Reprint

as at 1 October 2017

Income Tax Act 2007

Public Act 2007 No 97
Date of assent 1 November 2007
Commencement see section A 2

Contents

Page
A 1 Title 118
A 2 Commencement 119

Part A

Purpose and interpretation

AA 1 Purpose of Act 120
AA 2 Interpretation 120
AA 3 Definitions 120
AA 4 Crown bound 121

Part B

Core provisions

Subpart BA—Purpose
BA 1 Purpose 123
Subpart BB—Income tax and resulting obligations
BB 1 Imposition of income tax 123
BB 2 Main obligations 123
BB 3 Overriding effect of certain matters 124

Note

Changes authorised by subpart 2 of Part 2 of the Legislation Act 2012 have been made in this official reprint. Note 4 at the end of this reprint provides a list of the amendments incorporated.

This Act is administered by the Inland Revenue Department.

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Subpart BC—Calculating and satisfying income tax liabilities
BC 1 Non-filing and filing taxpayers 126
BC 2 Annual gross income 127
BC 3 Annual total deduction 127
BC 4 Net income and net loss 127
BC 5 Taxable income 128
BC 6 Income tax liability of filing taxpayer 130
BC 7 Income tax liability of person with schedular income 130
BC 8 Satisfaction of income tax liability 132
Subpart BD—Income, deductions, and timing
BD 1 Income, exempt income, excluded income, non-residents’ foreign- sourced income, and assessable income
132
BD 2 Deductions 133
BD 3 Allocation of income to particular income years 133
BD 4 Allocation of deductions to particular income years 134
Subpart BE—Withholding liabilities
BE 1 Withholding liabilities 135
Subpart BF—Other obligations
BF 1 Other obligations 137
Subpart BG—Avoidance
BG 1 Tax avoidance 138
Subpart BH—Double tax agreements
BH 1 Double tax agreements 138

Part C Income

Subpart CA—General rules
CA 1 Amounts that are income 141
CA 2 Amounts that are exempt income or excluded income 141
Subpart CB—Income from business or trade-like activities

Business generally

CB 1 Amounts derived from business 144
CB 2 Amounts received on disposal of business assets that include trading stock
144

Schemes for profit

CB 3 Profit-making undertaking or scheme 145

Personal property

CB 4 Personal property acquired for purpose of disposal 145
CB 5 Business of dealing in personal property 145

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Land

CB 6A Disposal within 2 years: bright-line test for residential land 145
CB 6 Disposal: land acquired for purpose or with intention of disposal 148
CB 7 Disposal: land acquired for purposes of business relating to land 148
CB 8 Disposal: land used for landfill, if notice of election 149
CB 9 Disposal within 10 years: land dealing business 149
CB 10 Disposal within 10 years: land development or subdivision business
150
CB 11 Disposal within 10 years of improvement: building business 151
CB 12 Disposal: schemes for development or division begun within 10 years
CB 13 Disposal: amount from major development or division and not already in income
CB 14 Disposal: amount from land affected by change and not already in income
151
152
153
CB 15 Transactions between associated persons 154
CB 15B When land acquired 155

Exclusions for bodies controlled by local authorities

CB 15C Council-controlled organisations and other companies 156

Exclusions for residential land

CB 16A Main home exclusion for disposal within 2 years 156
CB 16 Residential exclusion from sections CB 6 to CB 11 157
CB 17 Residential exclusion from sections CB 12 and CB 13 158
CB 18 Residential exclusion from section CB 14 158

Exclusions for business premises

CB 19 Business exclusion from sections CB 6 to CB 11 159
CB 20 Business exclusion from sections CB 12 and CB 13 159

Exclusions for farm land

CB 21 Farm land exclusion from sections CB 12 and CB 13 160
CB 22 Farm land exclusion from section CB 14 160

Exclusion for investment land

CB 23 Investment exclusion from sections CB 12 and CB 13 161
CB 23B Land partially disposed of or disposed of with other land 161

Timber

CB 24 Disposal of timber or right to take timber 162
CB 25 Disposal of land with standing timber 162

Investments

CB 26 Disposal of certain shares by portfolio investment entities 163

Farming, forestry, or fishing

CB 27 Income equalisation schemes 164

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CB 27B Entering partners’ livestock income [Repealed] 164

Environmental restoration

CB 28 Environmental restoration accounts 164

Minerals

CB 29 Disposal of minerals 166

Intellectual property

CB 30 Disposal of patent applications or patent rights 166

Transfer of business

CB 31 Disposal of business: transferred employment income obligations 166

Stolen property

CB 32 Property obtained by theft 167

Look-through companies

CB 32B Owners of look-through companies 167
CB 32C Dividend income for first year of look-through company 167

Mutual associations

CB 33 Amounts derived by mutual associations 170
CB 34 Amounts derived by members from mutual associations 171

Partners and partnerships

CB 35 Amounts of income for partners 172

Emissions units under Climate Change Response Act 2002

CB 36 Disposal of emissions units 172
Subpart CC—Income from holding property (excluding equity)

Land use

CC 1 Land 175
CC 1B Consideration relating to grant, renewal, extension, or transfer of leasehold estate or licence
CC 1C Consideration for agreement to surrender leasehold estate or terminate licence
176
177
CC 2 Non-compliance with covenant for repair 178

Financial instruments

CC 3 Financial arrangements 178
CC 4 Payments of interest 178
CC 5 Annuities 179
CC 6 Prizes received under Building Societies Act 1965 179
CC 7 Consideration other than in money 180
CC 8 Use of money interest payable by Commissioner 180
CC 8B Certain commercial bills: non-resident holders 181

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Royalties

CC 9 Royalties 181
CC 10 Films 182

Finance leases

CC 11 Lessee acquiring lease asset on expiry of term of lease 183
CC 12 Lessor acquiring lease asset on expiry of term of lease 184

Hire purchase agreements

CC 13 Amounts paid in income years after hire purchase agreement ends 184
Subