise in the in- dividual imputation credit account of a company which is at that time a member of a consolidated imputation group; and the arising of that debit would result in or increase a debit balance in the individual imputation credit account of the company,— that debit does not arise to the company’s imputation credit account but is debited to the consolidated imputation group’s imputation credit account.
(6) Where at any time— (a) (b) (c) a company has paid any further income tax under sec- tion ME 9 in respect of a debit balance in its individual imputation credit account; and the company is entitled under section ME 9(5) to credit that further income tax against any income tax liability of the company that arises or any instalment of provi- sional tax for which the company becomes liable at or after that time; and the company is at that time a member of a consolidated imputation group,— that further income tax may be credited against— (d) any income tax liability of the group that arises at or after that time; or any instalment of provisional tax in accordance with section MB 37 for which the group becomes liable at or after that time,— (e) and, to the extent so credited, the further income tax is not available to be credited under section ME 9(5).
Compare: 1994 No 164 s ME 13 Section ME 13(6)(e): amended, on 1 October 2007, by section 149(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
ME 14 Application of speciﬁc imputation provisions to consolidated imputation groups If at any time there is a credit balance in the imputation credit account of a consolidated imputation group that is not a resi- dent imputation subgroup and a member of the consolidated imputation group has a policyholder credit account, or a (1) 2022 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 14 consolidated group whose members are members of the con- solidated imputation group has a policyholder credit account, the nominated company of the consolidated imputation group may— (a) elect that an amount forming all or part of the credit bal- ance be, at the time, a credit to the policyholder credit account of the member or consolidated group and a debit to the imputation credit account of the consoli- dated imputation group; and (b) make an election under paragraph (a) by recording the debit in the imputation credit account.
(1A) (2) (3) (b) If the members of a consolidated group that has a policy- holder credit account are members of a consolidated imput- ation group and the consolidated group has a non-standard bal- ance date, section ME 7(3) and (4) apply to the transfer of a credit balance from the imputation credit account of the con- solidated imputation group to the policyholder credit account of the consolidated group as if— (a) each reference to a company were a reference to the con- solidated imputation group or the consolidated group, as appropriate; and each reference to the provisions of the Act applicable to an individual company were a reference to the equiva- lent provision of this section or of sections ME 10 to ME 13 applicable to consolidated imputation groups with members that are the members of a consolidated group.
Section ME 8 applies, with any necessary modiﬁcations, to a consolidated imputation group as if it were a single company but, for the purposes of sections ME 8(2) to (4), dividends paid by 1 member of the consolidated imputation group to another member of the consolidated imputation group are not taken into account.
Section ME 9, and sections 97, 101, 139B, 140B, 140D, and 180 of the Tax Administration Act 1994 apply, with any ne- cessary modiﬁcations, to a consolidated imputation group and its imputation credit account as if— it were a single company; and (a) 2023 Part M s ME 14 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) (b) each reference to a provision of this Act were a refer- ence to the equivalent provision applicable to consoli- dated imputation groups; and each reference to liability of a company for further in- come tax, late payment penalty, or imputation penalty tax were (subject to the application of section HB 1(2) to (5)) a reference to joint and several liability for that tax of each company which is a member of the group at the time the further income tax, late payment penalty, or imputation penalty tax becomes payable.
(3B) Sections ME 9B and ME 9C and sections 97, 101, 139B, 140B, 140D, and 180 of the Tax Administration Act 1994 apply, with any necessary modiﬁcations, to a consolidated imputation group and its imputation credit account as if— (a) (b) it were a single company; and each reference to a provision of this Act were a refer- ence to the equivalent provision applicable to consoli- dated imputation groups; and each reference to liability of a company for additional income tax, late payment penalty, or imputation penalty tax were (subject to the application of section HB 1(2) to (5)) a reference to joint and several liability for that tax of each company which is a member of the group at the time the additional income tax, late payment penalty, or imputation penalty tax becomes payable.
(c) (b) Sections GC 22 and ME 40 apply, with any necessary modiﬁ- cations, in any case which involves accounts of a consolidated imputation group, as if— (a) the consolidated imputation group were a single com- pany; and references to provisions of this Act were references to the equivalent provisions applicable to such equivalent accounts.
Section MD 2— (a) applies, with any necessary modiﬁcations, in respect of any tax paid by a consolidated group that is a consoli- dated imputation group as if— (i) the group were a single company; and (4) (5) 2024 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 14 (b) (ii) (iii) the reference to that company ceasing to be an imputation credit account company were a ref- erence to the consolidated group ceasing to be a consolidated imputation group; and each reference to a provision of this Act or of the Tax Administration Act 1994 were a reference to the equivalent provision applicable to consoli- dated imputation groups; and does not apply to limit a refund of income tax payable to a company which is a member of a consolidated group that is a consolidated imputation group in respect of income tax paid individually by that company to the extent that, if that refund had been of income tax paid by the consolidated group, section MD 2 would not have limited the refund; but, where and to the extent that a refund of income tax is paid which would not have been payable but for this paragraph, section MD 2(3) applies as if that refund were in respect of tax paid by the consolidated group.
(6) If a company that is a member of an imputation group has an entitlement under section MD 1 to a refund of overpaid income tax,— (a) the company must apply for the refund by a notice to the Commissioner that is in a form acceptable to the Commissioner: section MD 2 applies to the entitlement as if— (i) (b) the imputation credit account of the imputation group were the imputation credit account of the company: the credit in the imputation credit account for the purpose of section MD 2 were reduced by each refund to a member of the imputation group.
(ii) Compare: 1994 No 164 s ME 14 Subsection (3B) was inserted, as from 1 October 2005, by section 78 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
2025 Part M s ME 15 Income Tax Act 2004 Reprinted as at 29 August 2011 Policyholder credit accounts ME 15 Resident life insurance companies to maintain policyholder credit account A company resident in New Zealand (being a company carry- ing on a business of providing life insurance to which the life insurance rules apply) must establish and maintain a policy- holder credit account for each imputation year.
Compare: 1994 No 164 s ME 15 ME 16 Calculation of balance of policyholder credit account For the purposes of sections MD 3 and ME 15 to ME 24, the balance of a policyholder credit account at any time is ascer- tained by calculating the difference in amount between the ag- gregate of credits and the aggregate of debits to the account existing at that time, and the account has— (a) (b) Compare: 1994 No 164 s ME 16 a credit balance to the extent that credits exceed debits: a debit balance to the extent that debits exceed credits.
ME 17 Policyholder credit account of company (1) Every policyholder credit account company must record in its policyholder credit account for any imputation year— (a) the opening balance of the account for that imputation year, in accordance with subsection (2): credits as they arise in accordance with section ME 18(1) and (2): debits as they arise in accordance with section ME 18(3) and (4).
(b) (c) The opening balance of the policyholder credit account of a company for any imputation year is,— (a) for the imputation year during which the company com- mences to be a policyholder credit account company, nil: for any subsequent imputation year, the amount of the closing balance of the policyholder credit account of the company for the immediately preceding imputation year, and such amount is— (i) a credit arising to the account where the closing balance is a credit balance: (b) (2) 2026 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 18 (ii) a debit arising to the account where the closing balance is a debit balance.
Compare: 1994 No 164 s ME 17 ME 18 Credits and debits arising to policyholder credit account (1) of company There arise as credits to be recorded in the policyholder credit account of a policyholder credit account company the follow- ing amounts: (a) any amount of a credit balance in an imputation credit account that is a debit to the imputation credit account and a credit to the policyholder credit account as a result of an election— (i) under section ME 14 by the nominated company for an imputation group to which the company belongs, if the company is a member of an imput- ation group and not a member of a consolidated group; or under section ME 7 by the company, if the com- pany is not a member of an imputation group or of a consolidated group that is a consolidated im- putation group: (ii) (b) (bb) (bc) (c) any amount forming all or part of a credit balance in the company’s dividend withholding payment account that the company elects in accordance with section MG 7 to be a credit to the company’s policyholder credit account: an amount equal to any allocation deﬁcit debit that arises in the company’s dividend withholding payment account under section MG 8B, if the amount of the al- location deﬁcit debit is given by section MG 8B(3)(a): an amount equal to the credit balance in the company’s dividend withholding payment account immediately be- fore an allocation deﬁcit debit arises in the company’s dividend withholding payment account under section MG 8B, if the amount of the allocation deﬁcit debit is given by section MG 8B(3)(b): any amount forming all of the credit balance in another company’s or person’s policyholder credit account that 2027 Part M s ME 18 Income Tax Act 2004 Reprinted as at 29 August 2011 that other company or person elects, in accordance with section ME 19A, to transfer as a credit to the policy- holder credit account of the company along with the transfer of the other company’s or person’s life insur- ance business to the company.
(b) The credits referred to in subsection (1) arise,— (a) in the case of a credit referred to in subsection (1)(a), on the date that the amount of the credit arises as a debit to the company’s imputation credit account under section ME 7: in the case of a credit referred to in subsection (1)(b), on the date that the amount of the credit arises as a debit to the company’s dividend withholding payment account under section MG 7: in the case of a credit referred to in paragraph (bb) or (bc) of that subsection, at the end of the imputation year in respect of which the credit arises: in the case of a credit referred to in subsection (1)(c), on the date of transfer of the life insurance business.
There arise as debits to be recorded in the policyholder credit account of a policyholder credit account company the follow- ing amounts: (a) (bb) (c) the amount of any credit balance in the account that the company elects in accordance with section ME 19 to use as a credit against the company’s policyholder base income tax liability: the amount of any credit balance in the account that the company elects under section ME 19 to be a credit to the imputation credit account of— (i) the imputation group to which the company be- longs, if the company is a member of an imput- ation group; or the company, if the company is not a member of an imputation group: (ii) the amount of the credit balance in the account that the company elects in accordance with section ME 19A to transfer as a credit to the policyholder credit account of another company or person along with the transfer (b) (c) (2) (3) 2028 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 18 of the company’s life insurance business to that other company or person.
(4) The debits referred to in subsection (3) arise,— (a) in the case of a debit referred to in subsection (3)(a), on the last day of the income year of the company to which the income tax that is reduced by the relevant amount of the credit balance relates: in the case of a debit referred to in subsection (3)(b), on the date the company elects in accordance with section ME 19 to credit the imputation credit account of the company or imputation group: in the case of a debit referred to in subsection (3)(c), on the date of transfer of the life insurance business.
(b) (c) Compare: 1994 No 164 s ME 18 Subsection (1)(a) was amended, as from 1 October 2005, by section 233(1)(a) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting “under section ME 7 by”.

Subsection (1)(a)(i) was amended, as from 1 October 2005, by section 233(1)(b) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting “under section ME 14 by” before the words “the nominated company”.
Subsection (1)(a)(ii) was amended, as from 1 October 2005, by section 233(1)(c) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting “under section ME 14 by” before the words “the nominated company”.

Subsection (1)(bb) and (bc) were inserted, as from 1 October 2005, by sec- tion 233(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Subsection (2)(bb) was inserted, as from 1 October 2005, by section 233(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Subsection (3)(b)(i) was amended, as from 1 October 2005, by section 233(4)(a) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting “and not a member of a consolidated group”.
Subsection (3)(b)(ii) was amended, as from 1 October 2005, by section 233(4)(b) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting “or of a consolidated group that is a consolidated imputation group”.
Subsection (4)(b) was amended, as from 1 October 2005, by section 233(5) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “imputation credit account of the company or imputation group” for “company’s imputation credit account”.
2029 Part M s ME 19 Income Tax Act 2004 Reprinted as at 29 August 2011 ME 19 Election to use credit balance as credit against policyholder base income tax liability or as credit in imputation credit account (1) A policyholder credit account company may elect that all or part of any credit balance in its policyholder credit account at the time of the election is to be credited against any policy- holder base income tax liability of the company, or provisional tax payable by the company in respect of its policyholder base.
(2) A company makes an election under subsection (1) by record- ing the amount in respect of which it makes the election as a debit in its policyholder credit account, and any amount so recorded as a debit in accordance with subsection (1) is cred- ited against any policyholder base income tax liability of the company or provisional tax payable by the company in respect of its policyholder base.
(3) A policyholder credit account company may elect that all or part of any credit balance in its policyholder credit account at the time of the election be a debit to the company’s pol- icyholder credit account and a credit to the imputation credit account of— (a) the imputation group to which the company belongs, if the company is a member of an imputation group; or the company, if the company is not a member of an imputation group.
(b) (4) An election of a company under subsection (3) is made by recording the amount that is subject to the election— (a) as a debit in the company’s policyholder credit account; and as a credit in the imputation credit account— (i) of the imputation group to which the company belongs, if the company is a member of an im- putation group; or of the company.
(ii) (b) (5) Notwithstanding subsection (3), no policyholder credit ac- count company may in any imputation year elect that any credit balance in its policyholder credit account is to be a credit to the imputation credit account of the company, or of the company’s imputation group, where and to the extent to which— 2030 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 19A (6) (a) (b) (c) the company furnishes a return of income under section 38 of the Tax Administration Act 1994 for a non-stand- ard accounting year; and that credit balance is an amount of credit arising in that imputation year from an election made by the company in accordance with section ME 7 or MG 7 during the accounting year of the company in which the last day of that imputation year falls; and the election would, if made, result in a debit to the com- pany’s policyholder credit account in that imputation year.
For the purposes of subsection (5), a credit balance in a pol- icyholder credit account is deemed not to contain the amount of a credit referred to in paragraph (b) of that subsection to the extent that the credit has been cancelled out by any subsequent debit arising to the account, and for this purpose the amount of any debit is offset against the amount of any credits in the order in which the credits arise.
Compare: 1994 No 164 s ME 19 Subsection (3)(a) was amended, as from 1 October 2005, by section 234(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting “and not a member of a consolidated group”.

Subsection (3)(b) was amended, as from 1 October 2005, by section 234(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting “or of a consolidated group that is a consolidated imputation group”.
Subsection (4)(b)(i) was amended, as from 1 October 2005, by section 234(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting “and not a member of a consolidated group”.

Subsection (4)(b)(ii) was amended, as from 1 October 2005, by section 234(4) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting “, if the company is not a member of an imputation group or of a consolidated group that is a consolidated imputation group”.
ME 19A Credit balance may be transferred on transfer of life insurance business (1) Where a policyholder credit account company or policyholder credit account person transfers its life insurance business to another company or person, the policyholder credit account company or person may, if— (a) the transfer meets the requirements set out in section EY 44(1); and 2031 Part M s ME 20 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) in the case of— (i) a policyholder credit account company, the com- pany is not, following the transfer, required by section ME 15 to maintain a policyholder credit account; or a policyholder credit account person, the person is not, following the transfer, eligible to make an election under section ME 21 to maintain a policyholder credit account,— (ii) elect to transfer the whole of the credit balance in its account at the time of transfer of the business to the policyholder credit account of the company or person to which its business is transferred.
(2) A policyholder credit account company or person makes an election under subsection (1) by recording a debit in its pol- icyholder credit account accordingly.
Compare: 1994 No 164 s ME 19A ME 20 Determinations by Commissioner as to credits and debits arising to policyholder credit account (1) Where the Commissioner considers that— (a) (b) any amount recorded as a credit or a debit arising to a company’s policyholder credit account— (i) is not the correct amount that should have been recorded in respect of the credit or debit; or should not have been so recorded; or should not have been recorded as arising at the time it was recorded as arising; or (ii) (iii) any amount that has not been recorded as a credit or debit to the imputation credit account of a company, or of a company’s consolidated imputation group, should have been so recorded,— the Commissioner must determine the correct amount (includ- ing a nil amount) of the credit or debit properly arising to the account and the time at which such credit or debit arose.
(2) Where the Commissioner makes a determination under sub- section (1), then, except in so far as the company establishes on objection that any credit or debit was correctly recorded, 2032 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 21 (b) or not recorded as the case may be, in the policyholder credit account,— (a) the relevant credit or debit is deemed to have arisen, or not to have arisen, or to have been the amount de- termined by the Commissioner under subsection (1), as the case may require, effective on the date on which the debit or credit originally arose, or is determined by the Commissioner as having arisen: the company must make such other corrections in respect of any credits or debits or balances recorded as arising to its policyholder credit account or imputation credit account or dividend withholding payment ac- count, and the nominated company of any consolidated imputation group of which the company is a member must make such corrections in the consolidated imput- ation group’s imputation credit account, whether for the imputation year in which the incorrect record the subject of the determination was made or for any sub- sequent imputation year, as may be necessary or as may be directed by the Commissioner as a consequence of the determination in relation to the amount incorrectly recorded or not recorded.
(3) As soon as is convenient after a determination is made under subsection (1), the Commissioner must give notice to the com- pany in respect of whose policyholder credit account the deter- mination is made, and the notice may be included in a notice of assessment under section 111(1) of the Tax Administration Act 1994.

(4) An omission to give the notice referred to in subsection (3) does not invalidate the determination.
Compare: 1994 No 164 s ME 20 ME 21 Person may elect to maintain policyholder credit account (1) Any person carrying on a business of providing life insurance (not being a company resident in New Zealand) to which sec- tion CR 1(4) applies may at any time during an income year of that person elect to maintain a policyholder credit account for that income year.
2033 Part M s ME 22 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) A person who so elects must notify the Commissioner of that fact within 21 days after the date of the election, or within such further time as the Commissioner may allow in any case or class of cases, and must maintain a policyholder credit ac- count— (a) (b) for the income year in which the election is made; and subject to this section, for every subsequent income year.
(3) A person who has made an election under subsection (1) may, during any income year subsequent to that in which the elec- tion was made, elect to cease to be a policyholder credit ac- count person, and, subject to subsection (4), any person who so elects must, as from the commencement of the income year succeeding that in which the election to so cease is made, cease to be a person required to maintain a policyholder credit ac- count.
(4) An election made under subsection (3) is of no effect unless the person furnishes, within the time provided for in section 66(3) of the Tax Administration Act 1994, the annual policyholder credit account return required in respect of the income year in which the election is made.
Compare: 1994 No 164 s ME 21 ME 22 Policyholder credit account of person (1) Every policyholder credit account person must record in the person’s policyholder credit account for any income year of that person— (a) the opening balance of the account for that income year, in accordance with subsection (2): credits as they arise in accordance with section ME 23(1), (2), (3), and (6): debits as they arise in accordance with section ME 23(4), (5), and (6).
(b) (c) The opening balance of the policyholder credit account of a person for any income year is,— (a) for the income year during which the person com- mences to be a policyholder credit account person, nil: for any subsequent income year, the amount of the clos- ing balance of the policyholder credit account of the (b) (2) 2034 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 23 person for the preceding income year, and such amount is— (i) a credit arising to the account where the closing balance is a credit balance: a debit arising to the account where the closing balance is a debit balance.
(ii) Compare: 1994 No 164 s ME 22 ME 23 Credits and debits arising to policyholder credit account (1) (2) of person There arise as credits to be recorded in the policyholder credit account of a policyholder credit account person— such amounts as would arise as credits if— (a) (i) (ii) that policyholder credit account person were, in respect of the business of providing life insurance carried on by that person, an imputation credit account company; and that policyholder credit account were an imput- ation credit account; and section ME 4(1)(d), (e), and (j) did not apply: (iii) any amount forming all of the credit balance in another company’s or person’s policyholder credit account that that other company or person elects, in accordance with section ME 19A, to transfer as a credit to the policy- holder credit account of the person along with the trans- fer of the other company’s or person’s life insurance business to the person.
(b) Subject to subsection (3), any such credit arises,— (a) in the case of a credit referred to in subsection (1)(a), on the date on which the credit would have arisen to the imputation credit account of the policyholder credit account person if— (i) that policyholder credit account person were, in respect of the business of providing life insurance carried on by that person, an imputation credit account company; and that policyholder credit account were an imput- ation credit account: (ii) 2035 Part M s ME 23 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) in the case of a credit referred to in subsection (1)(b), on the date of transfer of the life insurance business.
(3) Where any amount of income tax is treated as being paid by the policyholder credit account person by virtue of section LB 2 or LD 8 or MF 14, for the purposes of this section the income tax is deemed to be paid on the date upon which the relevant dividend is paid.
There arise as debits to be recorded in the policyholder credit account of a policyholder credit account person for any income year the following amounts: (a) (4) (b) (c) any of the credit balance of the account that the person elects in accordance with section ME 24 to use as a credit against the policyholder base income tax liability of the person: any amount equal to any debits which would have arisen to the imputation credit account of the policy- holder credit account person if— (i) that policyholder credit account person were, in respect of the business of providing life insurance carried on by that person, an imputation credit account company; and that policyholder credit account were an imput- ation credit account; and section ME 5(1)(b), (c), and (i) did not apply: (iii) the amount of the credit balance in the account that the person elects in accordance with section ME 19A to transfer as a credit to the policyholder credit account of another company or person along with the transfer of the person’s life insurance business to that other company or person.
(ii) The debits referred to in subsection (4) arise,— (a) in the case of a debit referred to in subsection (4)(a), on the date the person makes the election in accordance with section ME 24: in the case of a debit referred to in subsection (4)(b), on the date the debit would have arisen to the imputation credit account of the policyholder credit account person if— (b) (5) 2036 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 24 (i) (ii) that policyholder credit account person were, in respect of the business of providing life insurance carried on by that person, an imputation credit account company; and that policyholder credit account were an imput- ation credit account: (c) in the case of a debit referred to in subsection (4)(c), on the date of transfer of the life insurance business.
(6) Notwithstanding any provision of this section, in the case of any policyholder credit account person not resident in New Zealand to whom section EY 47 applies,— (a) a credit arises only to that person’s policyholder credit account by virtue of income tax paid to the extent that it does not exceed— (i) the amount of income tax liability that would have arisen in respect of the person’s taxable in- come if the sole activity of the person carrying on a business of providing life insurance con- sisted of or related to any 1 or more policies of life insurance for which that life insurer is the in- surer which were offered or entered into in New Zealand; or an amount that would have been so calculated and deemed to be derived from New Zealand under that formula but for the application of sec- tion NG 3; and (ii) (b) no debit arises to that person’s policyholder credit ac- count by virtue of any refund of income tax paid to that person if no credit arose to that person’s policy- holder credit account in respect of that income tax paid by virtue of paragraph (a).
Compare: 1994 No 164 s ME 23 ME 24 Use of credit balance to reduce income tax (1) A policyholder credit account person may elect that all or any part of the credit balance in the policyholder credit account of that person at the time of election is to be credited against any policyholder base income tax liability of the person or 2037 Part M s ME 25 Income Tax Act 2004 Reprinted as at 29 August 2011 provisional tax payable in respect of the person’s policyholder base.
(2) A person makes an election under this section by recording the amount in respect of which the election is made as a debit in the person’s policyholder credit account, and any amount recorded as a debit in accordance with this section is credited against any policyholder base income tax liability of the per- son or provisional tax payable by the person in respect of the person’s policyholder base.
Compare: 1994 No 164 s ME 24 Policyholder credit accounts: consolidated groups ME 25 Policyholder credit accounts and consolidated groups Every consolidated group any member of which is a company carrying on a business of providing life insurance to which the life insurance rules apply must establish and maintain a pol- icyholder credit account, separate from the policyholder credit account of each company which is a member of that consoli- dated group.
Compare: 1994 No 164 s ME 25 ME 26 Credits and debits arising to group policyholder credit (b) account The opening balance of the policyholder credit account of a consolidated group for any imputation year is— (a) nil, for the imputation year during which the consoli- dated group is formed; and the amount of the closing balance of the policyholder credit account for the preceding imputation year (being a credit or debit, as the case may be), in any other case.
There arise as credits to be recorded in the policyholder credit account of the consolidated group for any imputation year the following amounts: (a) any amount forming all or part of a credit balance in the imputation credit account of an imputation group or of a consolidated group that is a consolidated imputation group if— (1) (2) 2038 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 26 (i) (ii) the members of the consolidated group are mem- bers of the consolidated imputation group; and the nominated company for the consolidated im- putation group elects under section ME 14(1)(a) that the credit balance be a credit to the policy- holder credit account of the consolidated group: any amount forming all or part of a credit balance in the group’s dividend withholding payment account that the nominated company for the group elects in accordance with section ME 14(2) to be a credit to the group’s pol- icyholder credit account: the amount of any credit arising during the imputation year to the policyholder credit account under section ME 27(1).
an amount equal to any allocation deﬁcit debit that arises in the consolidated group’s dividend withholding payment account under section MG 8B, if the amount of the allocation deﬁcit debit is given by section MG 8B(3)(a): an amount equal to the credit balance in the consoli- dated group’s dividend withholding payment account immediately before an allocation deﬁcit debit arises in the consolidated group’s dividend withholding payment account under section MG 8B, if the amount of the al- location deﬁcit debit is given by section MG 8B(3)(b): (b) (c) (d) (e) (3) The credits referred to in subsection (2) arise,— (a) in the case of a credit referred to in subsection (2)(a), on the date that the amount of the credit arises as a debit to the group’s imputation credit account under section ME 12(2)(b): in the case of a credit referred to in subsection (2)(b), on the date that the amount of the credit arises as a debit to the group’s dividend withholding payment account under section MG 15(2)(b): in the case of a credit referred to in subsection (2)(c), at the time ﬁrst referred to in section ME 27(1).
(b) (c) (4) There arise as debits to be recorded in the policyholder credit account of a consolidated group the following amounts: 2039 Part M s ME 27 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) the amount of any credit balance in the account that the nominated company for the group elects in accordance with section ME 28(2) to use as a credit against the policyholder base income tax liability of the group: the amount of any credit balance in the policyholder credit account of the consolidated group if— (i) the consolidated group is a consolidated imput- ation group or the members of the consolidated group are members of an imputation group; and the nominated company for the consolidated group elects under section ME 28(3) that the credit balance be a credit to the imputation credit account of the consolidated group or imputation group.
(ii) (5) The debits referred to in subsection (4) arise,— (a) in the case of a debit referred to in subsection (4)(a), on the last day of the income year of the group to which the income tax that is reduced by the relevant amount of the credit balance relates: in the case of a debit referred to in subsection (4)(b), on the date the company elects in accordance with sec- tion ME 28(3) to credit the group’s imputation credit account.
(b) Compare: 1994 No 164 s ME 26 Subsection (2)(d) and (e) were inserted, as from 1 October 2005, by section 235(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Subsection (3)(d) was inserted, as from 1 October 2005, by section 235(2) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
ME 27 Debiting and crediting between group and individual policyholder credit accounts Subject to subsection (3), where and to the extent that at any time— (a) a company which is at that time a member of a consoli- dated group has a credit in its individual policyholder credit account (that credit being referred to in this sec- tion as the company credit); and (1) 2040 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 28 (c) (b) a debit arises under this section to be recorded in the policyholder credit account of the consolidated group; and that debit is not offset, determined by applying the pro- cedure set out in section ME 5(4)(c) as if that policy- holder credit account were an imputation credit account, against any credit in the consolidated group’s policy- holder credit account which arose before the date or on the same date upon which the company credit arose,— the company credit is, to the extent of that debit, credited to the policyholder credit account of the consolidated group.
(2) Where at any time all or any part of any credit in a com- pany’s policyholder credit account is credited to the policy- holder credit account of a consolidated group, an amount equal to the credit so arising arises as a debit at that time to be recorded under section ME 18 in the company’s policyholder credit account.
(3) Where under subsection (1) credits in the individual policy- holder credit accounts of 2 or more members of a consolidated group would, but for this subsection, be required to be credited to the group’s policyholder credit account, those credits must be credited— (a) in the order in which those credits arose, determined having regard to the procedure set out in section ME 5(4)(c) as if that policyholder credit account were an imputation credit account; and if 2 or more credits arose at the same time,— (i) (ii) in the order elected by the consolidated group; or if no election is made, on a pro rata basis,— (b) so far as the relevant debit to the group’s policyholder credit account extends and no further.
Compare: 1994 No 164 s ME 27 ME 28 Application of policyholder credit account provisions (1) to consolidated group The nominated company for a consolidated group may elect that all or part of any credit balance in the group’s policy- holder credit account at the time of the election is to be credited against any policyholder base income tax liability of the group 2041 Part M s ME 29 Income Tax Act 2004 Reprinted as at 29 August 2011 or provisional tax payable by the group, in respect of its pol- icyholder base.
(2) An election under subsection (1) is made by recording the amount in respect of which the nominated company makes the election as a debit in the group’s policyholder credit ac- count, and any amount so recorded as a debit in accordance with this subsection is credited against any policyholder base income tax liability of the group or provisional tax payable by the group in respect of its policyholder base.
The nominated company for a consolidated group that is a con- solidated imputation group, or the members of which are mem- bers of an imputation group, may— (a) (3) elect that all or any part of a credit balance in the pol- icyholder credit account of the consolidated group at the time of the election be a credit balance in the imputation credit account of the consolidated group or imputation group; and record the election by recording the amount affected by the election as a debit in the policyholder credit account of the consolidated group.
(b) (4) Sections ME 19(5) and (6) and ME 20, with any necessary modiﬁcations, apply in any case where a consolidated group has a policyholder credit account as if— (a) each reference to the policyholder credit account com- pany were a reference to the group; and each reference to a provision of this Act applicable to an individual company were a reference to the equivalent provision of this Act applicable to consolidated groups.
(b) Compare: 1994 No 164 s ME 28 Imputation credit accounts and policyholder credit accounts: amalgamated companies ME 29 Debits and credits arising to imputation credit account or policyholder credit account on amalgamation (1) Where any amalgamating company ceases to exist upon a qualifying amalgamation,— (a) if, immediately before the amalgamation, a credit or debit exists in the amalgamating company’s imputation 2042 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 29 credit account, determined by applying the procedure set out in sections GC 21 and ME 5(4), or in its pol- icyholder credit account, the credit or debit must be treated with effect from the time of the amalgamation as a credit or debit in the equivalent account of the amalga- mated company (or, if the amalgamated company does not have a policyholder credit account, in its imputation credit account) and not as a credit or debit in the rele- vant account of the amalgamating company but apply- ing section ME 5(1)(i) as if, with respect to all times prior to the amalgamation, the amalgamated company did not separately exist and was instead the amalgam- ating company with the same holders of shares and op- tions over shares as the amalgamating company each holding the same number and class of shares and op- tions over shares as they held in the amalgamating com- pany; and any credit or debit (not being a debit arising under sec- tion ME 5(1)(i)) would have arisen, but for the amal- gamation, to be recorded in the imputation credit ac- count of the amalgamating company on a date after the amalgamation, the credit or debit instead arises to be recorded in the imputation credit account of the amal- gamated company.
(b) (2) Where a consolidated group ceases to exist on a qualifying amalgamation which involves all members of the consolidated group amalgamating (whether or not also amalgamating with any company outside the group),— (a) if, immediately before the amalgamation, the consoli- dated group is a consolidated imputation group and a credit or debit exists in the group’s imputation credit account, determined by applying the procedure set out in sections GC 21 and ME 5(4), or the consolidated group has a policyholder credit account and a credit or debit exists in that account, the credit or debit must be treated with effect from the time of the amalgamation as a credit or debit in the equivalent account of the amalga- mated company (or, if the amalgamated company does not have a policyholder credit account, in its imputation 2043 Part M s ME 30 Income Tax Act 2004 Reprinted as at 29 August 2011 credit account) and not as a credit or debit in the relevant account of the consolidated group but applying section ME 5(1)(i) as if, with respect to times prior to the amal- gamation, the amalgamated company did not separately exist and was instead the consolidated group with the same holders of shares and options over shares as the consolidated group each holding the same number and class of shares and options over shares as they held in the consolidated group; and any credit or debit (not being a debit arising under sec- tion ME 12(1)(h)) would have arisen, but for the amal- gamation, to be recorded in the imputation credit ac- count of the group on a date after the amalgamation, the credit or debit instead arises to be recorded in the imput- ation credit account of the amalgamated company.
(b) Compare: 1994 No 164 s ME 29 Imputation credit accounts: statutory producer boards ME 30 Statutory producer board may determine to attach (1) imputation credit to certain distributions Every statutory producer board that is an imputation credit ac- count company is entitled to determine, in respect of any year of determination,— (a) to attach an imputation credit to a cash distribution in respect of which the producer board makes an election in accordance with subsection (2) (being a cash distri- bution that the producer board is otherwise authorised to make): to make a notional distribution with an imputation credit attached in respect of all persons who were members of the producer board at any time during the year of determination.
(b) (2) A statutory producer board may, where— (a) it is to make a cash distribution in respect of all persons who at any time during the year of determination were members of the producer board, based on— (i) the proportion that amounts paid in respect of each such member’s produce transactions bear to 2044 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 31 the total amount paid in respect of produce trans- actions of all members of the producer board; or the proportion that levies payable by each such member bear to the total levies payable by all members of the producer board; or such other method as the Commissioner may ap- prove; and (ii) (iii) (b) all or any part of that cash distribution would, were it not for this section, be allowed as a deduction to the producer board, whether as a rebate under section HF 1 or otherwise,— elect, on or before the day it makes the distribution, not to claim the amount of the cash distribution as a deduction; and where a producer board so elects the amount of the cash dis- tribution is, to the extent it is not a deduction, deemed for the purposes of this Act to be a dividend.
(3) Any determination under subsection (1) must be made after the year of determination in respect of which the determination is made, but not later than 6 months after the end of that year of determination.

(4) A statutory producer board that makes an election under sub- section (2) must give notice to the Commissioner of the elec- tion not later than the time allowed in accordance with section 37 of the Tax Administration Act 1994 for providing its return of income for the year of determination.
Compare: 1994 No 164 s ME 30 ME 31 Amount of imputation credit to be attached to cash distribution (1) Where a statutory producer board determines under section ME 30(1)(a) to attach an imputation credit to a cash distribu- tion, the aggregate of all imputation credits to be attached in respect of the distribution is an amount calculated in accord- ance with the following formula: 2045 Part M s ME 32 Income Tax Act 2004 Reprinted as at 29 August 2011 where— a is the total amount of the cash distribution (exclusive of any imputation credit) b is the basic rate of income tax for companies, ex- pressed as a percentage, stated in schedule 1, part A, clause 5 and applying in respect of the income year that is concurrent with the imputation year in which the de- termination is made.
(2) Where a statutory producer board determines under section ME 30(1)(a) to attach an imputation credit to a cash distribu- tion, the amount of the imputation credit attached is, in rela- tion to each person who was a member of the producer board during the year of determination, an amount calculated in ac- cordance with the following formula: where— c is the member’s share of the cash distribution (exclu- d e sive of the imputation credit) is the total amount of the cash distribution (exclusive of any imputation credit) is the aggregate of all imputation credits attached in respect of the cash distribution.
(3) [Repealed] Compare: 1994 No 164 s ME 31 Section ME 31(3): repealed (with effect on 1 October 2007), on 6 October 2009, by section 825 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section ME 31(3): added (with effect from 1 October 2007), on 19 December 2007, by section 159 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
ME 32 Amount of imputation credit to be attached to notional distribution (1) Where a statutory producer board determines under section ME 30(1)(b) to make a notional distribution with an imput- ation credit attached, the amount of the imputation credit in relation to each person who was a member of the producer board during the year of determination is, having regard to any 2046 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 32 (b) (c) produce transactions of the member during that year of deter- mination and to any levies payable by the member for that year of determination, calculated by the producer board— (a) in accordance with the formula in subsection (2) (which relates to produce transactions of the member); or in accordance with the formula in subsection (3) (which relates to levies payable by the member); or partly in accordance with the formula in subsection (2) and partly in accordance with the formula in subsection (3), where it is appropriate to take into account both produce transactions and levies payable; or in such other manner as the Commissioner approves.
(d) The producer board may calculate the amount of the imput- ation credit attached to a notional distribution, in relation to each person who was a member of the producer board during the year of determination, in accordance with the following formula: (2) where— a is the aggregate of all amounts paid to or by the mem- ber in respect of produce transactions of the member during the year of determination b c is the aggregate of all amounts paid to or by all mem- bers of the producer board for produce transactions dur- ing the year of determination is the aggregate of all imputation credits determined by the producer board to be attached in respect of the notional distribution.
(3) The producer board may calculate the amount of the imput- ation credit attached to a notional distribution, in relation to each member, in accordance with the following formula: where— d is the aggregate of all levies payable by the member to the producer board for the year of determination 2047 Part M s ME 33 Income Tax Act 2004 Reprinted as at 29 August 2011 e f is the aggregate of all levies payable by all members to the producer board for the year of determination is the aggregate of all imputation credits attached in respect of the notional distribution.
(4) Where the Commissioner is satisﬁed, having regard to— (a) (b) any levy payable to or any produce transactions of the producer board; and any other circumstances that the Commissioner consid- ers relevant,— that a calculation made by a producer board under this section does not result in a fair and reasonable allocation of an imput- ation credit to a person who was a member of the producer board during the relevant year of determination, the Com- missioner may determine the extent to which the producer board should have made the calculation under any of subsec- tion (1)(a) to (d).
(5) Where and to the extent that the Commissioner makes a deter- mination under subsection (4), the amount of the imputation credit attached to the notional distribution is, notwithstanding any calculation made by the producer board, the amount cal- culated under the determination of the Commissioner.
Compare: 1994 No 164 s ME 32 ME 33 Notional distribution deemed to be dividend (1) Where a statutory producer board has determined under sec- tion ME 30(1)(b) to attach an imputation credit in respect of a notional distribution to persons who were members of the producer board during a year of determination, the producer board is, for the purposes of this Act, deemed to have paid a dividend to each such member of an amount calculated in ac- cordance with the following formula: where— a is the amount of the imputation credit attached to the notional distribution of the member b is the basic rate of income tax for companies, ex- pressed as a percentage, stated in schedule 1, part A, 2048 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 34 clause 5 and applying in respect of the income year that is concurrent with the imputation year in which the de- termination is made.
(2) Any notional distribution that is deemed by subsection (1) to be a dividend is, for the purposes of this Act, deemed to have been derived on the date of the determination made in relation to the distribution under section ME 30(1)(b).
(3) A statutory producer board that makes a determination in respect of a notional distribution under section ME 30(1)(b) must— (a) furnish, with the return furnished under section 33 of the Tax Administration Act 1994 for the income year in which the determination is made, particulars of the dividend deemed to have been paid; and retain such particulars as will enable the Commissioner to determine whether any subsequent distribution in re- spect of the deemed dividend is not a dividend under section CD 18(3) or CD 24(1).
(b) (4) .

[Repealed] Compare: 1994 No 164 s ME 33 Section ME 33(4): repealed (with effect on 1 October 2007), on 6 October 2009, by section 826 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section ME 33(4): added (with effect from 1 October 2007), on 19 December 2007, by section 160 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
ME 34 Statutory producer boards and dividend withholding payments (1) Where a statutory producer board is a dividend withholding payment company, sections ME 30 to ME 33 apply, with any necessary modiﬁcations, as if references to an imputation credit included references to a dividend withholding payment credit.
(2) Where a statutory producer board proposes in respect of any year of determination to attach both dividend withholding pay- ment credits and imputation credits, the determination under section ME 30 in relation to the dividend withholding payment 2049 Part M s ME 35 Income Tax Act 2004 Reprinted as at 29 August 2011 credits must be made at the same time as the determination under that section in relation to the imputation credits.
Compare: 1994 No 164 s ME 34 Imputation credits: co-operative companies ME 35 Co-operative company may make annual determination to attach imputation credit to certain distributions Every co-operative company that is an imputation credit ac- count company is entitled to determine— (a) (1) (b) once only in respect of any year of determination to at- tach an imputation credit to a cash distribution in respect of which the co-operative company makes an election in accordance with subsection (2): once only in respect of any year of determination to make a notional distribution with an imputation credit attached in respect of all persons who at any time dur- ing the year of determination were shareholders of the company.
(2) A co-operative company may, where— (a) (b) it is to make a cash distribution in respect of all persons who at any time during the year of determination were shareholders of the company, based on the proportion that amounts paid in respect of each such shareholder’s produce transactions bear to the total amount paid in respect of produce transactions of all shareholders of the company; and all or any part of that cash distribution would, were it not for this section, be allowed as a deduction to the cooperative company, whether as a rebate under section HF 1 or otherwise,— elect, on or before the day it makes the distribution, by notice to the Commissioner, not to claim the amount of the cash dis- tribution as a deduction; and where a co-operative company so elects the amount of the cash distribution is, to the extent it is not a deduction, deemed for the purposes of this Act to be a dividend.
(3) Any determination under subsection (1) must be made after the year of determination in respect of which the determination is 2050 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 36 made, but not later than 6 months after the end of that year of determination.
Compare: 1994 No 164 s ME 35 ME 36 Amount of imputation credit to be attached to cash distribution (1) Where a co-operative company determines under section ME 35(1)(a) to attach an imputation credit to a cash distribution, the aggregate of all imputation credits to be attached in respect of the distribution is an amount calculated in accordance with the following formula: where— a is the total amount of the cash distribution (exclusive of any imputation credit) b is the basic rate of income tax, expressed as a percent- age, stated in— (a) (b) schedule 1, part A, clause 5 if the co-operative company is not a Maori authority; or schedule 1, part A, clause 2 if the co-operative company is a Maori authority.
(2) Where a co-operative company determines under section ME 35(1)(a) to attach an imputation credit to a cash distribution, the amount of the imputation credit attached is, in relation to each person who was a shareholder of the co-operative com- pany during the year of determination, an amount calculated in accordance with the following formula: where— c is the shareholder’s share of the cash distribution (ex- d e clusive of the imputation credit) is the total amount of the cash distribution (exclusive of any imputation credit) is the aggregate of all imputation credits attached in respect of the cash distribution.
2051 Part M s ME 37 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) .

[Repealed] Compare: 1994 No 164 s ME 36 Section ME 36(3): repealed (with effect on 1 October 2007), on 6 October 2009, by section 827 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section ME 36(3): added (with effect from 1 October 2007), on 19 December 2007, by section 161 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
ME 37 Amount of imputation credit to be attached to notional distribution Where a co-operative company determines under section ME 35(1)(b) to make a notional distribution with an imputation credit attached, the amount of the imputation credit is, in rela- tion to each person who was a shareholder of the cooperative company during the year of determination, an amount calcu- lated in accordance with the following formula: where— a is the aggregate of all amounts paid to or by the share- holder in respect of produce transactions of the share- holder for the year of determination b c is the aggregate of all amounts paid to or by sharehold- ers of the company in respect of all produce transactions for the year of determination is the aggregate of all imputation credits determined by the co-operative company to be attached in respect of the notional distribution.
Compare: 1994 No 164 s ME 37 ME 38 Notional distribution deemed to be dividend or taxable Maori authority distribution (1) Where a co-operative company has determined under section ME 35(1)(b) to attach an imputation credit in respect of a notional distribution to persons who were shareholders of the company during a year of determination, the co-operative company is, for the purposes of this Act, deemed to have paid a dividend or taxable Maori authority distribution to each 2052 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 39 such shareholder of an amount calculated in accordance with the following formula: where— a is the amount of the imputation credit attached to the notional distribution of the shareholder b is the basic rate of income tax, expressed as a percent- age, stated in— (a) (b) schedule 1, part A, clause 5 if the co-operative company is not a Maori authority; or schedule 1, part A, clause 2 if the co-operative company is a Maori authority.
(2) Any notional distribution that is deemed by subsection (1) to be a dividend is, for the purposes of this Act, deemed to have been derived on the date of the determination made in relation to the distribution under section ME 35(1)(b).

[Repealed] Compare: 1994 No 164 s ME 38 (3) Section ME 38(3): repealed (with effect on 1 October 2007), on 6 October 2009, by section 828 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ME 38(3): added (with effect from 1 October 2007), on 19 December 2007, by section 162 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
ME 39 Co-operative companies and dividend withholding payments (1) Where a co-operative company is a dividend withholding pay- ment company, sections ME 35 to ME 38 and section 64 of the Tax Administration Act 1994 apply, with any necessary modi- ﬁcations, as if references to an imputation credit included ref- erences to a dividend withholding payment credit.
(2) Where a co-operative company proposes in respect of any year of determination to attach both dividend withholding payment credits and imputation credits, the determination under section ME 35 in relation to the dividend withholding payment credits 2053 Part M s ME 40 Income Tax Act 2004 Reprinted as at 29 August 2011 must be made at the same time as the determination under that section in relation to the imputation credits.
Compare: 1994 No 164 s ME 39 Imputation credit accounts: credits and debits incorrectly recorded ME 40 Determinations by Commissioner as to credits and debits arising to imputation credit account (1) Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s imputation credit account is not the correct amount that should have been recorded in respect of the credit or debit, the Commissioner must determine the amount of the credit or debit properly arising to the account.
(2) Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s imputation credit account should not have been so recorded, the Commissioner must determine accordingly.
(3) Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s imputation credit account should not have been recorded as arising at the time it was recorded as arising, the Commissioner must determine the time at which the credit or debit properly arose to the account.
(4) Where the Commissioner considers that any amount that has not been recorded as a credit or debit arising to a company’s imputation credit account should have been so recorded, the Commissioner must determine— (a) (b) the amount of the credit or debit so arising; and the time at which the credit or debit arose to the account.
(5) Where the Commissioner makes a determination under any of subsections (1) to (4), then, except in so far as the company establishes by proceedings on a challenge that any credit or debit was correctly recorded, or not recorded as the case may be, in the imputation credit account,— (a) the relevant credit or debit is deemed to have arisen, or not to have arisen, or to have been the amount de- termined by the Commissioner under subsection (1), as the case may require, effective on the date on which the 2054 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 41 (b) debit or credit originally arose, or is determined by the Commissioner as having arisen: the company must make such other corrections in re- spect of any credits or debits or balances arising to its imputation credit account or dividend withholding pay- ment account or branch equivalent tax account, whether for the imputation year to which the determination re- lated or for any subsequent imputation year, as may be directed by the Commissioner to be necessary or appro- priate as a consequence of the determination in relation to the amount incorrectly recorded, or not recorded.
(6) As soon as is convenient after a determination is made under any of subsections (1) to (4), the Commissioner must give no- tice of the determination to the company in respect of whose imputation credit account the determination is made.

(7) Any such notice may be included in a notice of assessment made under section 111(1) of the Tax Administration Act 1994.

(8) An omission to give the notice referred to in subsection (6) (9) does not invalidate the determination.
This section applies, with any necessary modiﬁcations, in any case which 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 such equivalent accounts.
Compare: 1994 No 164 s ME 40 Imputation credit accounts: unit trusts and group investment funds ME 41 Special debits arising to imputation credit account of unit trust or group investment fund (1) Notwithstanding anything in this Part, a debit arises to the im- putation credit account of a company or a consolidated group in respect of any dividends derived in an income year by the company or any company in that group if— (a) the dividend is derived by a company resident in New Zealand which is either— 2055 Part M s ME 41 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) the manager of a unit trust; or the trustee or manager of a group investment fund,— (such manager or trustee being in this subsection referred to as the manager); and (b) the dividend is derived in respect of the redemption or other cancellation of— (i) (ii) units in the unit trust; or interests of investors in the group investment fund; and (c) these units or interests were acquired by the manager from unit holders or investors— (i) in the ordinary course of the manager’s activities in respect of the unit trust or group investment fund; and in accordance with the terms upon which units in the unit trust or interests in the group investment fund were offered to potential unit holders or in- vestors.
(ii) The amount of the debit referred to in subsection (1) is the greater of— (a) the aggregate of the amounts of imputation credits and dividend withholding payment credits attached to the dividends, excluding imputation credits that have been included in a debit to the company’s or consolidated group’s imputation credit account arising under section ME 5(1)(i) in the income year, being imputation credits attached to dividends derived by the company or group company in the circumstances described in subsection (1); and the amount calculated in accordance with the following formula: (b) where— a is the aggregate amount of the dividends paid (including any imputation and dividend with- holding payment credits attached to the divi- dends) (2) 2056 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s ME 41 b c d is the taxable income of the company or, as the case may be, the consolidated group for the in- come year in which the dividends are derived is the income tax liability of the company or, as the case may be, the consolidated group for the income year is the amount of imputation credits attached to dividends that have been included in a debit to the company’s or consolidated group’s im- putation credit account that arises under section ME 5(1)(i) in the income year, being imputation credits attached to dividends derived by the com- pany or group company in the circumstances de- scribed in subsection (1).
(3) The debit referred to in subsection (1) arises on the date on which the company or nominated group company ﬁles a re- turn of income for the income year in which the dividends are derived.
Compare: 1994 No 164 s ME 41 Subpart MF—Branch equivalent tax accounts Contents Page Branch equivalent tax accounts of companies MF 1 Company may elect to maintain branch equivalent tax 2058 account MF 2 Balance of branch equivalent tax account MF 3 Branch equivalent tax account of company MF 4 Credits and debits arising to branch equivalent tax account 2059 2059 2060 of company MF 5 Use of credit to reduce dividend withholding payment, or 2066 use of debit to satisfy income tax liability MF 6 Determinations by Commissioner as to credits and debits 2068 arising to branch equivalent tax account MF 7 Branch equivalent tax accounts and consolidated groups 2070 Consolidated groups 2057 Part M s MF 1 Income Tax Act 2004 Reprinted as at 29 August 2011 MF 8 Debits and credits arising to group branch equivalent tax 2071 account MF 9 Debiting and crediting between group and individual branch equivalent tax accounts MF 10 Use of consolidated group credit to reduce dividend withholding payment, or use of group or individual debit to satisfy income tax liability Branch equivalent tax accounts of persons MF 11 Person may elect to maintain branch equivalent tax 2075 2075 2079 account MF 12 Branch equivalent tax account of person MF 13 Credits and debits arising to branch equivalent tax account 2080 2080 of person MF 14 Debit election to offset income tax payable in respect of 2082 foreign dividend MF 15 Extension of branch equivalent tax account provisions to 2082 certain FIF income Amalgamated companies MF 16 Debits and credits arising to branch equivalent tax account 2083 of amalgamated company on amalgamation Branch equivalent tax accounts of companies MF 1 Company may elect to maintain branch equivalent tax account (1) A company resident in New Zealand may at any time during an imputation year, or within the time within which the company is required to furnish a return of its income for the income year which corresponds with that imputation year (or within such further time as the Commissioner may allow), elect to maintain
 a branch equivalent tax account for that imputation year.
(2) A company that so elects must notify the Commissioner of that fact within 21 days after the date of the election, or within such further time as the Commissioner may allow in any case or class of cases.
(3) A company that makes an election under subsection (1) must maintain a branch equivalent tax account — 2058 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 3 (a) (b) for the imputation year in respect of which the election is made; and subject to this section, for every subsequent imputation year.
(4) A company that has made an election under subsection (1) may, during any imputation year subsequent to that in respect of which the election was made, elect that the company is to cease to be a branch equivalent tax account company, and, sub- ject to subsection (5), any company that so elects ceases, as from the commencement of the imputation year succeeding that in which the election to so cease is made, to be a company required to maintain a branch equivalent tax account.
(5) An election under subsection (4) is of no effect unless the com- pany furnishes, within the time provided for in section 69 of the Tax Administration Act 1994, the annual imputation return required in respect of the imputation year in which the election is made.
Compare: 1994 No 164 s MF 1 MF 2 Balance of branch equivalent tax account For the purposes of this subpart and sections 77 and 78 of the Tax Administration Act 1994, the balance of a branch equiva- lent tax account at any time is ascertained by calculating the difference in amount between the aggregate of credits and the aggregate of debits to the account existing at that time, and the account has— (a) (b) Compare: 1994 No 164 s MF 2 a credit balance to the extent that credits exceed debits: a debit balance to the extent that debits exceed credits.
MF 3 Branch equivalent tax account of company (1) Every branch equivalent tax account company must record in its branch equivalent tax account for any imputation year— (a) the opening balance of the account for that imputation year, in accordance with subsection (2): credits as they arise in accordance with section MF 4(1) and (2): debits as they arise in accordance with section MF 4(3) to (6).
(b) (c) 2059 Part M s MF 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) The opening balance of the branch equivalent tax account of a company for any imputation year is,— (a) (b) for the imputation year during which the company com- mences to be a branch equivalent tax account company, nil: for any subsequent imputation year, the amount of the closing balance of the branch equivalent tax account of the company for the immediately preceding imputation year, and such amount is— (i) a credit arising to the account where the closing balance is a credit balance: a debit arising to the account where the closing balance is a debit balance.
(ii) (3) [Repealed] Compare: 1994 No 164 s MF 3 Section MF 3(3): repealed (with effect on 1 October 2007), on 6 October 2009, by section 829 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section MF 3(3): added (with effect from 1 October 2007), on 19 December 2007, by section 163 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MF 4 Credits and debits arising to branch equivalent tax (1) account of company There arise as credits to be recorded in the branch equivalent tax account of a branch equivalent tax account company the following amounts: (a) an amount (not less than nil) calculated in accordance with the following formula: ((a – b) x c) – d – e where— a is the attributed CFC income derived by the b c company in the income year is the total amount of any deductions and offsets for the income year that the company is allowed for attributed CFC loss, attributed CFC net loss, FIF loss, and FIF net loss is the basic rate of income tax, expressed as a percentage, stated in— 2060 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 4 (i) (ii) schedule 1, part A, clause 5, if the com- pany is not a Maori authority; or schedule 1, part A, clause 2, if the com- pany is a Maori authority is the total amount of any foreign tax credits allowed under section LC 4 or LC 5 that are set off against the company’s income tax liability for the income year d (c) (d) (e) e is the total amount of credits against the com- pany’s income tax liability for the income year from debit balances in the branch equivalent tax accounts of the company and any other company: the amount of any debit balance in the account that the company elects in accordance with section MF 5 to set off against the income tax liability of the company or of another company: an amount equal to any refund of dividend withholding payment paid to the company under section NH 4 to the extent that the refund is in respect of an amount of dividend withholding payment paid which gave rise to a debit to the branch equivalent tax account under this section, except, to the extent that the refund is in respect of a dividend withholding payment paid before the date that a credit arises under paragraph (e), a credit does not arise to the extent that the amount of the refund does not exceed the amount of the credit that arises on that date: the amount of any particular debit in the
 company’s branch equivalent tax account at any time (in this para- graph referred to as the speciﬁed time), not being a debit which has before the speciﬁed time been cancelled out by a subsequent credit, unless there is a group of per- sons— (i) the aggregate of whose minimum voting interests in the company in the period from the date upon which the debit arose until the speciﬁed time is equal to or greater than 66%; and in any case where at any time during that period a market value circumstance exists in respect of the company, the aggregate of whose minimum mar- (ii) 2061 (2) (3) Part M s MF 4 Income Tax Act 2004 Reprinted as at 29 August 2011 ket value interests in the company in the period is equal to or greater than 66%: (f) the amount of any debit balance of the branch equiva- lent tax account where, during the imputation year, the company ceases to be resident in New Zealand.
The credits referred to in subsection (1) arise,— (a) in the case of a credit referred to in subsection (1)(a), on the date on which the company ﬁles a return of income for the income year of the company referred to in that subsection: in the case of a credit referred to in subsection (1)(c), on the date the company elects in accordance with sec- tion MF 5 to set off the amount against the income tax liability of the company or of another company: in the case of a credit referred to in subsection (1)(d), on the date the refund is paid: in the case of a credit referred to in subsection (1)(e), at the speciﬁed time referred to in that paragraph: in the case of a credit referred to in subsection (1)(f), on the date on or on the expiry of which the company ceases to be a resident of New Zealand.
(b) (c) (d) (e) There arise as debits to be recorded in the branch equivalent tax account of a branch equivalent tax account company the following amounts: (a) an amount of dividend withholding payment, calculated before any reduction is allowed under section NH 7, paid by the company in respect of a dividend derived from an income interest in a controlled foreign com- pany, whether the amount is paid directly or by an elec- tion to reduce an amount of net loss: the amount of any credit balance in the account that the company elects in accordance with section MF 5 to use to reduce an amount of dividend withholding payment payable by the company or any other company under section NH 2: an amount equal to any refund of income tax to the ex- tent that the refund would have been made had the com- pany not derived any income other than attributed CFC income in the income year to which the refund relates, (b) (c) 2062 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 4 (d) except, to the extent that the refund is in respect of in- come tax paid before the date that a debit arises under paragraph (d), a debit does not arise to the extent that the amount of the refund does not exceed the amount of the debit that arises on that date: the amount of any particular credit in the company’s branch equivalent tax account at any time (in this para- graph referred to as the speciﬁed time), not being a credit which has before the speciﬁed time been can- celled out by a subsequent debit, unless there is a group of persons— (i) the aggregate of whose minimum voting interests in the company in the period from the date upon which the credit arose until the speciﬁed time is equal to or greater than 66%; and in any case where at any time during that period a market value circumstance exists in respect of the company, the aggregate of whose minimum mar- ket value interests in the company in the period is equal to or greater than 66%: (ii) (e) the amount of any credit balance of the branch equiva- lent tax account where,
 during the imputation year, the company ceases to be resident in New Zealand.
(4) The debits referred to in subsection (3) arise,— (a) (b) (c) (d) (e) in the case of the debit referred to in subsection (3)(a), on the date the dividend withholding payment is paid: in the case of a debit referred to in subsection (3)(b), on the date by which the company is required by section NH 3 to pay to the Commissioner the dividend with- holding payment that is reduced by the relevant amount of the credit balance: in the case of a debit referred to in subsection (3)(c), on the date the refund is paid: in the case of a debit referred to in subsection (3)(d), at the speciﬁed time referred to in that paragraph: in the case of a debit referred to in subsection (3)(e), on the date on or on the expiry of which the company ceases to be resident in New Zealand.
2063 Part M s MF 4 Income Tax Act 2004 Reprinted as at 29 August 2011 Subject always to the express provisions of this Act, subsec- tions (1)(e) and (3)(d) are intended to limit the circumstances in which a taxpayer, being a company, may carry forward a branch equivalent tax account debit or credit for subsequent utilisation to those where the tax beneﬁt arising from such util- isation is obtained or available to be obtained (directly or indi- rectly) at least to the extent of 66%, only by the same natural persons holding (directly or indirectly) rights in relation to the company who— (a) by virtue of holding (directly or indirectly) such rights, bore the dividend withholding payment or tax liability giving rise to the branch equivalent tax account debit or credit: held (directly or indirectly) such rights at the time of the event giving rise to the branch equivalent tax account debit or credit.
(b) For the purposes of subsections (1)(e) and (3)(d),— (a) in respect of any period referred to in either of those pro- visions, the minimum voting interest or market value interest of any person in the company in the period is equal to the lowest voting interest or market value inter- est (as the case may be) which that person holds in the company during that period; and section MF 3(2)(b) does not apply, and— (i) any credit in the company’s branch equivalent tax account is treated as continuing to exist until treated as being cancelled out by a subsequent debit in accordance with paragraph (c); and any debit in the company’s branch equivalent tax account is treated as continuing to exist until treated as being cancelled out by a subsequent credit in accordance with paragraph (d); and in determining whether any credit in the company’s branch equivalent tax account has been cancelled out by any subsequent debit,— (i) any amount of debit may be taken into account only once for the purpose of ascertaining whether any credit has been so cancelled out; and (ii) (b) (c) (5) (6) 2064 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 4 (ii) the amount of any debit is offset against the amount of any credit in the order in which the credits arise; and (d) (e) (f) in determining whether any debit in the company’s branch equivalent tax account has been cancelled out by any subsequent credit,— (i) any amount of credit may be taken into account only once for the purpose of ascertaining whether any debit has been so cancelled out; and the amount of any credit is offset against the amount of any debit in the order in which the debits arise; and (ii) any credit arising on or before 16 December 1988 is deemed to have been cancelled out by a subsequent debit before the speciﬁed time referred to in subsection (3)(d); and in the case of any credit arising after 16 December 1988 and before 1 April 1992 (not being a credit cancelled out before 1 April 1992 by a subsequent debit), the credit is deemed ﬁrst to arise in
 the company’s branch equivalent tax account on 1 April 1992, but a debit is deemed to arise in accordance with subsection (3)(d) in respect of that credit at any time if and to the extent that, at that speciﬁed time, that credit still exists and a debit would have arisen in respect of that credit in accordance with section 394ZZP(3)(d) of the Income Tax Act 1976 as that paragraph applied before its repeal and replacement by section 60 of the Income Tax Amendment Act (No 2) 1992, had that paragraph continued to apply but with the ﬁgure “75” omitted and the ﬁgure “66” substituted.
(7) [Repealed] Compare: 1994 No 164 s MF 4 Subsection (2)(a) was amended, as from 1 October 2005, by section 236 Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting “or paragraph (b)”.

Section MF 4(7): repealed (with effect on 19 December 2007), on 6 October 2009, by section 830 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MF 4(7): added (with effect from 1 October 2007), on 19 December 2007, by section 164 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
2065 Part M s MF 5 Income Tax Act 2004 Reprinted as at 29 August 2011 MF 5 Use of credit to reduce dividend withholding payment, or use of debit to satisfy income tax liability (1) A branch equivalent tax account company may elect that all or part of any credit balance in its branch equivalent tax account at the time of the election is to be used for the purpose of reducing, so far as the liability extends, the amount of any dividend withholding payment deduction required to be made by the company, or any other company which is at the time the relevant dividend is paid in the same group of companies as the company, under sections NH 1 and NH 2.
[Repealed] (2) (3) A company makes an election under subsection (1) by record- ing the amount in respect of which it makes the election as a debit in its branch equivalent tax account.
(4) Where for any income year the income of a company (referred to in this subsection as the ﬁrst company) includes an amount of attributed CFC income derived in respect of an income in- terest in a controlled foreign company, the ﬁrst company, or any other company which is for the income year in the same group of companies as the ﬁrst company, may elect that all or any part of the debit balance (if any) in the branch equivalent tax account of the ﬁrst company or the other company, as the case may be, at the time of the election is to be credited against any income tax liability of the ﬁrst company.
(5) A company makes an election under subsection (4) by record- ing the amount in respect of which the election is made as a credit in the company’s branch equivalent tax account.
(5B) An election made for a company (the ﬁrst company) by the ﬁrst company or any other company under section MF 5(4) for an income year is invalid to the extent to which the total of all those elections and any other elections for the ﬁrst company under section MF 10(4) for the year is greater than an amount calculated for the ﬁrst company for the year using the formula in section MF 4(1)(a) (but treating item e as zero).
(5C) An amount of election that is invalid under subsection (5B)— is not recorded as a credit in the branch equivalent tax account of the company that makes the election: (a) 2066 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 5 (b) (c) is not an amount of debit balance for which the election is made: does not relate to the election.
(6) Where a company has made an election under subsection (4) in respect of the income tax liability for any income year, the amount of debit balance in respect of which the election is made is set off against any income tax liability of the company or the relevant other company for that income year to the extent that— (a) the amount set off does not exceed an amount equal to the company’s income tax liability that would arise if no income were derived by the company other than the attributed CFC income referred to in subsection (4), such amount to be calculated under the formula set out in section MF 4(1)(a) (but applying as if item “e” were nil); and the company has made a proper election in accordance with this section; and the company has paid (whether directly or by way of an election to reduce an amount of a net loss or by means of a reduction of dividend withholding payment under section NH 7) the dividend withholding payment that gives rise to a debit to the company’s branch equivalent tax account.
(b) (c) (6B) (7) (8) If an election under subsection (4) relates to an amount that ex- ceeds the income tax liability, for the income year, of the com- pany that receives the offset under subsection (6), the excess amount is treated as giving rise to a net loss of the company for the purpose of subparts IF and IG.
The amount of the net loss under subsection (7) is given by the following formula: where— a b is the amount of the excess: is the rate of income tax, expressed as a percentage, stated in— 2067 Part M s MF 6 Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) schedule 1, part A, clause 5, if the company is not a Maori authority; or schedule 1, part A, clause 2, if the company is a Maori authority.
Compare: 1994 No 164 s MF 5 Subsection (2) was repealed, as from 1 October 2005, by section 237(1) Taxa- tion (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from the income year corresponding to the 2005–06 income year.

Section MF 5(5B): inserted (with effect from 1 April 2005), on 19 December 2007, by section 165(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Section MF 5(5C): inserted (with effect from 1 April 2005), on 19 December 2007, by section 165(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).

Subsection (6B) was substituted, as from 1 October 2005, by section 237(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from the income year corresponding to the 2005–06 income year.
Subsection (7) was substituted, as from 1 October 2005, by section 150(1) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3) with application as from the income year corres- ponding to the 2005–06 tax year.
Subsection (8) was inserted, as from 1 October 2005, by section 150(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
MF 6 Determinations by Commissioner as to credits and debits arising to branch equivalent tax account (1) Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s branch equivalent tax account is not the correct amount that should have been recorded in respect of the credit or debit, the Commissioner must determine the amount of the credit or debit properly aris- ing to the account.
(2) Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s branch equivalent tax account should not have been so recorded, the Commis- sioner must determine accordingly.
(3) Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s branch equivalent tax account should not have been recorded as arising at the 2068 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 6 time it was recorded as arising, the Commissioner must deter- mine the time at which the credit or debit properly arose to the account.
(4) Where the Commissioner considers that any amount that has not been recorded as a credit or debit arising to a company’s branch equivalent tax account should have been so recorded, the Commissioner must determine— (a) (b) the amount of the credit or debit so arising; and the time at which the credit or debit arose to the account.
(5) Where the Commissioner makes a determination under any of subsections (1) to (4), then, except in so far as the company establishes by proceedings on a challenge that any credit or debit was correctly recorded, or not recorded as the case may be, in the branch equivalent tax account,— (a) (b) the relevant credit or debit is deemed to have arisen, or not to have arisen, or to have been the amount de- termined by the Commissioner under subsection (1), as the case may require, effective on the date on which the debit or credit originally arose, or is determined by the Commissioner as having arisen: the company must make such other corrections in re- spect of any credits or debits or balances recorded as arising to its branch equivalent tax account or imput- ation credit account or dividend withholding payment account, whether for the imputation year in which the incorrect record the subject of the determination was made or for any subsequent imputation year, as may be necessary or as may be directed by the Commissioner as a consequence of the determination in relation to the amount incorrectly recorded, or not recorded.
(6) As soon as is convenient after a determination is made under any of subsections (1) to (4), the Commissioner must give no- tice of the determination to the company in respect of whose branch equivalent tax account the determination is made.

(7) Any such notice may be included in a notice of assessment made under section 111(1) of the Tax Administration Act 1994.
2069 Part M s MF 7 Income Tax Act 2004 Reprinted as at 29 August 2011 (8) An omission to give the notice referred to in subsection (6) does not invalidate the determination.
Compare: 1994 No 164 s MF 6 Consolidated groups MF 7 Branch equivalent tax accounts and consolidated groups (1) A consolidated group— (a) must maintain a branch equivalent tax account for an imputation year if, in that imputation year, any company which is a member of that consolidated group at any time in that imputation year maintains a branch equiva- lent tax account; and (b) may at any time elect to maintain a branch equivalent tax account for an imputation year,— which group branch equivalent tax account must be separate from the branch equivalent tax account of each company which is a member of that consolidated group.
(2) Where a consolidated group has elected to maintain a branch equivalent tax account under subsection (1),— (a) the nominated company for the group must notify the Commissioner of that fact within 21 days after the date of the election, or within such further time as the Com- missioner may allow in any case or class of cases; and the group must maintain a branch equivalent tax account with effect from the date of the election and, subject to subsection (3), for every imputation year subsequent to the imputation year in which the election was made.
(b) (3) Subject to subsection (4), the nominated company for a con- solidated group that maintains a branch equivalent tax account may elect at any time that the group is to cease to maintain a branch equivalent tax account and, where such an election is made, the group ceases to be required to maintain a group branch equivalent tax account from the commencement of the imputation year succeeding that in which the election so to cease is made.
(4) An election under subsection (3),— (a) in any case where the nominated company for the group has elected to maintain a branch equivalent tax account, 2070 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 8 (b) (c) may only be made during an imputation year subse- quent to the imputation year in which the election to maintain the account was made; and is of no effect if the group is required to maintain a branch equivalent tax account under subsection (1)(a) in respect of the imputation year from the commencement of which the election to cease would otherwise take ef- fect; and is of no effect unless the annual group imputation return required in respect of the imputation year in which the election was made is furnished within the time provided for in section 69 of the Tax Administration Act 1994.
Compare: 1994 No 164 s MF 7 MF 8 Debits and credits arising to group branch equivalent (1) tax account The opening balance of the branch equivalent tax account of a consolidated group for any imputation year is— (a) nil, for the imputation year during which the consoli- dated group commences to maintain a branch equiva- lent tax account; and the amount of the closing balance of the branch equiva- lent tax account for the preceding imputation year (be- ing a credit or debit as the case may be), in any other case.
(b) (2) There arise as credits to be recorded in the branch equivalent tax account of a consolidated group the following amounts: (a) an amount (not less than nil) calculated in accordance with the following formula: ((a – b) x c) – d – e where— a is the attributed CFC income derived by the con- b c solidated group in the income year is the total amount of any deductions and offsets for the income year that the consolidated group is allowed for attributed CFC loss, attributed CFC net loss, FIF loss, and FIF net loss is the basic rate of income tax, expressed as a percentage, stated in— 2071 Part M s MF 8 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) schedule 1, part A, clause 5, if the consoli- dated group does not consist of Maori au- thorities; or schedule 1, part A, clause 2, if the consoli- dated group consists of Maori authorities is the total amount of any foreign tax credits al- lowed under section LC 4, LC 5 or LC 16 that are credited against the consolidated group’s income tax liability for the income year is the total amount of credits against the consoli- dated group’s income tax liability for the income year from debit balances in the branch equivalent tax accounts of the consolidated group and other companies: d e (c) (d) (e) the amount of any debit balance in the account that the nominated company for the consolidated group elects in accordance with section MF 10(3) or (4) to set off against the income tax liability of the consolidated group or of another company: an amount equal to any refund of dividend withholding payment paid under section NH 4 to the extent that the refund is in respect of any amount of dividend withhold- ing payment paid which gave rise to a debit to the branch equivalent tax account under this section; except, to the extent that the refund is in respect of a dividend with- holding payment paid before the date that a credit arises under paragraph (e), a credit does not arise to the ex- tent that the amount of the refund does not exceed the amount of the credit
 that arises on that date: the amount of any credit which would arise under sec- tion MF 4(1)(e) if that provision were to apply, with any necessary modiﬁcations, to a consolidated group and its branch equivalent tax account as if it were a single com- pany.
The credits referred to in subsection (2) arise,— (a) in the case of a credit referred to in subsection (2)(a), on the date on which is ﬁled a return of income for the consolidated group for the income year referred to in that paragraph: (3) 2072 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 8 (b) (c) (d) in the case of a credit referred to in subsection (2)(c), on the date the nominated company elects in accordance with section MF 10(3) or (4) to set off the amount against the income tax liability of the consolidated group or of another company: in the case of a credit referred to in subsection (2)(d), on the date the refund is paid: in the case of a credit referred to in subsection (2)(e), at the relevant speciﬁed time referred to in section MF 4(1)(e).
(4) There arise as debits to be recorded in the branch equivalent tax account of a consolidated group the following amounts: (a) the amount of any dividend withholding payment paid (whether directly or by way of an election to reduce an amount of net loss), or payable but for a reduction under section NH 7, during the income year by a com- pany which is, at the time of payment of the dividend giving rise to the liability to pay dividend withholding payment, a member of the consolidated group, in re- spect of a dividend derived by the company in respect of an income interest in a controlled foreign company: the amount of any credit balance in the account that the nominated company for the consolidated group elects in accordance with section MF 10(1) to use to reduce an amount of dividend withholding payment deductible under sections NH 1 and NH 2 by a company which is, at the time of payment of the dividend giving rise to the liability to pay the dividend withholding payment, a member of the consolidated group: an amount equal to any refund of income tax to the ex- tent that the refund would have been made had the con- solidated group not derived any income other than at- tributed CFC income in the income year to which the refund relates, except that, to the extent that the refund is in respect of income tax paid before the date that a debit arises under paragraph (d), a debit does not arise to the extent that the amount of the refund does not ex- ceed the amount of the debit that arises on that date: (b) (c) 2073 Part M s MF 8 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) the amount of any debit which would arise under section MF 4(3)(d) if that provision were to apply, with any necessary modiﬁcations, to a consolidated group and its branch equivalent tax account as if it were a single company.
The debits referred to in subsection (4) arise,— (a) in the case of a debit referred to in subsection (4)(a), on the date the dividend withholding payment is paid: in the case of a debit referred to in subsection (4)(b), on the date by which the relevant company is required by section NH 3 to pay to the Commissioner the divi- dend withholding payment that is reduced by the rele- vant amount of the credit balance: in the case of a debit referred to in subsection (4)(c), on the date the refund is paid: in the case of a debit referred to in subsection (4)(d), at the relevant speciﬁed time referred to in section MF 4(3)(d).
(b) (c) (d) Section MF 6 applies, with any necessary modiﬁcations, in the case of a branch equivalent tax account of a consolidated group as if the group were a single company.

[Repealed] Compare: 1994 No 164 s MF 8 Subsection (2)(a), deﬁnition of item “d”, was amended, as from 1 October 2005, by section 238(1)(a) Taxation (Venture Capital and Miscellaneous Provi- sions) Act 2004 (2004 No 111) by substituting “, LC 5 or LC 16” for “or LC 5”.
Subsection (2)(a), deﬁnition of item “e”, was amended, as from 1 October 2005, by section 238(1)(b) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “other companies” for “companies that are members of the consolidated group”.
Subsection (3)(a), deﬁnition of item “e”, was amended, as from 1 October 2005, by section 238(2)(a) Taxation (Venture Capital and Miscellaneous Provi- sions) Act 2004 (2004 No 111) by substituting “a credit referred to in subsection (2)(a)” for “the credits referred to in subsection (2)(a) and (b)”.
Subsection (3)(a), deﬁnition of item “e”, was amended, as from 1 October 2005, by section 238(2)(b) Taxation (Venture Capital and Miscellaneous Pro- visions) Act 2004 (2004 No 111) by substituting “that paragraph” for “those paragraphs”.

Section MF 8(7): repealed (with effect on 19 December 2007), on 6 October 2009, by section 831 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(5) (6) (7) 2074 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 10 Section MF 8(7): added (with effect from 1 October 2007)), on 19 December 2007, by section 166 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MF 9 Debiting and crediting between group and individual branch equivalent tax accounts Where— (a) any credit arises to the branch equivalent tax account of a consolidated group in respect of any attributed CFC income; or any debit arises to the branch equivalent tax account of a consolidated group in respect of a refund of income tax paid in respect of attributed CFC income; or any debit arises to the branch equivalent tax account of a consolidated group in respect of an amount of dividend withholding payment paid; or any credit arises to the branch equivalent tax account of a consolidated group in respect of a refund of dividend withholding payment paid,— no credit or debit arises to the branch equivalent tax account of any individual company in respect of that attributed CFC income, income tax refund, dividend withholding payment, or dividend withholding payment refund.
Compare: 1994 No 164 s MF 9 MF 10 Use of consolidated group credit to reduce dividend withholding payment, or use of group or individual debit to satisfy income tax liability (1) Where— (a) there is a credit balance in the branch equivalent tax account of a consolidated group; and the nominated company for the consolidated group elects (by debiting the account) to use all or any part of the credit balance for the purpose of reducing, so far as the liability extends, the amount of any dividend withholding payment deduction required to be made under sections NH 1 and NH 2 by a company; and the company, at the time of payment of the dividend giving rise to the liability to pay dividend withholding payment,— 2075 (b) (c) (d) (b) (c) Part M s MF 10 Income Tax Act 2004 Reprinted as at 29 August 2011 is a member of the consolidated group; or (i) (ii) would be a member of the same group of com- panies as the consolidated group if the consoli- dated group were a single company,— the dividend withholding payment required to be made is re- duced by the amount of the credit balance so elected.
(2) (3) Where a consolidated group derives attributed CFC income for an income year,— (a) (b) (c) the nominated company of the consolidated group; or any member of the consolidated group; or any other company which for the income year would be in the same group of companies as the consolidated group if the consolidated group were a single com- pany— may elect (by crediting the account) that all or any part of the debit balance in the branch equivalent tax account of the consolidated group or the company (as the case may be) at the time of the election is to be set off against the income tax liability of the consolidated group for the income year.
(4) Where a company (referred to in this section as the ﬁrst com- pany) derives attributed CFC income in an income year, the nominated company of a consolidated group, which group would be, if the consolidated group were a single company, in the same group of companies as the ﬁrst company for the income year, may elect (by crediting the account) that all or part of any debit balance in the branch equivalent tax account of the consolidated group at the time of the election is to be set off against the income tax liability of the ﬁrst company for the income year.
(4B) An election made for a consolidated group under section MF 10(3) by any company described in section MF 10(3)(a) to (c) for an income year is invalid to the extent to which the total of all those elections is greater than an amount calculated for the consolidated group for the year using the formula in section MF 8(2)(a) (but treating item e as zero).
(4C) An election made for a company (the ﬁrst company) by any consolidated group under section MF 10(4) for an income year is invalid to the extent to which the total of all those elections 2076 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 10 and any other elections for the ﬁrst company under section MF 5(4) for the year is greater than an amount calculated for the ﬁrst company for the year using the formula in section MF 4(1)(a) (but treating the item e as zero).
(4D) An amount of election that is invalid under subsections (4B) or (4C)— (a) is not recorded as a credit in the branch equivalent tax account of the company or the consolidated group, as the case may be, that makes the election: is not an amount of debit balance for which the election is made: does not relate to the election.
(b) (c) (5) Where a company has made an election under subsection (3) or (4) in respect of an income tax liability for any income year, the amount of debit balance in respect of which the election is made must be set off against the income tax liability to the extent that— (a) the amount set off does not exceed an amount equal to the income tax liability that would arise if no income were derived in that income year by the consolidated group or the ﬁrst company, as the case may be, other than attributed CFC income referred to in subsection (3) or (4), such amount to be calculated under the formula set out in section MF 8(2)(a) (but applying as if item “e” were nil); and the company has made a proper election in accordance with this section; and the consolidated group or relevant other company, as the case may be, has paid (whether directly or by way of an election to reduce an amount of net loss or by means of a reduction of dividend withholding payment under section NH 7) the dividend withholding payment that gives rise to a debit to the branch equivalent tax account of the entity making the payment.
(b) (c) (6) If an election under subsection (3) or (4) relates to an amount that exceeds the income tax liability, for the income year, of the company or group that receives the offset under subsection (5), the excess amount is treated as giving rise to a net loss of 2077 Part M s MF 10 Income Tax Act 2004 Reprinted as at 29 August 2011 the company or group for the purpose of subparts IF and IG of an amount given by the following formula: where— a b is the amount of the excess is the basic rate of income tax, expressed as a percent- age, stated in— (a) schedule 1, part A, clause 5, if the company is not a Maori authority or the group does not consist of Maori authorities; or schedule 1, part A, clause 2, if the company is a Maori authority or the group consists of Maori authorities.
(b) If an election under subsection (3) or (4) relates to an amount that exceeds the income tax liability, for the income year, of the company or group that receives the offset under subsection (5), the excess is a net loss of the company or group for the purposes of subparts IF and IG.

Compare: 1994 No 164 s MF 10 Subsection (2) was repealed, as from 1 October 2005, by section 239(1) Taxa- tion (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Subsection (6) was substituted, as from 1 October 2005, by section 239(2) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Section MF 10(4B): substituted (with effect on 1 April 2005), on 6 October 2009, by section 832(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MF 10(4B): repealed (with effect on 1 April 2005), on 6 October 2009, by section 832(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MF 10(4B): inserted (with effect from 1 April 2005), on 19 December 2007, by section 167(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Section MF 10(4C): substituted (with effect on 1 April 2005), on 6 October 2009, by section 832(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MF 10(4C): repealed (with effect on 1 April 2005), on 6 October 2009, by section 832(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MF 10(4C): inserted (with effect from 1 April 2005), on 19 December 2007, by section 167(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).

(6) 2078 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 11 Section MF 10(4D): substituted (with effect on 1 April 2005), on 6 October 2009, by section 832(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MF 10(4D): repealed (with effect on 1 April 2005), on 6 October 2009, by section 832(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MF 10(4D): inserted (with effect from 1 April 2005), on 19 December 2007, by section 167(1) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Branch equivalent tax accounts of persons MF 11 Person may elect to maintain branch equivalent tax account (1) A person resident in New Zealand (not being a company) may at any time during an income year of that person, or within the time within which the person is required to furnish a return of income for that income year (or within such further time as the Commissioner may allow), elect to maintain a branch equivalent tax account for that income year.
(2) A person who so elects must notify the Commissioner of that fact within 21 days after the date of the election, or within such further time as the Commissioner may allow in any case or class of cases.

(3) A person who makes an election under subsection (1) must maintain a branch equivalent tax account— (a) for the income year in respect of which the election is made; and subject to this section, for every subsequent income year.
(b) (4) A person who has made an election under subsection (1) may, during any income year subsequent to that in respect of which the election was made, elect to cease to be a branch equivalent tax account person, and, subject to subsection (5), any person who so elects ceases, as from the commencement of the in- come year succeeding that in which the election to so cease is made, to be a person required to maintain a branch equivalent tax account.
(5) An election made under subsection (4) is of no effect unless the person furnishes, within the time provided for in section 78(3) of the Tax Administration Act 1994, the annual branch 2079 Part M s MF 12 Income Tax Act 2004 Reprinted as at 29 August 2011 equivalent tax account return required in respect of the income year in which the election is made.
Compare: 1994 No 164 s MF 11 MF 12 Branch equivalent tax account of person (1) Every branch equivalent tax account person must record in the person’s branch equivalent tax account for any income year of that person— (a) the opening balance of the account for that income year, in accordance with subsection (2): credits as they arise in accordance with section MF 13(1) and (2): debits as they arise in accordance with section MF 13(3) and (4).
(b) (c) (2) The opening balance of the branch equivalent tax account of a person for any income year is,— (a) (b) for the income year during which the person com- mences to be a branch equivalent tax account person, nil: for any subsequent income year, the amount of the clos- ing balance of the branch equivalent tax account of the person for the preceding income year, and such amount is— (i) a credit arising to the account where the closing balance is a credit balance: a debit arising to the account where the closing balance is a debit balance.
(ii) Compare: 1994 No 164 s MF 12 MF 13 Credits and debits arising to branch equivalent tax (1) account of person There arise from time to time, as credits to be recorded in the branch equivalent tax account of a branch equivalent tax ac- count person, amounts calculated in accordance with the fol- lowing formula: 2080 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 13 where— a is the amount of the person’s unadjusted income tax liability for any income year is the amount that is the lesser of— (i) (ii) the amount of any attributed CFC income derived by the person during that income year; and the taxable income of the person for that income year is the taxable income referred to in paragraph (ii) of b c item “b” d is any foreign tax credit allowed in accordance with section LC 4 or LC 5 that is offset against the person’s income tax liability for that income year.
(2) Any such credit arises on the date on which the person ﬁles a return of income for the income year of the person in which the attributed CFC income referred to in item “b” of the formula in subsection (1) was derived.
There arise as debits to be recorded in the branch equivalent tax account of a branch equivalent tax account person for any income year the following amounts: (a) (3) (c) (b) any of the credit balance of the account that the person elects in accordance with section MF 14 is to be a credit against the income tax liability of the person: an amount equal to any refund of income tax to the ex- tent that the refund would have been made had the per- son not derived any income other than attributed CFC income: the amount of the credit balance of the branch equiva- lent tax account where, during the income year, the per- son ceases to be resident in New Zealand.
The debits referred to in subsection (3) arise,— (a) in the case of a debit referred to in subsection (3)(a), on the date the person makes the election in accordance with section MF 14: in the case of a debit referred to in subsection (3)(b), on the date the refund is paid: (b) (4) 2081 Part M s MF 14 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) in the case of a debit referred to in subsection (3)(c), on the date the person ceases to be resident in New Zealand.
Compare: 1994 No 164 s MF 13 MF 14 Debit election to offset income tax payable in respect of foreign dividend (1) Where for any income year the income of a branch equivalent tax account person includes the amount of any dividend de- rived in respect of an income interest in a controlled foreign company, the person may elect that all or any part of the credit balance (if any) in the person’s branch equivalent tax account at the time of the election is to be credited against the person’s income tax liability for that income year.
(2) A person makes an election under this section by recording the amount in respect of which the election is made as a debit in the person’s branch equivalent tax account.
(3) Where a person has made an election under this section in respect of the income tax liability for any income year, the amount of credit balance in respect of which the election is made is credited against any income tax liability of the person for that income year to the extent that— (a) (b) (c) the amount credited does not exceed the amount that would be the person’s income tax liability for the in- come year, if the only income of the person were the dividends referred to in subsection (1); and the person has made a proper election in accordance with this section; and the person has paid income tax (including provisional tax), for the income year in respect of which the credit arose to the person’s branch equivalent tax account, equal to or exceeding the credit balance so credited in payment.
Compare: 1994 No 164 s MF 14 MF 15 Extension of branch equivalent tax account provisions to certain FIF income This subpart and section NH 2 apply as if— 2082 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MF 16 (a) (b) (c) (ii) any FIF income of a person in respect of an attributing interest in a foreign investment fund— (i) calculated under the accounting proﬁts method or the branch equivalent method; or in any case where section EX 43(6) or EX 46 applies with respect to the FIF income, calculated under any calculation method,— were attributed CFC income of the person; and the fund were a controlled foreign company; and the interest of the person in the fund were an income interest.
Compare: 1994 No 164 s MF 15 Amalgamated companies MF 16 Debits and credits arising to branch equivalent tax account of amalgamated company on amalgamation (1) Where any amalgamating company ceases to exist upon a qualifying amalgamation,— (a) if, immediately before the amalgamation, a credit or debit exists, determined by applying the procedure set out in sections GC 26 and MF 4(6), in the amalgamat- ing company’s branch equivalent tax account, the credit or debit is treated with effect from the time of the amal- gamation as a credit or debit in the branch equivalent tax account of the amalgamated company and not as a credit or debit in the branch equivalent tax account of the amalgamating company but applying section MF 4(1)(e) and (3)(d) as if, with respect to all times prior to the amalgamation, the amalgamated company did not separately exist and was instead the amalgamating com- pany with the same holders of shares and options over shares as the amalgamating company each holding the same number and class of shares and options over shares as they held in the amalgamating company; and any credit (not being a credit arising under section MF 4(1)(e)) or debit (not being a debit arising under sec- tion MF 4(3)(d)) would have arisen, but for the amal- gamation, to be recorded in the branch equivalent tax account of the amalgamating company on a date after 2083 (b) Income Tax Act 2004 Reprinted as at 29 August 2011 the amalgamation, the credit or debit instead arises to be recorded in the branch equivalent tax account of the amalgamated company.
(2) Where a consolidated group ceases to exist on a qualifying amalgamation which involves all members of the consolidated group amalgamating (whether or not also amalgamating with any company outside the group),— (a) if, immediately before the amalgamation, a credit or debit exists, determined by applying the procedure set out in sections GC 26 and MF 4(6), in the consoli- dated group’s branch equivalent tax account, the credit or debit is treated with effect from the time of the amal- gamation as a credit or debit in the branch equivalent tax account of the amalgamated company and not as a credit or debit in the branch equivalent tax account of the con- solidated group but applying section MF 4(1)(e) and (3)(d) as if, with respect to all times prior to the amal- gamation, the amalgamated company did not separately exist and was instead the consolidated group with the same holders of shares and options over shares as the consolidated group each holding the same number and class of shares and options over shares as they held in the consolidated group; and any credit or debit (not being a debit arising under section MF 8(4)) would have arisen, but for the amal- gamation, to be recorded in the branch equivalent tax account of the consolidated group on a date after the amalgamation, the credit or debit instead arises to be recorded in the branch equivalent tax account of the amalgamated company.
(b) Compare: 1994 No 164 s MF 16 Subpart MG—Dividend withholding payment accounts Contents MG 1 Balance of dividend withholding payment account Page 2085 2084 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 1 MG 2 Company may elect to maintain dividend withholding 2086 payment account MG 3 Dividend withholding payment account MG 4 Credits arising to dividend withholding payment account MG 5 Debits arising to dividend withholding payment account MG 6 Company may attach dividend withholding payment 2087 2088 2090 2094 credit to dividend MG 7 Transfer by life insurance company of credit balance to 2095 policyholder credit account MG 8 Allocation rules for dividend withholding payment credits MG 8B Policyholder credit account companies and dividend withholding payment credits MG 9 Further dividend withholding payment payable by company MG 10 Dividend with both imputation credit and dividend withholding payment credit attached 2096 2098 2102 2104 MG 11 Transfer of credit balance to imputation credit account 2105 Credits and debits incorrectly recorded MG 12 Determinations by Commissioner as to credits and debits 2105 arising to dividend withholding payment credit account Consolidated groups MG 13 Dividend withholding payment accounts and consolidated 2107 groups MG 14 Credits arising to group dividend withholding payment 2109 account MG 15 Debits arising to group dividend withholding payment 2111 account MG 16 Debiting and crediting between group and individual 2114 dividend withholding payment accounts MG 16A Application of speciﬁc dividend withholding provisions 2116 to consolidated groups Amalgamated companies MG 17 Debits and credits arising to dividend withholding 2118 payment account of amalgamated company on amalgamation MG 1 Balance of dividend withholding payment account For the purposes of the dividend withholding payment rules, the balance of a dividend withholding payment account at any 2085 Part M s MG 2 Income Tax Act 2004 Reprinted as at 29 August 2011 time is ascertained by calculating
 the difference in amount be- tween the aggregate of credits and the aggregate of debits to the account existing at that time, and the account has— (a) (b) Compare: 1994 No 164 s MG 1 a credit balance to the extent that credits exceed debits: a debit balance to the extent that debits exceed credits.
MG 2 Company may elect to maintain dividend withholding payment account (1) A company that is resident in New Zealand and is not a port- folio tax rate entity may at any time elect to maintain a divi- dend withholding payment account for an imputation year.

(2) A company that so elects must notify the Commissioner of that fact within 21 days after the date of the election, or within such further time as the Commissioner may allow in any case or class of cases.
(3) A company that makes an election under subsection (1)— (a) must maintain a dividend withholding payment account with effect from the date on which the company makes the election; and (b) must, subject to this section, maintain a dividend with- holding payment account for every imputation year sub- sequent to the one in which the election was made.
(4) A company that has made an election under subsection (1) may, during any imputation year subsequent to that in which the election was made, elect that the company is to cease to be a dividend withholding payment account company, and, sub- ject to subsection (5), any company that so elects ceases, as from the commencement of the imputation year succeeding that in which the election to so cease is made, to be a company required to maintain a dividend withholding payment account.
(5) An election under subsection (4) is of no effect unless the com- pany— (a) furnishes, within the time provided for in section 71 of the Tax Administration Act 1994, the annual dividend withholding payment account return required in respect of the imputation year in which the election was made; and 2086 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 3 (6) (b) has paid any further dividend withholding payment that may be payable by the company for that imputation year under section MG 9.
If an emigrating company is a dividend withholding payment account company immediately before the emigration time for the emigrating company, the emigrating company ceases to be a dividend withholding payment account company at the emigration time.
(7) A company that ceases to be a dividend withholding payment account company as a result of subsection (6) must— (a) furnish, within the time limit in section 71 of the the annual dividend Tax Administration Act 1994, with-holding payment account return required from the company as a dividend withholding payment account company for the imputation year in which the company becomes a non-resident; and pay any further dividend withholding payment that may be payable under section MG 9 by the company as a dividend withholding payment account company for the imputation year.
(b) Compare: 1994 No 164 s MG 2 Section MG 2(1): amended, on 1 October 2007, by section 133 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Subsection (5)(a) was amended, as from 3 April 2006, by section 151(1) Taxa- tion (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provi- sions) Act 2006 (2006 No 3) by inserting the word “account” after the words “dividend withholding payment” with application as from the 2005–06 imput- ation year.
Subsections (6) and (7) were inserted, as from 3 April 2006, by section 151(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the 2005–06 im- putation year.
MG 3 Dividend withholding payment account (1) Every dividend withholding payment account company must record in its dividend withholding payment account for each imputation year— (a) the opening balance of the account for the imputation year, in accordance with subsection (2): credits as they arise in accordance with section MG 4: debits as they arise in accordance with section MG 5.
(b) (c) 2087 Part M s MG 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) The opening balance of the dividend withholding payment ac- count for any imputation year is,— (a) (b) for the imputation year during which the company com- mences to be a dividend withholding payment account company, nil: for any subsequent imputation year, the amount of the closing balance of the dividend withholding payment account for the preceding imputation year, and such amount is— (i) a credit arising to the account where the closing balance is a credit balance: a debit arising to the account where the closing balance is a debit balance.
(ii) Compare: 1994 No 164 s MG 3 MG 4 Credits arising to dividend withholding payment account There arise as credits to be recorded in a company’s dividend (1) withholding payment account for any imputation year the fol- lowing amounts: (a) the amount of dividend withholding payment paid by the company during the imputation year, other than divi- dend withholding payment that is paid by way of a cred- iting of further dividend withholding payment under section MG 9(5): the amount of any dividend withholding payment credit attached to a dividend paid to the company during the imputation year: the amount debited to the company’s imputation credit account under section ME 5(1)(o) on account of net for- eign attributed income: the amount of dividend withholding payment payable under section MI 10(4) on account of a credit transferred from the company’s conduit tax relief account under section MI 6(2): the amount of a dividend withholding payment paid by the company under section MI 10(3): the amount of dividend withholding payment credit shown in a credit transfer notice that the company is issued with during the imputation year: (b) (ba) (bb) (bc) (bd) 2088 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 4 (c) (d) the amount of any further dividend withholding pay- ment paid by the company during the imputation year under section MG 9: the amount of any debit arising to the account under section MG 5(1)(h) (which relates to debits arising in respect of dividend withholding payment credits deter- mined to have been the subject of an arrangement to ob- tain a tax advantage), to the extent that it is subsequently established that the relevant dividend withholding pay- ment credit should not have been determined to be the subject of such an arrangement.
(2) The credits referred to in subsection (1) arise,— (a) (b) (ba) (bb) (bc) (bd) (c) (d) in the case of a credit referred to in subsection (1)(a), on the date the dividend withholding payment is paid: in the case of a credit referred to in subsection (1)(b), on the date the dividend is paid: in the case of the credit referred to in subsection (1)(ba), on the date the debit arises to the imputation credit ac- count: in the case of the credit referred to in subsection (1)(bb), immediately before the end of the imputation year (whether or not the dividend withholding payment is paid by then): in the case of the credit referred to in subsection (1)(bc), on the date the dividend withholding payment is paid: in the case of the credit referred to in subsection (1)(bd), on the date the credit transfer notice is issued: in the case of a credit referred to in subsection (1)(c), on the date the further dividend withholding payment is paid: in the case of a credit referred to in subsection (1)(d), on the date that the relevant debit under section MG 5(1)(h) arose.
(3) For the purposes of subsection (1), a credit does not arise where, in accordance with section NH 3(2) or (3), payment of all or part of a dividend withholding payment is satisﬁed by reducing a net loss.

Compare: 1994 No 164 s MG 4 2089 Part M s MG 5 Income Tax Act 2004 Reprinted as at 29 August 2011 Subsection (1)(bd) was inserted, as from 1 July 2006, by section 152(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Subsection (2)(bd) was inserted, as from 1 July 2006, by section 152(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MG 5 Debits arising to dividend withholding payment account There arise as debits to be recorded in a company’s dividend (1) withholding payment account for any imputation year the fol- lowing amounts: (a) (ab) (b) (c) (ca) (d) the amount of any dividend withholding payment credit attached to a dividend paid by the company during the imputation year: the amount of any dividend withholding payment credit attached to a dividend that is paid to the company during the imputation year, if the dividend withholding pay- ment credit is shown in a credit transfer notice issued by the company: in the case of a company carrying on a business of pro- viding life insurance to which the life insurance rules apply, the amount of any credit balance of the com- pany’s dividend withholding payment account that the company elects in accordance with section MG 7 is to be a credit to the company’s policyholder credit account: any amount forming all or part of an end of imput- ation year credit balance in the account that the com- pany elects in accordance with section MG 11 is to be a credit to the imputation credit account of the company or of an imputation group to which the company be- longs: the amount of a credit transferred to the company’s con- duit tax relief account under section MI 6(1): the amount of a refund of dividend withholding pay- ment paid to the company except— (i) to the extent that the refund is for a dividend with- holding payment paid prior to the date that a debit arises under paragraph (i); and a debit does not arise for a refund paid under section MI 11: (ii) 2090 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 5 (e) (f) (g) (h) (i) (j) (k) the amount of any credit of tax refunded to the company under section LD 8(1)(c): the amount of any allocation deﬁcit debit arising in the account under section MG 8(4): the amount of any allocation deﬁcit debit arising in the account under section MG 8B: the amount of any further debit arising to the dividend withholding payment account under section GC
 22 in relation to a dividend withholding payment credit de- termined to be the subject of an arrangement to obtain a tax advantage: the amount of any particular credit in the company’s dividend withholding payment account at any time (in this paragraph referred to as the speciﬁed time), not being a credit which has before the speciﬁed time been cancelled out by a prior or subsequent debit, unless there is a group of persons— (i) the aggregate of whose minimum voting interests in the company in the period from the date upon which the credit arose until the speciﬁed time is equal to or greater than 66%; and in any case where at any time during that period a market value circumstance exists in respect of the company, the aggregate of whose minimum mar- ket value interests in the company in the period is equal to or greater than 66%: (ii) the amount of the credit balance, if any, of the dividend withholding payment account where, during the imput- ation year, the company ceases to be a dividend with- holding payment account company: the amount of any overpaid dividend withholding pay- ment that the Commissioner applies in satisfaction of an amount (other than dividend withholding payment) that is due and payable under any provision of this Act or any other of the Inland Revenue Acts, except to the extent that the amount applied— (i) is in respect of dividend withholding payment paid before the date that a debit arises under para- graph (i); and 2091 Part M s MG 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) does not exceed the amount of the debit that arises on that date.
The debits referred to in subsection (1) arise,— (a) (ab) (b) (c) (ca) (d) (e) (f) (g) (h) (i) in the case of a debit referred to in subsection (1)(a), on the date the dividend is paid: in the case of a debit referred to in subsection (1)(ab), on the date the relevant dividend is paid: in the case of a debit referred to in subsection (1)(b), on the date the company makes the election in accordance with section MG 7: in the case of a debit referred to in subsection (1)(c), at the end of the imputation year in which there was the credit balance: in the case of the debit referred to in subsection (1)(ca), immediately before the end of the imputation year: in the case of a debit referred to in subsection (1)(d) or (e), on the date the refund is paid: in the case of a debit referred to in subsection (1)(f) or (g), at the end of the imputation year in respect of which the allocation deﬁcit debit arises: in the case of a debit referred to in subsection (1)(h), at the end of the imputation year in respect of which it is determined under section GC 22 that the tax advantage arrangement occurred or commenced: in the case of a debit referred to in subsection (1)(i), at the speciﬁed time referred to in that paragraph: in the case of a debit referred to in subsection (1)(j), immediately before the company ceases to be a dividend withholding payment account company: in the case of a debit referred to in subsection (1)(k), on the date that the Commissioner applies the relevant amount in satisfaction of the other amount that is due and payable.
Subject always to the express provisions of this Act, subsec- tion (1)(i) is intended to limit the circumstances in which a tax- payer, being a company, may carry forward a dividend with- holding payment account credit for subsequent utilisation to those where the tax beneﬁt arising from such utilisation is ob- tained or available to be obtained (directly or indirectly), at (2) (3) 2092 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 5 least to the extent of 66%, only by the same natural persons holding (directly or indirectly) rights in relation to the com- pany who,— (a) by virtue of holding (directly or indirectly) such rights, bore the dividend withholding payment liability giv- ing rise to the dividend withholding payment account credit; or held (directly or indirectly) such rights at the time of the event giving rise to the dividend withholding payment account credit.
(b) (4) For the purposes of subsection (1)(i),— (a) (b) (c) (d) (e) in respect of any period referred to in that paragraph the minimum voting interest or market value interest of any person in the company in the period is equal to the lowest voting interest or market value interest, as the case may be, which that person holds in the company during that period; and section MG 3(2)(b) does not apply and any credit in the company’s dividend withholding payment account is treated as continuing to exist until treated as being cancelled out by a prior or subsequent debit in accord- ance with paragraph (c); and in determining whether any credit in the company’s dividend withholding payment account has been can- celled out by any prior or subsequent debit,— (i) any amount of debit may be taken into account only once for the purpose of ascertaining whether any credit has been so cancelled out; and the amount of any debit is offset against the amount of any credit in the order in which the credits arise; and (ii) any credit arising on or before 16 December 1988 is deemed to have been cancelled out by a subsequent debit before the speciﬁed time referred to in that para- graph; and in the case of any credit arising after 16 December 1988 and before 1 April 1992 (not being a credit cancelled out before 1 April 1992 by a subsequent debit), the credit is deemed ﬁrst to arise in the company’s dividend with- 2093 Part M s MG 6 Income Tax Act 2004 Reprinted as at 29 August 2011 holding payment account on 1 April 1992, but a debit is deemed to arise in accordance with subsection (1)(i) in respect of that credit at any time if and to the extent that, at that speciﬁed time, that credit still exists and a debit would have arisen in respect of that credit in accordance with section 394ZW(1)(f) of the Income Tax Act 1976 as that paragraph applied before its repeal and replace- ment by section 57 of the Income Tax Amendment Act (No 2) 1992, had that paragraph continued to apply but with the ﬁgure “75” omitted and the ﬁgure “66” substi-
 tuted.
Compare: 1994 No 164 s MG 5 Subsection (1)(ab) was inserted, as from 1 July 2006, by section 153(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Subsection (1)(c) was amended, as from 1 October 2005, by section 240(1) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “imputation credit account of the company or of an imputation group to which the company belongs” for “company’s imputation credit ac- count” with application as from the 2005–06 income year.
Subsection (1)(e) was amended, as from 1 April 2005, by section 79 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “section LD 8(1)(c)” for “section LD 8(1)(a)” with application as from the 2005–06 income year.
Subsection (1)(f) was amended, as from 1 October 2005, by section 240(2) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “section MG 8(4)” for “section MG 8” with application as from the 2005–06 income year.
Subsection (1)(g) was amended, as from 1 October 2005, by section 240(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “section MG 8B” for “section MG 8(5)” with application as from the 2005–06 income year.

Subsection (2)(ab) was inserted, as from 1 July 2006, by section 153(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MG 6 Company may attach dividend withholding payment credit to dividend (1) A dividend withholding payment account company may, on payment of a dividend by the company, attach a dividend with- holding payment credit to the dividend.
(2) A dividend withholding payment account company that is also a conduit tax relief company may attach a dividend withhold- 2094 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 7 (3) ing payment credit to a dividend derived by a non-resident, but only to the extent allowed under section MZ 4.

The rules for determining residence in sections OE 7 and OE 8 apply for the purposes of subsection (2).
Compare: 1994 No 164 s MG 6 MG 7 Transfer by life insurance company of credit balance to policyholder credit account (1) Where a dividend withholding payment account company is also a policyholder credit account company but not a conduit tax relief company, the company may elect that all or any part of the credit balance (if any) in the company’s dividend with- holding payment account at the time of election is to be a credit to the company’s policyholder credit account and a debit to its dividend withholding payment account.
(2) A company makes an election under this section by recording the amount in respect of which the election is made— (a) as a debit in the company’s dividend withholding pay- ment account; and as a credit in its policyholder credit account.
(b) (3) Where a company that may make an election under subsection (1) furnishes a return of income under section 38 of the Tax Administration Act 1994 for a non-standard accounting year, then,— (a) where and to the extent to which, in respect of any im- putation year,— (i) any credit has arisen to the company’s dividend withholding payment account in accordance with section MG 4(1)(a) on or before the last day of that imputation year and during the accounting year in which the last day of that imputation year falls; and the amount of that credit has not, on or before the last day of that imputation year, been can- celled out by any subsequent debit arising in ac- cordance with section MG 5(1)(d), by virtue of any refund of dividend withholding payment paid during that accounting year; and (ii) 2095 Part M s MG 8 Income Tax Act 2004 Reprinted as at 29 August 2011 (iii) the company has not, on or before the last day of that imputation year, elected in accordance with this section that the amount of that credit is to be transferred to the company’s policyholder credit account,— the company is deemed to have so elected on the last day of that imputation year: (b) where and to the extent to which in any imputation year any credit has arisen to the company’s dividend with- holding payment account in accordance with section MG 4(1)(b), then, notwithstanding any provision of this section, the company may not elect that any part of that credit is to be transferred to the company’s policyholder credit account on any day falling after the last day of that imputation year and during the accounting year in which the last day of that imputation year falls.
For the purposes of subsection (3)(a)(ii), the amount of any debit referred to in that subparagraph is offset against the amount of any credits referred to in that subparagraph in the order in which the credits arise.
Compare: 1994 No 164 s MG 7 (4) MG 8 Allocation rules for dividend withholding payment credits (1) A company must not attach to a dividend a dividend withhold- ing payment credit of such an amount that the dividend with- holding payment ratio of the dividend would exceed the ratio calculated in accordance with the following formula: where— a is the basic rate of income tax for companies, ex- pressed as a percentage, stated in schedule 1, part A, clause 5 and applying in respect of the income year in which the dividend is paid.
(2) Where a dividend withholding payment account company has paid a benchmark dividend in any imputation year, the com- pany must, unless it makes a ratio change declaration in ac- 2096 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 8 (3) cordance with subsection (3), ensure that the dividend with- holding payment ratio of every subsequent dividend paid by the company during that imputation year is the same as the dividend withholding payment ratio of the benchmark divi- dend; and for the purposes of this subsection any benchmark dividend with a dividend withholding payment ratio exceed- ing the ratio speciﬁed in subsection (1) is deemed to have the ratio so speciﬁed.
The dividend withholding payment ratio of a subsequent divi- dend may differ from that of a benchmark dividend if— (a) an ofﬁcer of the company declares, in a ratio change declaration in the prescribed form, that the subsequent dividend is not being paid as part of an arrangement to obtain a tax advantage within the meaning of section GC 22, and provides such further information as may be prescribed; and the ratio change declaration is delivered to the Com- missioner before the date of payment of the subsequent dividend, or before such later date as the Commissioner may allow in any case or class of cases; and the subsequent dividend is not paid as part of an arrange- ment to obtain a tax advantage within the meaning of section GC 22.
(b) (c) (4) Where the dividend withholding payment ratio of a subsequent dividend differs from the dividend withholding payment ratio of a benchmark dividend in contravention of subsection (2), there arises an allocation deﬁcit debit of an amount calculated in accordance with the following formula: (a x b) – c where— a is the aggregate of the amount of all dividends paid by the company during the imputation year (exclusive of any imputation credit or dividend withholding payment credit) b is the lesser of— (i) the dividend withholding payment ratio of the dividend with the greatest dividend withholding payment ratio of all dividends paid by the com- pany during the income year; and 2097 Part M s MG 8B Income Tax Act 2004 Reprinted as at 29 August 2011 c (ii) the ratio calculated in accordance with the for- mula stated in subsection (1) is the aggregate of all dividend withholding payment credits attached to dividends paid by the company dur- ing the imputation year.
[Repealed] [Repealed] [Repealed] (5) (6) (7) (8) Nothing in this section applies to a dividend that is the subject of a determination made by a statutory producer board or a cooperative company in accordance with section ME 30 or ME 35.

[Repealed] Compare: 1994 No 164 s MG 8 (9) Section MG 8(1) item a: amended (with effect from 1 October 2007), on 19 December 2007, by section 168(1) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Subsections (5) to (7) were repealed, as from 1 October 2005, by section 241 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Section MG 8(9): repealed (with effect on 1 October 2007), on 6 October 2009, by section 833 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section MG 8(9): added (with effect from 1 October 2007), on 19 December 2007, by section 168(2) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
MG 8B Policyholder credit account companies and dividend (1) withholding payment credits This section applies to a policyholder credit account company (called the company) that is not a conduit tax relief company and an imputation year (called the dividend year) in which the company pays a dividend with a dividend withholding pay- ment credit attached.
(2) An allocation deﬁcit debit of an amount given by subsection (3) arises at the end of the dividend year in the company’s dividend withholding payment account if— (a) the total of the amounts of the company’s policyholder income and policyholder net loss for the DWP reference 2098 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 8B (b) period, found using the policyholder base calculation for each imputation year, is greater than zero: the shareholder DWP ratio for the DWP reference period exceeds the policyholder DWP ratio for the DWP reference period.
(3) (4) (b) The amount of the allocation deﬁcit debit that arises under subsection (2) is— (a) equal to the maximum deﬁcit debit, if the maximum deﬁcit debit is less than or equal to the credit balance that is in the company’s dividend withholding payment account immediately before any allocation deﬁcit debit arises under this section: equal to the reduced deﬁcit debit, if paragraph (a) does not apply.
In this section— DWP reference period means the period that consists of— (a) (b) the dividend year: the longest period of consecutive imputation years— (i) that begins on or after the date on which this sec- tion applies for the company; and that ends immediately before the dividend year; and in which the company paid no dividend that had a dividend withholding payment credit attached maximum deﬁcit debit means the quantity that is given by the following formula (iii) (ii) (a - b) x d x (1 - r) where— a is the company’s shareholder DWP ratio for the DWP reference period: b d r is the company’s policyholder DWP ratio for the DWP reference period: is the total of the amounts of the company’s policy- holder income and policyholder net loss found for the DWP reference period using the policyholder base cal- culation: is the basic rate of income tax, expressed as a percent- age, stated in— 2099 Part M s MG 8B Income Tax Act 2004 Reprinted as at 29 August 2011 (a) (b) schedule 1, part A, clause 5, if the company is not a Maori authority: schedule 1, part A, clause 2, if the company is a Maori authority policyholder DWP ratio means the quantity that is given by the following formula where— c d r is the total for the DWP reference period of all the credits that have arisen in the company’s policyholder credit account as a result of an election by the company under section MG 7 in relation to a credit balance in the company’s dividend withholding payment account is the total of the amounts of the company’s policy- holder income and policyholder net loss found for the DWP reference period using the policyholder base cal- culation is the basic rate of income tax, expressed as a percent- age, stated in— (a) schedule 1, part A, clause 5, if the company is not a Maori authority: schedule 1, part A, clause 2, if the company is a Maori authority (b) Subsection (4) policyholder DWP ratio item “c” was amended, as from 1 Oc- tober 2005, by section 80(1)(a) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No
 79) by substituting “dividend withholding pay- ment account” for “dividend withholding payment credit account” with appli- cation from the 2005–06 income year.
reduced deﬁcit debit means the quantity that is given by the following formula where— c is the total for the DWP reference period of all the credits that have arisen in the company’s policyholder credit account as a result of an election by the company under section MG 7 in relation to a credit balance in the company’s dividend withholding payment account 2100 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 8B d e f g r is the total of the amounts of the company’s policy- holder income and policyholder net loss found for the DWP reference period using the policyholder base cal- culation is the credit balance in the company’s dividend with- holding payment account at the end of the dividend year immediately before any allocation deﬁcit debit arises under this section is the total amount of DWP credits that the company has attached to dividends paid by the company in the DWP reference period is the total amount of dividends paid by the company in the DWP reference period is the basic rate of income tax, expressed as a percent- age, stated in— (a) schedule 1, part A, clause 5, if the company is not a Maori authority: schedule 1, part A, clause 2, if the company is a Maori authority (b) Subsection (4) reduced deﬁcit debit item “c” was amended, as from 1 October 2005, by section 80(1)(b) Taxation (Base Maintenance and Miscellaneous Pro- visions) Act 2005 (2005 No 79) by substituting “dividend withholding payment account” for “imputation credit account” with application from the 2005–06 income year.
shareholder DWP ratio means the quantity given by the fol- lowing formula where— f is the total amount of DWP credits that the company has attached to dividends paid by the company in the DWP reference period g is the total amount of dividends paid by the company in the DWP reference period.

(5) This section does not apply to a dividend that is the subject of a determination made by a statutory producer board or a co-operative company under section ME 30 or section ME 35.
Section MG 8B was inserted, as from 1 October 2005, by section 242 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from the 2005–06 income year.
2101 Part M s MG 9 Income Tax Act 2004 Reprinted as at 29 August 2011 MG 9 Further dividend withholding payment payable by company (1) Where there is a debit balance in a company’s dividend with- holding payment account at the end of any imputation year, and the company is not a company that is liable to pay a fur- ther dividend withholding payment under subsection (3), the company is liable to pay to the Commissioner a further divi- dend withholding payment of an amount equal to that debit balance, subject to subsection (7).
(2) A company must pay any further dividend withholding pay- ment to which it is liable under subsection (1) not later than the 20 June following the end of the imputation year for which there was the debit balance.

(3) Where there is a debit balance in a company’s dividend with- holding payment account immediately before the company ceases to be resident in New Zealand, the company is liable to pay to the Commissioner a further dividend withholding pay- ment of an amount equal to that debit balance.
(5) (4) A company must pay any further dividend withholding pay- ment to which it is liable under subsection (3) not later than the last day on which it is still resident in New Zealand.
If a company pays a further dividend withholding payment for which the company is liable under this section, the company may elect that the amount of the payment be also credited— in payment of a liability of the company to pay a divi- (a) dend withholding payment in relation to an income year that corresponds to an imputation year in which the company was a dividend withholding payment account company: (b) with effect on the date on which the Commissioner re- ceives the further dividend withholding payment.
If a company is liable under this section to pay a further divi- dend withholding payment in relation to an imputation year and, after the end of the imputation year, pays a dividend with- holding payment in relation to an imputation year in which the company was a dividend withholding payment account com- pany, the company may elect that the amount of the dividend withholding payment be also credited— (5A) 2102 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 9 (a) in payment of the liability of the company to pay the further dividend withholding payment: (b) with effect on the date on which the Commissioner re- ceives the dividend withholding payment.
(6) to this section and section 103 of Subject the Tax Administration Act 1994, the provisions of this Act and of the Tax Administration Act 1994 (other than the dividend withholding payment rules), so far as they are applicable and with any necessary modiﬁcations, apply with respect to any further dividend withholding payment for which a company is chargeable under this section as if it were income tax.
(7) A company that has a debit balance in the company’s dividend withholding payment account at the end of an imputation year may apply to the Commissioner by notice for a reduction of the company’s liability to make a further dividend withholding payment relating to the imputation year if— (a) (b) the company had a debit balance in the company’s divi- dend withholding payment account at the end of the im- mediately preceding imputation year; and the debit balance referred to in paragraph (a) exceeds the total of the dividend withholding payments that the company has made during the imputation year.
If the Commissioner receives a notice under subsection (7) from a company, the company’s liability to make a further divi- dend withholding payment relating to the imputation year is reduced by the amount of the difference between— (a) the debit balance in the company’s dividend withhold- ing payment account at the end of the immediately pre- ceding imputation year; and the total of the dividend withholding payments that the company has made during the imputation year.
(b) Compare: 1994 No 164 s MG 9 Subsection (5A)(b) was amended, as from 1 October 2005, by section 243 Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “dividend withholding payment” for “payment of income tax”.
2103 (8) Part M s MG 10 Income Tax Act 2004 Reprinted as at 29 August 2011 MG 10 Dividend with both imputation credit and dividend withholding payment credit attached (1) Where a company pays a dividend with both an imputation credit and a dividend withholding payment credit attached, the company must ensure that the combined imputation and divi- dend withholding payment ratio of the dividend does not ex- ceed the ratio calculated in accordance with the following for- mula: where— a is the basic rate of income tax for companies, ex- pressed as a percentage, stated in schedule 1, part A, clause 5, and applying in respect of the income year in which the dividend is paid.
(2) Where a company pays a dividend with a combined imputation and dividend withholding payment ratio exceeding the ratio stated in subsection (1), there is an excess credit amount in relation to the dividend of an amount calculated in accordance with the following formula: a x (b – c) where— a is the amount of the dividend paid (excluding the im- putation credit and the dividend withholding payment credit) b c is the combined imputation and dividend withholding payment ratio of the dividend is the combined imputation and dividend withholding payment ratio calculated in accordance with the formula stated in subsection (1).
(3) [Repealed] Compare: 1994 No 164 s MG 10 Section MG 10(1) item a: amended (with effect from 1 October 2007), on 19 December 2007, by section 169(1) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section MG 10(3): repealed (with effect on 1 October 2007), on 6 October 2009, by section 834 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
2104 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 12 Section MG 10(3): added (with effect from 1 October 2007), on 19 December 2007, by section 169(2) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
MG 11 Transfer of credit balance to imputation credit account (1) A company that is not a conduit tax relief company and has a credit balance in the dividend withholding payment account of the company at the end of an imputation year, or immediately before a debit arises in the account under section MG 5(1)(j), may elect that all or part of the credit balance be, for the im- putation year in which the credit balance occurs— (a) a debit to the dividend withholding payment account of the company; and a credit to the imputation credit account of the company, or of an imputation group of which the company is a member at the time the credit balance occurs.
(b) (2) A company makes an election under this section by recording the amount in respect of which it makes the election— (a) as a debit in the company’s dividend withholding pay- ment account; and as a credit in its imputation credit account.

(b) Compare: 1994 No 164 s MG 11 Subsection (1) was substituted, as from 1 October 2005, by section 244 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Credits and debits incorrectly recorded MG 12 Determinations by Commissioner as to credits and debits arising to dividend withholding payment credit account (1) Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s dividend withhold- ing payment account is not the correct amount that should have been recorded in respect of the credit or debit, the Commis- sioner must determine the amount of the credit or debit prop- erly arising to the account.
(2) Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s dividend with- holding payment account should not have been so recorded, the Commissioner must determine accordingly.
2105 Part M s MG 12 Income Tax Act 2004 Reprinted as at 29 August 2011 (3) Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s dividend withhold- ing payment account should not have been recorded as arising at the time it was recorded as arising, the Commissioner must determine the time at which the credit or debit properly arose to the account.
(4) Where the Commissioner considers that any amount that has not been recorded as a credit or debit arising to a company’s dividend withholding payment account should have been so recorded, the Commissioner must determine— (a) (b) the amount of the credit or debit so arising; and the time at which the credit or debit arose to the account.
(5) Where the Commissioner makes a determination under any of subsections (1) to (4), then, except in so far as the company establishes on objection that any credit or debit was correctly recorded, or not recorded, as the case may be, in the dividend withholding payment account,— (a) (b) the relevant credit or debit in the account is deemed to have arisen, or not to have arisen, or is deemed to have been the amount determined by the Commissioner under subsection (1), as the case may require, effective on the date on which the debit or credit originally arose, or is determined by the Commissioner as having arisen: the company must make such other corrections in respect of any credits or debits or balances arising to its dividend withholding payment account or imput- ation credit account or branch equivalent tax account, whether for the imputation year to which the determin- ation related or for any subsequent imputation year, as may be necessary or as may be directed by the Commissioner as a consequence of the determination in relation to the amount incorrectly recorded, or not recorded.
(6) As soon as is convenient after a determination is made under any of subsections (1) to (4), the Commissioner must give no- tice of the determination to the company in respect of whose dividend withholding payment account the determination is made.

2106 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 13 (7) Any such notice may be included in a notice of assessment made under section 111(1) of the Tax Administration Act 1994.
(8) An omission to give the notice referred to in subsection (6) does not invalidate the determination.
Compare: 1994 No 164 s MG 12 Consolidated groups MG 13 Dividend withholding payment accounts and consolidated groups (1) A consolidated group— (a) must maintain a dividend withholding payment account if, in that imputation year, any company which is a member of that consolidated group at any time in that imputation year maintains a dividend withholding pay- ment account; and (b) may at any time elect to maintain a dividend withhold- ing payment account for an imputation year,— which group dividend withholding payment account must be separate from the dividend withholding payment account of each company which is a member of the consolidated group.
(2) Where a consolidated group has elected to maintain a dividend withholding payment account under subsection (1),— (a) (b) the nominated company for the group must notify the Commissioner of that fact within 21 days after the date of the election, or within such further time as the Com- missioner may allow in any case or class of cases; and the group must maintain a dividend withholding pay- ment account with effect from the date of the election and, subject to subsection (4), for every imputation year subsequent to that imputation year in which the election was made.
(3) The opening balance of the dividend withholding payment ac- count of a consolidated group for any imputation year is— (a) nil, for the imputation year during which the consoli- dated group commences to maintain a dividend with- holding payment account; and 2107 Part M s MG 13 Income Tax Act 2004 Reprinted as at 29 August 2011 (4) (b) the amount of the closing balance of the dividend with- holding payment account for the preceding imputation year (being a credit or debit, as the case may be), in any other case.
Subject to subsection (5), the nominated company for a con- solidated group that maintains a dividend withholding pay- ment account may elect at any time that the group is to cease to maintain a dividend withholding payment account and, where such an election is made, the group ceases to be required to maintain a group dividend withholding payment account from the commencement of the imputation year succeeding that in which the election so to cease is made.
(5) An election under subsection (4),— (a) (b) (c) in any case where the nominated company for the group has elected to maintain a dividend withholding payment account, may only be made during an imputation year subsequent to the imputation year in which the election to maintain the account was made; and is of no effect if the group is required to maintain a dividend withholding payment account under subsec- tion (1)(a) in respect of the imputation year from the commencement of which the election to cease would otherwise take effect; and is of no effect unless— (i) the annual dividend withholding payment ac- count return required in respect of the imputation year in which the election was made is furnished within the time provided for in section 71 of the Tax Administration Act 1994; and any further dividend withholding payment that may be payable by the group for that imputation year under section MG 9 is paid by the date spe- ciﬁed in section MG 9(2).
(ii) (6) Subsection (7) applies to a consolidated group that maintains a group dividend withholding payment account if— (a) a member of the consolidated group is an emigrating company; and 2108 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 14 (b) the emigrating company is a dividend withholding pay- ment account company immediately before the emigra- tion time for the emigrating company.
(7) The consolidated group must— (a) (b) (c) cease to maintain a group dividend withholding pay- ment account at the emigration time for the member; and if there is a debit balance in the group dividend with- holding payment account immediately before the emi- gration time of the member, pay to the Commissioner a further dividend withholding payment of an amount equal to the debit balance; and furnish, within the time limit under sections 71 and 73 of the Tax Administration Act 1994, the annual dividend withholding payment account return required from the group for the imputation year in which the member be- comes a non-resident.
Compare: 1994 No 164 s MG 13 Subsection (5)(c)(i) was amended, as from 3 April 2006, by section 154(1) Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3) by inserting the word “account” after the words “dividend withholding payment” with application as from the 2005–06 imput- ation year.
Subsections (6) and (7) were inserted, as from 3 April 2006, by section 154(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the 2005–06 im- putation year.
MG 14 Credits arising to group dividend withholding payment (1) account There arise as credits to be recorded in the dividend withhold- ing payment account of a consolidated group for any imput- ation year the following amounts: (a) the amount of dividend withholding payment paid dur- ing the imputation year by any company that is a mem- ber of the consolidated group in respect of a dividend paid to a company which is at the time of payment of the dividend a member of the consolidated group, ex- cept where and to the extent that— 2109 Part M s MG 14 Income Tax Act 2004 Reprinted as at 29 August 2011 (i) (ii) the dividend withholding payment is paid by way of a crediting of further dividend withholding payment under section MG 9(5) or MG 16(6); or payment of the dividend withholding payment is satisﬁed by reducing a net loss under section NH 5(4): the amount of any dividend withholding payment credit attached to a dividend paid during the imputation year to a company which is at the time of payment a member of the consolidated group: the amount of dividend withholding payment credit shown in a credit transfer notice a company is issued with, if the company is a member of the consolidated group at the time the credit transfer notice is issued: the amount of any further dividend withholding pay- ment paid during the imputation year in respect of the group’s dividend withholding payment account under section MG 9: the amount of any debit arising to the account under sec- tion MG 15(1)(h), to the extent that it is subsequently established that the relevant dividend withholding pay- ment credit should not have been determined to be the subject of an arrangement to which that paragraph ap- plies: the amount of any credit arising during the imputation year to the dividend withholding payment account under section MG 16(2): the amount debited to the group’s imputation credit ac- count under section ME 12(1)(n) on account of net for- eign attributed income.
(b) (bb) (c) (d) (e) (f) The credits referred to in subsection (1) arise,— (a) in the case of the credits referred to in subsection (1)(a), (b), and (c), on the date the relevant dividend withhold- ing payment, dividend, or further dividend withholding payment is paid: in the case of the credit referred to in subsection (1)(bb), on the date the credit transfer notice is issued: (ab) (2) 2110 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 15 (b) (c) (d) in the case of a credit referred to in subsection (1)(d), on the date that the relevant debit under section MG 15(1)(h) arose: in the case of the credit referred to in subsection (1)(e), immediately before the relevant debit referred to in sec- tion MG 16(2)(b) arose to the dividend withholding payment account: in the case of a debit referred to in subsection (1)(f), on the date the debit arises in the group’s imputation credit account.
Compare: 1994 No 164 s MG 14 Subsection (1)(bb) was inserted, as from 1 July 2006, by section 155(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Subsection (2)(ab) was inserted, as from 1 July 2006, by section 155(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MG 15 Debits arising to group dividend withholding payment (1) account There arise as debits to be recorded in the dividend withhold- ing payment account of a consolidated group for any imput- ation year the following amounts: (a) (ab) (b) the amount of any dividend withholding payment credit attached to a dividend paid during the imputation year by any company which is, at the time of payment, a member of the consolidated group: the amount of any dividend withholding payment credit attached to a dividend that is paid during the imputation year to a company that is, at the time of the payment, a member of the consolidated group, if the dividend with-holding payment credit is shown in a credit trans- fer notice issued by the company: the amount of any credit balance of the dividend with- holding payment account that the nominated company for the consolidated group elects in accordance with section NH 6(2) during the imputation year is a credit to the policyholder credit account of the consolidated group: 2111 Part M s MG 15 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) (d) (e) (f) (g) (h) (i) (j) any amount forming all or part of an end of imputation year balance in the account that the nominated com- pany for the consolidated group elects in accordance with section NH 6(6) to be a credit to the imputation credit account of the consolidated group: the amount of any refund of dividend withholding pay- ment paid during the imputation year under section NH 4 in respect of a dividend withholding payment paid in respect of a dividend paid to a company which at the time of payment of the dividend was a member of the consolidated group, except that, where the refund is in respect of a dividend withholding payment paid before the date that a debit arises under paragraph (i), a debit does not arise to the extent that the amount of the refund does not exceed the amount of the debit that arises on that date: the amount of any credit of tax refunded under section LD 8(1)(c) in respect of a dividend paid to a company
 which is at the time of payment a member of the con- solidated group: the amount of any allocation deﬁcit debit arising in the account under section MG 8(4) in respect of any com- pany which is at the time of payment of the relevant dividend a member of the consolidated group: the amount of any allocation deﬁcit debit arising in the account under section MG 8B: the amount of any further debit arising during the imput- ation year to the dividend withholding payment account under section GC 22 in relation to a dividend withhold- ing payment credit determined to be the subject of an arrangement to obtain a tax advantage: the amount of any debit that would arise under section MG 5(1)(i) if that provision were to apply, with any necessary modiﬁcations, to a consolidated group and its dividend withholding payment account as if it were a single company: the amount of the credit balance, if any, of the dividend withholding payment account where the consolidated 2112 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 15 (k) (l) group ceases to maintain a dividend withholding pay- ment account: the amount of any debit arising during the imputation year to the dividend withholding payment account under section MG 16(5): the amount of any overpaid dividend withholding pay- ment paid by a company in respect of a dividend de- rived by the company, which is at the time of derivation a member of the consolidated group, that the Commis- sioner applies in satisfaction of an amount (other than dividend withholding payment) that is due and payable by a company that is a member of the consolidated group under any provision of this Act or any other of the Inland Revenue Acts, except to the extent that the amount applied— (i) is in respect of dividend withholding payment paid before the date that a debit arises under para- graph (i); and does not exceed the amount of the debit that arises on that date.
(ii) (2) The debits referred to in subsection (1) arise,— (a) in the case of a debit referred to in subsection (1)(a), on the date the dividend is paid: in the case of a debit referred to in subsection (1)(ab), on the date the relevant dividend is paid: in the case of a debit referred to in subsection (1)(b), on the date the company makes the election in accordance with section NH 6(2): in the case of a debit referred to in subsection (1)(c), at the end of the imputation year in which there was the credit balance: in the case of the debits referred to in subsection (1)(d) and (e), on the date the refund is paid: in the case of the debits referred to in subsection (1)(f) and (g), at the end of the imputation year in respect of which the allocation deﬁcit debit arises: in the case of a debit referred to in subsection (1)(h), at the end of the imputation year in respect of which it is (ab) (b) (c) (d) (e) (f) 2113 Part M s MG 16 Income Tax Act 2004 Reprinted as at 29 August 2011 (h) (g) determined under section GC 22 that the tax advantage arrangement occurred or commenced: in the case of a debit referred to in subsection (1)(i), at the speciﬁed time: in the case of a debit referred to in subsection (1)(j), im- mediately before the consolidated group ceases to main- tain a dividend withholding payment account: in the case of a debit referred to in subsection (1)(k), at the time ﬁrst referred to in section MG 16(5): in the case of a debit referred to in subsection (1)(l), on the date that the Commissioner applies the relevant amount in satisfaction of the other amount that is due and payable.
Compare: 1994 No 164 s MG 15 (j) (i) Subsection (1)(ab) was inserted, as from 1 July 2006, by section 156(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Subsection (1)(f) was amended, as from 1 October 2005, by section 245(1) Tax- ation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “section MG 8(4)” for “section MG 8”.
Subsection (1)(g) was amended, as from 1 October 2005, by section 245(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “section MG 8B” for “section MG 8(5)”.

Subsection (2)(ab) was inserted, as from 1 July 2006, by section 156(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
MG 16 Debiting and crediting between group and individual dividend withholding payment accounts (1) Where— (a) (b) any credit arises to the dividend withholding payment account of a consolidated group in respect of any divi- dend withholding payment paid or dividend withhold- ing payment credit attached to a dividend derived; or any debit arises to the dividend withholding payment account in respect of any dividend withholding payment credit attached to a dividend paid, any dividend with- holding payment or tax credit refunded, or any alloca- tion debit arising under section ME 8(4),— that credit or debit does not arise to the dividend withholding payment account of any individual company.
2114 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 16 (2) Subject to subsection (4), where and to the extent that at any time— (a) (b) (c) a company which is at that time a member of a con- solidated group has a credit in its individual dividend withholding payment account (such credit being in this section referred to as the company credit); and a debit arises under section MG 15 to be recorded in the dividend withholding payment account of the consoli- dated group; and that debit is not offset, determined by applying the pro- cedure set out in section MG 5(4)(c), against any credit in the consolidated group’s dividend withholding pay- ment account which arose before the date or on the same date upon which the company credit arose,— the company credit is, to the extent of that debit, credited to the dividend withholding payment account of the consolidated group, and that credit to the group’s dividend withholding payment account is, for the purposes of section MG 15(1)(i), deemed to have been cancelled out by that debit notwithstand- ing section MG 5.
(3) Where at any time all or part of any credit in a company’s dividend withholding payment account is credited to the divi- dend withholding payment account of a consolidated group, an amount equal to the credit so arising arises as a debit at that time to be recorded under section MG 5 in the company’s divi- dend withholding payment account.
(4) Where under subsection (2) credits in the individual dividend withholding payment accounts of 2 or more members of a con- solidated group would, but for this subsection, be required to be credited to the group’s dividend withholding payment ac- count, those credits must be credited— (a) in the order in which those credits arose, determined by applying the procedure set out in section MG 5(4)(c); and if 2 or more credits arose at the same time,— (i) (ii) in the order elected by the consolidated group; or if no such election is made, on a pro rata basis,— so far as the relevant debit to the group’s dividend withholding payment account extends and no further.
(b) 2115 Part M s MG 16A Income Tax Act 2004 Reprinted as at 29 August 2011 (5) Where and to the extent that at any time— (a) (b) a debit would, but for this subsection, arise in the indi- vidual dividend withholding payment account of a com- pany which is at that time a member of a consolidated group; and the arising of that debit would result in or increase a debit balance in the individual dividend withholding payment account of the company,— that debit does not arise to the company’s dividend withhold- ing payment account but is debited to the consolidated group’s dividend withholding payment account.
(6) Where at any time— (a) (b) (c) a company has paid any further dividend withholding payment under section MG 9 in respect of a debit bal- ance in its individual dividend withholding payment ac- count; and the company is entitled under section MG 9(5) to credit that further dividend withholding payment in payment of any dividend withholding payment for which the company becomes liable at or after that time; and the company is at that time a member of a consoli- dated group,— the further dividend withholding pay- ment may be credited in payment of any dividend with- holding payment payable at or after that time by any company which is at that time a member of the consoli- dated group and, to the extent so credited, is not avail- able to be credited under section MG 9(5).
Compare: 1994 No 164 s MG 16 MG 16A Application of speciﬁc dividend withholding provisions to consolidated groups Section MG 8 applies with any necessary modiﬁcations to a consolidated group— (a) (b) as if the consolidated group were a company; and for the purpose of section MG 8(2) to (4), without tak- ing into account any dividend that is paid by a member of the consolidated group to another member of the con- solidated group.
(1) 2116 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MG 16A (1B) Section MG 8B applies with any necessary modiﬁcations to a consolidated group that has a policyholder credit account— (a) (b) as if the consolidated group were a company; and as if a reference to section MG 7 were a reference to section NH 6(2); and without taking into account any dividend that is paid by a member of the consolidated group to another member of the consolidated group.
(c) (2) (3) Section MG 9 and sections 103, 104, 139B, 140C, 140D and 181 of the Tax Administration Act 1994 apply, with any ne- cessary modiﬁcations, to a consolidated group and its dividend withholding payment account as if— (a) (b) the consolidated group were a single company; and each reference to a provision of this Act were a refer- ence to the equivalent provision that applies to consoli- dated groups; and each reference to the liability of a company for further dividend withholding payment, late payment penalty, or dividend withholding payment penalty tax were, subject to the application of section HB 1(2) to (5), a reference to a joint and several liability of each company which is a member of the group at the time the liability becomes payable.
(c) Sections GC 22 and MG 12 apply, with any necessary modi- ﬁcations, to the dividend withholding payment account of a consolidated group, as if— (a) (b) the consolidated group were a single company; and each reference to a provision of this Act were a refer- ence to the equivalent provision that applies to the ac- counts of a consolidated group.
Compare: 1994 No 164 s MG 16A Subsection (1) was substituted, as from 1 October 2005, by section 246 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

Subsection (1B) was inserted, as from 1 October 2005, by section 246 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
2117 Part M s MG 17 Income Tax Act 2004 Reprinted as at 29 August 2011 Amalgamated companies MG 17 Debits and credits arising to dividend withholding payment account of amalgamated company on amalgamation (1) Where any amalgamating company ceases to exist upon a qualifying amalgamation,— (a) if, immediately before the amalgamation, a credit or debit exists, determined by applying the procedure set out in sections GC 27 and MG 5(4), in the amalgamat- ing company’s dividend withholding payment account, the credit or debit is treated with effect from the time of the amalgamation as a credit or debit in the dividend withholding payment account of the amalgamated com- pany (or, if the amalgamated company does not have a dividend withholding payment account, in its imput- ation credit account) and not as a credit or debit in the dividend withholding payment account of the amalgam- ating company but applying section MG 5(1)(i) as if, with respect to all times prior to the amalgamation, the amalgamated company did not separately exist and was instead the amalgamating company with the same hold- ers of shares and options over shares as the amalgamat- ing company each holding the same number and class of shares and options over shares as they held in the amal- gamating company; and any credit or debit (not being a debit arising under section MG 5(1)(i)) would have arisen, but for the amalgamation, to be recorded in the dividend withhold- ing payment account of the amalgamating company on a date after the amalgamation, the credit or debit in- stead arises to be recorded in the dividend withholding payment account of the amalgamated company (or, if the amalgamated company does not have a dividend its imputation credit withholding payment account, account).
(b) (2) Where a consolidated group ceases to exist on a qualifying amalgamation which involves all members of the consolidated group amalgamating (whether or not also amalgamating with any company outside the group),— 2118 Reprinted as at 29 August 2011 (a) (b) Income Tax Act 2004 Part M s MG 17 if, immediately before the amalgamation, a credit or debit exists, determined by applying the procedure set out in sections GC 27 and MG 5(4), in the consoli- dated group’s dividend withholding payment account, the credit or debit is treated with effect from the time of the amalgamation as a credit or debit in the dividend withholding payment account of the amalgamated com- pany (or, if the amalgamated company does not have a dividend withholding payment account, in its imput- ation credit account) and not as a credit or debit in the dividend withholding payment account of the consoli- dated group but applying section MG 5(1)(i) as if, with respect to all times prior to the amalgamation, the amal- gamated company did not separately exist and was in- stead the consolidated group with the same holders of shares and options over shares as the consolidated group each holding the same number and class of shares and options over shares as they held in the consolidated group; and any credit or debit (not being a debit arising under sec- tion MG 15(1)(i)) would have arisen, but for the amal- gamation, to be recorded in the dividend withholding payment account of the consolidated group on a date after the amalgamation, the credit or debit instead arises to be recorded in the dividend withholding payment ac- count of the amalgamated company (or, if the amalga- mated company does not have a dividend withholding payment account, its imputation credit account).
Compare: 1994 No 164 s MG 17 Subpart MH—Payment of tax by public authorities Contents MH 1 Payment of tax by public authorities Page 2120 2119 Part M s MH 1 Income Tax Act 2004 Reprinted as at 29 August 2011 MH 1 Payment of tax by public authorities All money payable as income tax or any other tax or amount under this Act by any public authority is payable without fur- ther appropriation than this section.
Compare: 1994 No 164 s MH 1 Subpart MI—Conduit tax relief accounts Contents MI 1 Balance of conduit tax relief account MI 2 Company may elect to be conduit tax relief company and maintain conduit tax relief account MI 3 Conduit tax relief account MI 4 Credits arising to conduit tax relief account MI 5 Debits arising to conduit tax relief account MI 6 End of imputation year clearing transfer to or from dividend withholding payment account MI 7 Attachment of conduit tax relief credit to dividend MI 8 Allocation rules for conduit tax relief credits MI 9 Arrangement to obtain tax advantage MI 10 Dividend withholding payment payable in respect of conduit tax relief account debits MI 11 Refund of tax in respect of transfer from dividend withholding payment account Credits and debits incorrectly recorded MI 12 Correction by Commissioner of credits and debits MI 13 Debits and credits arising to conduit tax relief account of amalgamated company on amalgamation Page 2121 2121 2122 2123 2124 2127 2128 2128 2128 2128 2129 2130 2130 Consolidated groups MI 14 Consolidated group to maintain separate conduit tax relief 2132 account MI 15 Consolidated group conduit tax relief account MI 16 Consolidated group member is conduit tax relief company MI 17 Credits arising to group conduit tax relief account MI 18 Debits arising to group conduit tax relief account MI 19 Debiting and crediting between group and individual conduit tax relief accounts MI 20 End of imputation year clearing transfer to or from dividend withholding payment account 2132 2132 2132 2134 2136 2137 2120 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MI 2 MI 21 Dividend with-holding payment payable in respect of group conduit tax relief account debits MI 22 Application of speciﬁc conduit tax relief account 2138 2139 provisions to consolidated groups MI 1 Balance of conduit tax relief account (1) The balance of a conduit tax relief account is the difference between the aggregate amounts of credits and debits existing in the account.
The account has— (a) (b) Compare: 1994 No 164 s MI 1 a credit balance if credits exceed debits: a debit balance if debits exceed credits.

(2) MI 2 Company may elect to be conduit tax relief company and maintain conduit tax relief account (1) A dividend withholding payment account company may elect (2) to be a conduit tax relief company for an imputation year.
The company must notify the Commissioner of its election by the date the company must furnish its return of income for the tax year corresponding with the imputation year.

(4) (3) An election is effective from the date it is notiﬁed to the Com- missioner for the purposes of sections LG 1(1), MG 6, MI 7, MZ 4, and NH 7, but otherwise from the start of the imputation year.
The company must maintain a conduit tax relief account from the beginning of the imputation year and for every subsequent imputation year until revocation under subsection (5) takes ef- fect.

The company may revoke its election.

(5) (5A) A revocation of an election is effective from the beginning of the imputation year immediately succeeding the imputation year in which the revocation is made.
Revocation is of no effect unless the company— (a) furnishes the annual imputation return required for the imputation year in which the revocation election was (6) 2121 Part M s MI 3 Income Tax Act 2004 Reprinted as at 29 August 2011 made within the time limit in section 69 of the Tax Administration Act 1994; and has paid any dividend withholding payment payable in respect of that cessation under section MI 10(3).
(b) (6A) A company is treated as having revoked its election if it elects to cease to be a dividend withholding payment account com- pany under section MG 2(4).

(7) A company that revokes its election must maintain the account until the end of the imputation year in which the revocation is made.
(8) A company that ceases to be a dividend withholding payment account company as a result of section MG 2(6)— (a) ceases to be a conduit tax relief company; and (b) must furnish, within the time limit in section 69 of the Tax Administration Act 1994, the annual imputation re- turn required from the company for the imputation year in which the company becomes a non-resident; and (c) must pay any dividend withholding payment that may be payable under section MI 10(3) by the company as a dividend withholding payment account company for the imputation year.
Compare: 1994 No 164 s MI 2 Subsection (8) was inserted, as from 3 April 2006, by section 157(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the 2005–06 imputation year.
MI 3 Conduit tax relief account (1) For each imputation year, a company must record the follow- ing in its conduit tax relief account: the opening balance calculated under subsection (2): (a) credits arising under section MI 4: (b) (c) debits arising under section MI 5.

The opening balance of the account is,— (a) for the ﬁrst imputation year the company is a conduit tax relief company, nil; and for subsequent imputation years, the closing balance of the account at the end of the preceding imputation year.
(b) (2) (3) [Repealed] Compare: 1994 No 164 s MI 3 2122 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MI 4 Section MI 3(3): repealed (with effect on 1 October 2007), on 6 October 2009, by section 835 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section MI 3(3): added (with effect from 1 October 2007), on 19 December 2007, by section 170 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MI 4 Credits arising to conduit tax relief account (1) In an imputation year, a company’s conduit tax relief account must be credited by the following amounts: (a) an income tax rebate allowed to the company under sec- tion KH 1: a dividend withholding payment reduction allowed to the company under section NH 7 for a dividend paid to the company during the imputation year: a conduit tax relief credit attached to a dividend derived by the company: the amount of a debit arising under section MI 5(1)(d), to the extent it is subsequently established that the rele- vant conduit tax relief credit was not part of an arrange- ment to obtain a tax advantage: a credit transferred from the company’s dividend with- holding payment account under section MI 6(1).
(b) (c) (d) (e) (2) The credits arise at the following times: (a) in the case of an income tax rebate credit,— (i) on the last day of the imputation year that corres- ponds to the tax year, to the extent of the amount calculated under the following formula: where— PROV is the amount debited on the last day of the imputation year under section ME 5(2)(l)(i) XFER is the total amount to be transferred from the imputation credit account to the dividend withholding payment account under section ME 5(1)(o) 2123 Part M s MI 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (ii) CTR is the amount of income tax rebate to be credited under subsection (1)(a); and to the extent that subparagraph (i) does not apply, on the date the company ﬁles the return of income for the tax year: in the case of a dividend withholding payment reduc- tion credit, on the date the company is required to pay the Commissioner the dividend withholding payment reduced by section NH 7: in the case of a credit for a conduit tax relief credit at- tached to a dividend, on the date the dividend is paid: in the case of the subsequent correction credit, on the date the relevant debit arose under section MI 5(1)(d): in the case of a transferred credit, immediately before the end of the imputation year.
(b) (c) (d) (e) (3) [Repealed] Compare: 1994 No 164 s MI 4 Section MI 4(3): repealed (with effect on 1 October 2007), on 6 October 2009, by section 836 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section MI 4(3): added (with effect from 1 October 2007), on 19 December 2007, by section 171 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MI 5 Debits arising to conduit tax relief account (1) In an imputation year, a company’s conduit tax relief account must be debited by the following amounts: (a) a conduit tax relief credit attached to a dividend paid by the company during the imputation year: the amount of conduit tax relief adjustment calculated under section FH 8(5): an allocation deﬁcit debit arising under section MG 8, as applied by section MI 8: a debit arising to the account under section GC 22, as applied by section MI 9: a credit in the account at any time (that is not previously cancelled by a debit) if, since the time the credit arose, there has been an increase of 34 or more percentage points in the percentage of the company’s shareholders (b) (c) (d) (e) 2124 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MI 5 (f) (g) (h) (i) (j) who are resident in New Zealand, as measured under subsection (3): a credit in the account at any time (that is not previously cancelled by a debit) if and to the extent that— (i) the credit arose under section MI 4(1)(a) or (b); and the credit would not have arisen but for sections OE 7 and OE 8(3)(b) applying to deem a conduit tax relief group member to be a non-resident; and the conduit tax relief group member ceases to be a conduit tax relief group member because section OE 7(3)(c) is no longer satisﬁed: (ii) (iii) a credit in the account at any time (that is not previously cancelled by a debit) if— (i) the company is a conduit tax relief group member in respect of another conduit tax relief company; and the credit arose under section MI 4(1)(c) when the company received a dividend with a conduit tax relief credit attached from the other conduit tax relief company; and the company ceases at that time to be a con- duit tax relief group member because section OE 7(3)(c) is no longer satisﬁed: (ii) (iii) the credit balance (if any) of the account if the company ceases to be a conduit tax relief company during the imputation year: a credit transferred from the account to the company’s dividend
 withholding payment account under section MI 6(2): the amount of a credit transferred to the conduit tax re- lief account of a consolidated group under section MI 19.
(2) The debits referred to in subsection (1) arise at the following times: (a) in the case of a dividend attachment debit, on the date the dividend is paid: 2125 Part M s MI 5 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) (c) (d) (e) (f) (g) (h) (i) in the case of a conduit tax relief adjustment, on the date on which the income tax return for the tax year for which the adjustment is made is ﬁled: in the case of an allocation deﬁcit debit, at the end of the imputation year in which the debit arises: in the case of a tax advantage arrangement debit, at the end of the imputation year in which the arrangement commenced: in the case of a resident shareholder percentage debit, at the time the 34 percentage point change threshold is ﬁrst reached: in the case of the chain break debits referred to in sub- section (1)(f) and (g), at the time the group relationship ceases: in the case of a termination debit, immediately before the company ceases to be a conduit tax relief company: in the case of a credit transfer debit, immediately before the end of the imputation year: in the case of a debit for an amount transferred to the conduit tax relief account of a consolidated group under section MI 19, on the date of transfer.
(b) The percentage of shareholders of a conduit tax relief company who are resident in New Zealand at the time is the highest of— the percentage of direct voting interests held in the com- (a) pany by residents; and the percentage of direct market value interests held in the company (if a direct market value circumstance exists) by residents; and the percentage of total dividends payable by a company (if the shares in the company are not all shares of the same class) that would be derived by residents, if the company were liquidated at the relevant time.
(c) Subsection (1)(e) does not apply to the extent that the increase in shareholders resident in New Zealand is solely because sec- tion OE 7(1)(c) is not satisﬁed.
For the purposes of subsection (1)(e), (f), and (g), in determin- ing whether a credit has been cancelled out by a subsequent debit,— (a) section MI 3(2)(b) does not apply; and (3) (4) (5) 2126 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MI 6 (b) (c) an amount of debit can only cancel out a credit once; and a debit is offset against credits in the order in which the credits arise.
(6) A debit arises under subsection (1)(e) if it would have arisen but for an arrangement that affects the shares in the company, if a purpose or effect of the arrangement is to defeat the intent and application of subsection (1)(e).

The rules for determining residence in sections OE 7 and OE 8 apply for the purposes of subsections (1)(f) and (2).
[Repealed] Compare: 1994 No 164 s MI 5 (8) (7) Section MI 5(8): repealed (with effect on 1 October 2007), on 6 October 2009, by section 837 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section MI 5(8): added (with effect from 1 October 2007), on 19 December 2007, by section 172 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MI 6 End of imputation year clearing transfer to or from (1) (2) dividend withholding payment account If, immediately before the end of the imputation year and be- fore a transfer is made under this subsection (but after any transfer from the imputation credit account is credited under section ME 5(2)(l)(i) and any amount is credited to the conduit tax relief account under section MI 4(2)(a)(i)), a conduit tax relief company’s dividend withholding payment account is in credit and its conduit tax relief account is in debit, the company must transfer from the dividend withholding payment account to the conduit tax relief account the lesser of the 2 balances.
If, immediately before the end of the imputation year and be- fore a transfer is made under this subsection (but after any transfer from the imputation credit account is credited under section ME 5(2)(l)(i) and any amount is credited to the con- duit tax relief account under section MI 4(2)(a)(i)), a conduit tax relief company’s dividend withholding payment account is in debit and its conduit tax relief account is in credit, the company must transfer from the conduit tax relief account to 2127 Part M s MI 7 Income Tax Act 2004 Reprinted as at 29 August 2011 the dividend withholding payment account the lesser of the 2 balances.
Compare: 1994 No 164 s MI 6 MI 7 Attachment of conduit tax relief credit to dividend (1) A conduit tax relief company may attach a conduit tax relief credit to a dividend when it pays the dividend to a non-resident.

The rules for determining residence in sections OE 7 and OE 8 apply for the purposes of subsection (1).
Compare: 1994 No 164 s MI 7 (2) MI 8 Allocation rules for conduit tax relief credits (1) Sections MG 8 and MG 10 and the deﬁnitions of dividend withholding payment ratio and combined imputation and dividend withholding payment ratio apply as if a conduit tax relief credit were a dividend withholding payment credit.
To the extent that an allocation deﬁcit debit arises under sec- tion MG 8 only as a result of subsection (1), the allocation deﬁcit debit is debited to the conduit tax relief account and not the dividend withholding payment account.
Compare: 1994 No 164 s MI 8 (2) MI 9 Arrangement to obtain tax advantage (1) Section GC 22 and the deﬁnitions of dividend withholding payment ratio and combined imputation and dividend withholding payment ratio apply as if a conduit tax relief credit were a dividend withholding payment credit.

To the extent that a further debit arises under section GC 22 only as a result of subsection (1), the further debit is debited to the conduit tax relief account and not the dividend withholding payment account.
Compare: 1994 No 164 s MI 9 (2) MI 10 Dividend withholding payment payable in respect of conduit tax relief account debits If a debit arises to a company’s conduit tax relief account under section MI 5(1)(c), (d), or (e), the company must pay, to the Commissioner, an amount of dividend withholding payment (1) 2128 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MI 11 (2) (3) (4) (5) equal to that debit within 20 days of the end of the quarter in which the debit arises.
The amount of dividend withholding payment does not give rise to a credit in the company’s dividend withholding payment credit account.

If a debit arises to a company’s conduit tax relief account under section MI 5(1)(f), (g), or (h), the company must pay the Com- missioner an amount of dividend withholding payment equal to that debit within 20 days of the end of the quarter in which the debit arises.
If a credit balance is transferred from a company’s conduit tax relief account to its dividend withholding payment account under section MI 6(2), the company must pay the Commis- sioner an amount of dividend withholding payment equal to the amount transferred by 20 June after the imputation year for which the transfer is made.
Subject the Tax to this section and section 103A of Administration Act 1994, this Act and the Tax Administration Act 1994 (other than the dividend withholding payment rules), so far as they are applicable and with any necessary modiﬁcations, apply with respect to any dividend withholding payment for which a company is liable under this section as if it were income tax.
Compare: 1994 No 164 s MI 10 The heading to section MI 10 was amended, as from 3 April 2006, by section 158(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellan- eous Provisions) Act 2006 (2006 No 3) by substituting “Dividend” for “Further dividend” with application as from the 2005–06 imputation year.
Subsection (1) was amended, as from 3 April 2006, by section 158(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “an amount” for “a further amount” with application as from the 2005–06 imputation year.
Subsection (2) was amended, as from 3 April 2006, by section 158(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “amount” for “further amount” with application as from the 2005–06 imputation year.
MI 11 Refund of tax in respect of transfer from dividend (1) withholding payment account If a credit balance is transferred to a company’s conduit tax relief account from its dividend withholding payment account 2129 Part M s MI 12 Income Tax Act 2004 Reprinted as at 29 August 2011 (2) under section MI 6(1), the company is entitled to a refund equal to the amount of the transfer.
The Commissioner must pay the refund to the company or apply the refund to satisfy an obligation of the company at that time to pay an amount to the Commissioner.
Compare: 1994 No 164 s MI 11 Credits and debits incorrectly recorded MI 12 Correction by Commissioner of credits and debits (1) If the Commissioner considers that a credit or a debit in a com- pany’s conduit tax relief account is incorrectly recorded or de- termines that a debit or a credit has not been recorded at all, the Commissioner must determine the correct debit or credit amount and the date on which the debit or credit should be recorded.
(2) As soon as is convenient after a determination is made, the Commissioner must give notice of the determination of incor- rect entry to the company.

(4) (3) Unless the company establishes, in proceedings challenging the determination, that the Commissioner is wrong, the ac- count must be corrected accordingly.

The notice may be included in a notice of assessment under section 111(1) of the Tax Administration Act 1994.

Failure to give notice does not invalidate the Commissioner’s determination.
Compare: 1994 No 164 s MI 12 (5) MI 13 Debits and credits arising to conduit tax relief account of amalgamated company on amalgamation This section applies if an amalgamating company ceases to exist upon a qualifying amalgamation.
If, as a result of applying the procedure under section MI 5(5) and (6), there exists immediately before the amalgamation a credit or a debit in an amalgamating company’s conduit tax relief account, the credit or debit must be treated from the com- mencement of the amalgamation as a credit or debit in the con- duit tax relief account of the amalgamated company.
(1) (2) 2130 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MI 13 (3) (4) (5) (6) (7) If the amalgamated company has no conduit tax relief account, the credit or debit referred to in subsection (2) must be treated as a credit or debit in the amalgamated company’s imputation credit account.
Section MI 5(1)(e) applies to an amalgamated company as if, at all times prior to the amalgamation, the amalgamated com- pany did not separately exist and was instead the amalgamat- ing company with the same holders of shares and options over shares as the amalgamating company and with each holding the same number and class of shares and options over shares as they held in the amalgamating company.
If a credit or debit (not being a debit arising under section MI 5(1)(e)) would have arisen and, but for the amalgamation, been recorded in the conduit tax credit account of the amalgamating company on a date after the date of amalgamation, the credit or debit must be recorded in the conduit tax relief account of the amalgamated company.

If the amalgamated company referred to in subsection (5) has no conduit tax relief account, the debit must instead be recorded in that company’s imputation credit account.
If an amalgamated company does not have a conduit tax relief account after a qualifying amalgamation, and a credit is trans- ferred to the imputation account of the amalgamated company under either of subsection (3) or (6),— (a) the amalgamated company must within 20 days of the end of the quarter in which the amalgamation occurs pay an amount of dividend withholding payment equal to the amount of the credit transferred; and a payment required to be made under paragraph (a) does not give rise to a credit in the imputation credit ac- count or the dividend withholding payment account of the amalgamated company.
(b) Compare: 1994 No 164 s MI 13 2131 Part M s MI 14 Income Tax Act 2004 Reprinted as at 29 August 2011 Consolidated groups MI 14 Consolidated group to maintain separate conduit tax relief account (1) A consolidated group must maintain a group conduit tax relief account for an imputation year if a company which is a mem- ber of the consolidated group is a conduit tax relief company at any time during the imputation year.
(2) A group conduit tax relief account is a separate account from the conduit tax relief account of each company which is a member of the consolidated group.
Compare: 1994 No 164 s MI 14 MI 15 Consolidated group conduit tax relief account (1) The opening balance of a consolidated group’s conduit tax re- lief account is,— (a) for the ﬁrst imputation year the consolidated group maintains a group conduit tax relief account, nil; and for subsequent tax years, the closing balance of the ac- count at the end of the preceding imputation year.
(b) (2) [Repealed] Compare: 1994 No 164 s MI 15 Section MI 15(2): repealed (with effect on 1 October 2007), on 6 October 2009, by section 838 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section MI 15(2): added (with effect from 1 October 2007), on 19 December 2007, by section 173 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MI 16 Consolidated group member is conduit tax relief company A company is a conduit tax relief company, whether or not it has so elected under section MI 2, if it is a member of a consolidated group that is required to maintain a group conduit tax relief account for an imputation year.
Compare: 1994 No 164 s MI 16 MI 17 Credits arising to group conduit tax relief account (1) In an imputation year, a consolidated group’s conduit tax relief account must be credited by the following amounts: 2132 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MI 17 (a) (b) (c) (d) (e) (f) an income tax rebate allowed to the consolidated group under section KH 1: a dividend withholding payment reduction allowed under section NH 7 for a dividend paid during the imputation year to a company that is a member of the consolidated group at the time of the reduction: a conduit tax relief credit attached to a dividend de- rived by a company that is a member of the consolidated group at the time it derives the dividend: the amount of a debit that previously arose under section MI 18(1)(d), to the extent it is subsequently established that the relevant conduit tax relief credit was not part of an arrangement to obtain a tax advantage: the amount transferred from a company’s dividend withholding payment account under section MI 19: a credit transferred from the group’s dividend withhold- ing payment account under section MI 20(1).
(2) The credits arise at the following times: (a) in the case of an income tax rebate credit,— (i) on the last day of the imputation year that corres- ponds to the tax year, to the extent of the amount calculated using the formula— where— PROV is the amount debited on the last day of the imputation year under section ME 12(2)(l)(i) XFER is the total amount to be transferred from the imputation credit account to the dividend withholding payment account under section ME 12(1)(n) CTR is the amount of income tax rebate to be credited under subsection (1)(a); and to the extent that subparagraph (i) does not apply, on the date the company ﬁles its return of income for the tax year: (ii) 2133 Part M s MI 18 Income Tax Act 2004 Reprinted as at 29 August 2011 (c) (b) (d) in the case of a dividend withholding payment reduc- tion credit, on the date the company is required to pay the Commissioner the dividend withholding payment reduced by section NH 7: in the case of a credit for a conduit tax relief credit at- tached to a dividend, on the date the dividend is paid: in the case of a credit under section MI 17(1)(d), on the date the relevant debit arose under section MI 18(1)(d): in the case of a credit transferred under section MI 19, on the date the credit was transferred: in the case of a credit transferred under section MI 20(1), immediately before the end of the imputation year.
[Repealed] Compare: 1994 No 164 s MI 17 (e) (f) Section MI 17(3): repealed (with effect on 1 October 2007), on 6 October 2009, by section 839 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section MI 17(3): added (with effect from 1 October 2007), on 19 December 2007, by section 174 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(3) MI 18 Debits arising to group conduit tax relief account (1) In an imputation year, a consolidated group’s conduit tax relief account must be debited by the following amounts: (a) a conduit tax relief credit attached to a dividend paid during the imputation year by a company that is a mem- ber of the consolidated group at the time of payment: the amount of conduit tax relief adjustment calculated under section FH 8(5) for a company that is a member of the consolidated group on the last day of the tax year for which the adjustment arises: an allocation deﬁcit debit arising under section MG 8, as applied by section MI 8, for a company that is a member of the consolidated group at the time the relevant divi- dend is paid: a debit arising to the account under section GC 22, as applied by section MI 9: a credit in the group account at any time (that has not previously been cancelled by a debit) if, since the time (b) (c) (d) (e) 2134 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MI 18 that credit arose, there has been an increase of 34 or more percentage points in the percentage of the group’s shareholders who are resident in New Zealand, as mea- sured by applying section MI 5(3) to the group as if the group were a conduit tax relief company: the credit balance (if any) of the account if the consoli- dated group stops being required to maintain a group conduit tax relief account: a credit transferred from the account to the company’s dividend withholding payment account under section MI 20(2).
(f) (g) The debits arise at the following times: (a) in the case of a dividend attachment debit, on the date the dividend is paid: in the case of a conduit tax relief adjustment, on the date on which the income tax return for the tax year for which the adjustment is made is ﬁled: in the case of an allocation deﬁcit debit, at the end of the imputation year in which the debit arises: in the case of a tax advantage arrangement debit, at the end of the imputation year in which the arrangement commenced: in the case of a resident shareholder percentage debit, on the date that the 34 percentage point change threshold is ﬁrst reached: in the case of a termination debit, immediately before the consolidated group stops being required to maintain a conduit tax relief account: in the case of a credit transfer debit, immediately before the end of the imputation year.
(b) (c) (d) (e) (f) (g) For the purposes of subsection (1)(e), in determining whether a credit has been cancelled by a subsequent debit,— (a) (b) section MI 15 does not apply; and a credit arising under section MI 17(1)(e) is treated as arising on the date on which the corresponding credit arose in the conduit tax relief account of the group mem- ber; and an amount of debit can cancel out a credit only once; and (c) 2135 (2) (3) Part M s MI 19 Income Tax Act 2004 Reprinted as at 29 August 2011 (d) a debit is offset against credits in the order in which the credits arise.
(4) A debit arises under subsection (1)(e) if it would have arisen but for an arrangement that affects the shares of a company in the consolidated group, if a purpose or effect of the arrange- ment is to defeat the intent and application of subsection (1)(e).

[Repealed] Compare: 1994 No 164 s MI 18 (5) Section MI 18(5): repealed (with effect on 1 October 2007), on 6 October 2009, by section 840 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section MI 18(5): added (with effect from 1 October 2007), on 19 December 2007, by section 175 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MI 19 Debiting and crediting between group and individual conduit tax relief accounts (1) A credit does not arise to an individual company’s conduit tax relief account if a credit arises to a consolidated group’s conduit tax relief account for— (a) an amount of conduit tax relief arising under section KH 1 or NH 7; or a conduit tax relief credit attached to a dividend derived.
(2) A debit does not arise to an individual company’s conduit tax relief account if a debit arises to a consolidated group’s conduit tax relief account for— (a) (b) the amount of conduit tax relief credit attached to a divi- dend paid; or the amount of any conduit tax relief credit or tax credit refunded; or any amount of conduit tax relief adjustment calculated under section FH 8(5); or any allocation debit arising under section MG 8, as ap- plied by section MI 8.
(b) (c) (d) Subject to subsection (5), if a company has a credit in its indi- vidual conduit tax relief account (referred to as the company credit) and is a member of a consolidated group at that time, the credit must be transferred to the consolidated group’s con- duit tax relief account to the extent that— (3) 2136 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MI 20 (a) (b) (c) a debit arises under section MI 18 to be recorded in the consolidated group’s conduit tax relief account at that time; and that debit is not offset, determined by applying section MI 5(5), against a credit in the consolidated group’s conduit tax relief account which arose on or before the same date on which the company credit arose; and the credit does not exceed the consolidated group’s debit.
(4) If credit amounts in the individual conduit tax relief accounts of 2 or more members of a consolidated group would, but for this subsection, be required to be transferred to the group’s conduit tax relief account under subsection (3), those amounts must be transferred to the group account and must be cred- ited— (a) so far as the relevant debit to the group’s conduit tax relief account extends and no further; and in the order in which those credits arose, determined by applying section MI 5(5); and if 2 or more credits arose at the same time,— (i) (ii) in the order elected by the consolidated group; or if no such election is made, on a pro rata basis.
(b) (c) (5) A debit does not arise to a company’s conduit tax relief account but does arise to a consolidated group’s conduit tax relief ac- count to the extent that— (a) a debit would, but for this subsection, arise in the indi- vidual conduit tax relief account of a company that is a member of a consolidated group at the time the debit arises; and the arising of the debit would result in or increase the debit balance in the individual company’s conduit tax relief account.
Compare: 1994 No 164 s MI 19 (b) MI 20 End of imputation year clearing transfer to or from (1) dividend withholding payment account If, immediately before the end of the imputation year and be- fore a transfer is made under this subsection, but after a trans- fer from the imputation credit account is credited under sec- 2137 Part M s MI 21 Income Tax Act 2004 Reprinted as at 29 August 2011 (b) tion ME 12(2)(l)(i) and an amount is credited to the conduit tax relief account under section MI 17(2)(a)(i), a consolidated group’s dividend withholding payment account is in credit and its group conduit tax relief account is in debit, the consolidated group must— (a) apply section MI 19(3) as if the debit balance were the debit referred to in section MI 19(3)(b); and to the extent that the debit balance is not eliminated under paragraph (a), transfer from the dividend with- holding payment account to the conduit tax relief ac- count the lesser of— (i) the credit balance in the dividend withholding payment account; and the debit balance remaining in the conduit tax re- lief account after paragraph (a) has been applied.
If, immediately before the end of the imputation year and be- fore a transfer is made under this subsection, but after a trans- fer from the imputation credit account is credited under sec- tion ME 12(2)(l)(i) and an amount is credited to the conduit tax relief account under section MI 17(2)(a)(i), a consolidated group’s dividend withholding payment account is in debit and its group conduit tax relief account is in credit, the consoli- dated group must transfer from the conduit tax relief account to the dividend withholding payment account the lesser of the 2 balances.
Compare: 1994 No 164 s MI 20 (ii) (2) MI 21 Dividend with-holding payment payable in respect of group conduit tax relief account debits If a debit arises to a consolidated group’s conduit tax relief account under section MI 18(1)(c), (d), or (e), the group must pay to the Commissioner an amount of dividend withholding payment equal to the debit not later than 20 days after the end of the quarter in which the debit arises.
The amount of dividend withholding payment does not give rise to a credit in the group’s dividend withholding payment credit account.

If a debit arises to a consolidated group’s conduit tax relief account under section MI 18(1)(f), the group must pay to the (1) (2) (3) 2138 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MI 22 (4) (5) Commissioner an amount of dividend withholding payment equal to the debit not later than 20 days after the end of the quarter in which the debit arises.
If a credit balance is transferred from a consolidated group’s conduit tax relief account to its dividend withholding payment account under section MI 20(2), the consolidated group must pay to the Commissioner an amount of dividend withholding payment equal to the amount transferred by 20 June after the imputation year in which the transfer is made.
Subject to section 103A of the Tax Administration Act 1994, this Act and the Tax Administration Act 1994, other than the dividend withholding payment rules, so far as they are applic- able and with any necessary modiﬁcations, apply to a dividend withholding payment for which a consolidated group is liable under this section as if it were income tax.
Compare: 1994 No 164 s MI 21 The heading to section MI 21 was substituted, as from 3 April 2006, by section 159(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellan- eous Provisions) Act 2006 (2006 No 3) with application as from the 2005–06 imputation year.
Subsection (1) was amended, as from 3 April 2006, by section 159(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “an amount” for “a further amount” with application as from the 2005–06 imputation year.
Subsection (2) was amended, as from 3 April 2006, by section 159(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “amount” for “further amount” with application as from the 2005–06 imputation year.
MI 22 Application of speciﬁc conduit tax relief account (1) (2) provisions to consolidated groups Section MG 8, as applied by section MI 8, applies with any necessary modiﬁcations to a consolidated group as if it were a single company, but, for the purposes of section MG 8(2) to (4), dividends paid by 1 member of the consolidated group to another member of the consolidated group are not taken into account.
Section MI 10(5) and section 103A of the Tax Administration Act 1994 apply, with any necessary modiﬁcations, to a con- solidated group as if— (a) it were a single company; and 2139 (3) (4) Income Tax Act 2004 Reprinted as at 29 August 2011 (b) each reference to a provision of this Act were a refer- ence to the equivalent provision that applies to consoli- dated groups.
Section GC 22, as applied by section MI 9, applies with any ne- cessary modiﬁcations to the 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 that apply to equivalent ac- counts.
If a credit balance is transferred to a consolidated group’s con- duit tax relief account from its dividend withholding payment account under section MI 20(1)(b),— (a) the consolidated group is entitled to a refund of the amount of the transfer; and the Commissioner must pay the refund to the consoli- dated group or apply the refund to satisfy an obligation of the consolidated group to pay an amount to the Com- missioner at that time.
(b) Compare: 1994 No 164 s MI 22 Subpart MJ—Supplementary available subscribed capital accounts Contents MJ 1 Qualifying unit trust or group investment fund may elect to maintain supplementary available subscribed capital account Page 2141 MJ 2 Balance of supplementary available subscribed capital 2141 MJ 3 MJ 4 account Supplementary available subscribed capital account Supplementary available subscribed capital account: opening balance MJ 5 Credits arising to supplementary available subscribed capital account MJ 6 Debits arising to supplementary available subscribed capital account 2142 2142 2143 2144 2140 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MJ 2 Liquidation of qualifying unit trust or group investment fund MJ 7 Special rule for certain qualifying unit trusts and group investment funds Credits and debits incorrectly recorded MJ 8 Correction by Commissioner of credits and debits 2145 2145 MJ 1 Qualifying unit trust or group investment fund may elect (1) to maintain supplementary available subscribed capital account If a qualifying unit trust or a group investment fund that de- rives category A income is not a portfolio tax rate entity and issues shares on terms that their redemption will be subject to section CD 14(4), the qualifying unit trust or group invest- ment fund may establish and maintain a supplementary avail- able subscribed capital account on and after the date that the Taxation (Relief, Refunds and Miscellaneous Provisions) Act 2002 receives the Royal assent.
In this subpart, the date on which a qualifying unit trust or a group investment fund estab- lishes a supplementary available subscribed capital account is called the start date.

(2) Despite subsection (1), if section MJ 4(1) applies, and a quali- fying unit trust or group investment fund makes an actual cal- culation for a period before an effective date or a notional cal- culation as at an effective date that is within the period, the start date is the day after the effective date of the calculation.
Compare: 1994 No 164 s MJ 1 Section MJ 1(1): amended, on 1 October 2007, by section 134 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

MJ 2 Balance of supplementary available subscribed capital (1) (2) account The balance of a supplementary available subscribed capital account is the difference between the total amount of credits and the total amount of debits existing in the account.

The account has a credit balance if credits are more than debits.
Compare: 1994 No 164 s MJ 2 2141 Part M s MJ 3 Income Tax Act 2004 Reprinted as at 29 August 2011 MJ 3 Supplementary available subscribed capital account (1) For each imputation year, a qualifying unit trust or a group in- vestment fund must record the following in its supplementary available subscribed capital account: (a) (b) (c) The opening balance of the account is— (a) the opening balance: credits arising under section MJ 5 in the year: debits arising under section MJ 6 in the year.
for the ﬁrst imputation year in which the start date falls, nil; and for subsequent imputation years, the closing balance of the account for the prior imputation year.
(b) (2) Compare: 1994 No 164 s MJ 3 MJ 4 Supplementary available subscribed capital account: (1) opening balance This section applies to a qualifying unit trust or a group in- vestment fund that exists at any time between the date that the Taxation (Relief, Refunds and Miscellaneous Provisions) Act 2002 receives the Royal assent and 30 September 2003 (both dates inclusive).
(2) Despite section MJ 3(2), for the 2002-03 imputation year, a qualifying unit trust or a group investment fund may calculate the opening balance of its supplementary available subscribed capital account according to either— (a) an actual calculation of the total excess for any redemp- tions, being, for each redemption, the amount by which the available subscribed capital, as calculated under sec- tion CD 14(4), was more than the proceeds, calculated under sections CD 3 to CD 5 from the redemption, if the redemption occurred during the period beginning on the date on which the qualifying unit trust or group invest- ment fund became an imputation credit account com- pany and ending on the day before the start date; or a notional calculation according to the formula— (b) 2142 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MJ 5 where— further income tax on liquidation is the further in- come tax that would be payable under section ME 9 if the qualifying unit trust or group in- vestment fund were liquidated on the day before the start date, and it had paid all tax (including foreign dividend withholding payments) and imputed all dividends (including redemption dividends) at the maximum rate allowed tax not available to impute dividends is the amount of further income tax to be paid that arises due to the structural features of the taxation and imputation systems described in subsection (4) (3) (4) maximum imputation ratio is the ratio calculated us- ing the formula set out in section ME 8(1), as if the words “in which the dividend is paid” in item “a” were read as “in which the start date occurs”.
In subsection (2)(b), tax must be calculated under the item fur- ther income tax on liquidation based on an orderly realisa- tion of assets in the ordinary course of business.
For the purpose of subsection (2)(b), the structural features of the taxation and imputation systems that would not allow a company that does not issue shares on terms subject to section CD 14(4) to fully impute a distribution made on the liquidation of the company include, for example, the tax effects of— (a) non-taxable gains and losses, including exempt income but excluding dividends subject to section NH 1; and imputation credits lost because of a breach in the con- tinuity provisions; and foreign tax credits; and retained earnings generated before the qualifying unit trust or group investment fund established an imput- ation credit account.
(b) (c) (d) Compare: 1994 No 164 s MJ 4 MJ 5 Credits arising to supplementary available subscribed (1) capital account In an imputation year, a qualifying unit trust’s, or a group in- vestment fund’s, supplementary available subscribed capital 2143 Part M s MJ 6 Income Tax Act 2004 Reprinted as at 29 August 2011 account may be credited with the amount by which the avail- able subscribed capital, as calculated under section CD 14(4), is more than the proceeds, calculated under sections CD 3 to CD 5, from the redemption of shares in the qualifying unit trust or group investment fund.
The credit arises on the date that the shares are redeemed.

This section only applies to credits that arise in respect of re- demptions that occur on or after the start date.
Compare: 1994 No 164 s MJ 5 (2) (3) MJ 6 Debits arising to supplementary available subscribed capital account (1) A qualifying unit trust or a group investment fund that has a credit balance in its supplementary available subscribed cap- ital account at any time in the imputation year may elect to use all or part of the balance for the purpose of recording credits in its imputation credit account to satisfy a debit balance in that account.
(2) A qualifying unit trust or a group investment fund that has a credit balance in its supplementary available subscribed cap- ital account may, immediately before it ceases to be an imput- ation credit account company, elect to use all or part of the balance for the purpose of recording credits in its imputation credit account to satisfy a debit balance in that account.
(3) An election is made by— (a) (b) debiting the available subscribed capital account with the amount of the credit balance so elected; and crediting the imputation credit account with the amount allowed by section ME 4(1)(da).

The debit arises— (a) (b) on the date on which an election is made under subsec- tion (1): immediately before the qualifying unit trust or group in- vestment fund ceases to be an imputation credit account company if an election is made under subsection (2).
Compare: 1994 No 164 s MJ 6 (4) 2144 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MJ 8 Liquidation of qualifying unit trust or group investment fund MJ 7 Special rule for certain qualifying unit trusts and group (1) (2) investment funds If a qualifying unit trust or a group investment fund is liqui- dated and has never established a supplementary available sub- scribed capital account, the qualifying unit trust or the group investment fund may, upon liquidation, establish a supple- mentary available subscribed capital account and calculate an opening balance in accordance with section MJ 4(2).
If subsection (1) applies, section MJ 3 does not apply and the opening balance is treated as the closing balance of the ac- count.
Compare: 1994 No 164 s MJ 7 Credits and debits incorrectly recorded MJ 8 Correction by Commissioner of credits and debits (1) If the Commissioner considers that a credit or a debit in a quali- fying unit trust’s, or group investment fund’s, supplementary available subscribed capital account is incorrectly recorded or determines that a debit or a credit has not been recorded at all, the Commissioner must determine the correct debit or credit amount and the date on which the debit or credit should be recorded.
(2) As soon as is convenient after a determination is made, the Commissioner must give notice of the determination of incor- rect entry to the qualifying unit trust or group investment fund.

(3) Unless the qualifying unit trust or group investment fund es- tablishes in proceedings challenging the determination that the Commissioner is wrong, the account must be corrected accord- ingly.

The notice may be included in a notice of assessment under section 111(1) of the Tax Administration Act 1994.
Failure to give notice does not invalidate the Commissioner’s determination.
Compare: 1994 No 164 s MJ 8 (5) (4) 2145 Income Tax Act 2004 Reprinted as at 29 August 2011 Subpart MK—Maori authority credit accounts Contents MK 1 Maori authority to maintain Maori authority credit account MK 2 Balance of Maori authority credit account MK 3 Maori authority credit account MK 4 Credits arising to Maori authority credit account MK 5 Debits arising to Maori authority credit account MK 6 Maori authority may attach Maori authority credit to distribution MK 7 Allocation rules for Maori authority credit account credits MK 8 Further tax payable for end of year debit balance or when Maori authority ceases to exist Credits and debits incorrectly recorded MK 9 Correction by Commissioner of credits and debits Page 2146 2147 2147 2147 2149 2153 2153 2155 2156 MK 1 Maori authority to maintain Maori authority credit account (1) A Maori authority must establish and maintain a Maori author- ity credit account for each imputation year, and period within an imputation year, for which the Maori authority is not gov- erned by subsection (2).
(2) A Maori authority must not establish and maintain a Maori au- thority credit account for an imputation year, or a period within an imputation year, if, during the whole of the imputation year or period, the Maori authority is— (a) a Maori authority whose constitution or rules prohibit it from making a distribution of any kind to a member of the Maori authority; or a Maori authority that derives only exempt income, not being exempt income under section CW 10.
(b) Compare: 1994 No 164 s MK 1 2146 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MK 4 MK 2 Balance of Maori authority credit account (1) The balance of a Maori authority credit account is the differ- ence between the total amounts of credits and debits existing in the account.

The account has— (a) (b) Compare: 1994 No 164 s MK 2 a credit balance if credits exceed debits: a debit balance if debits exceed credits.
(2) MK 3 Maori authority credit account (1) For each imputation year, a Maori authority must record the following in its Maori authority credit account: the opening balance calculated under subsection (2): (a) credits arising under section MK 4: (b) debits arising under section MK 5.
(c) The opening balance of the account is— (a) for the ﬁrst imputation year in which the Maori author- ity establishes the account, nil: for subsequent imputation years, the closing balance of the account at the end of the preceding imputation year.
(b) Compare: 1994 No 164 s MK 3 (2) MK 4 Credits arising to Maori authority credit account (1) In an imputation year, a Maori authority must record the fol- lowing amounts as credits in its Maori authority credit account: the amount of any income tax paid by the Maori author- (a) ity during the imputation year to meet a provisional tax obligation under the provisional tax rules or to satisfy an income tax liability under sections BC 9 and BC 10, other than— (i) (ii) income tax paid for income tax payable in respect of the 2003-04 or an earlier income year: in the case of a Maori authority that becomes a Maori authority during the imputation year, in- come tax paid to the extent that the income tax is not more than the amount that would have been the Maori authority’s income tax liability for the income year, if the income year ended on the 2147 Part M s MK 4 Income Tax Act 2004 Reprinted as at 29 August 2011 (f) (e) (c) (d) (b) (iv) (iii) (eb) day immediately preceding the day on which the Maori authority became a Maori authority: income tax paid by way of crediting under section LB 2(2): income tax that is paid by way of a crediting of further income tax under section MK 8(5): the amount of any tax deemed to be paid by the Maori authority to another Maori authority under section MB 33(5)(b): the amount of further income tax paid by the Maori au- thority during the imputation year under section MK 8: the amount of a Maori authority credit attached to a distribution that is made to the Maori authority during the imputation year: the amount of an imputation credit attached to a divi- dend that is paid to the Maori authority during the im- putation year: the amount of an imputation credit attributed to it during the imputation year under section HL 27(7)(b): the amount of any dividend withholding payment credit attached to a dividend paid to the Maori authority dur- ing the imputation year at a time when the Maori au- thority is not a dividend withholding payment account company: an amount equal to any amount of a
 debit arising to the Maori authority credit account under section MK 5(1)(h) (which relates to debits arising in respect of Maori authority credits determined to have been the subject of an arrangement to obtain a tax advantage), to the extent that it is subsequently established that the relevant Maori authority credit should not have been de- termined to be the subject of such an arrangement: the amount of a resident withholding tax deduction deemed, under section NF 12(b), to have been derived by the Maori authority during the imputation year.
The credits referred to in subsection (1) arise at the following times: (a) in the case of the credits referred to in subsection (1)(a), (b), and (c), on the date the relevant tax is paid: (h) (g) (2) 2148 Reprinted as at 29 August 2011 Income Tax Act 2004 Part M s MK 5 (b) (c) (cb) (d) (e) in the case of a credit referred to in subsection (1)(d), on the date the relevant distribution is made: in the case of a credit referred to in subsection (1)(e) and (f), on the date the relevant dividend is paid: in the case of a credit referred to in subsection (1)(eb), on the day the amount is attributed: in the case of a credit referred to in subsection (1)(g), on the date that the relevant debit arose under section MK 5(2)(h): in the case of a credit referred to in subsection (1)(h), on the date that the resident withholding tax is deducted from the resident withholding income.
Compare: 1994 No 164 s MK 4 Section MK 4(1)(b): amended, on 1 October 2007, by section 160(1) of the Tax- ation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Pro- visions) Act 2006 (2006 No 3).

Section MK 4(1)(eb): inserted (with effect on 1 October 2007), on 29 August 2011, by section 205(1) of the Taxation (Tax Administration and Remedial Mat- ters) Act 2011 (2011 No 63).
Section MK 4(2)(cb): inserted (with effect on 1 October 2007), on 29 August 2011, by section 205(2) of the Taxation (Tax Administration and Remedial Mat- ters) Act 2011 (2011 No 63).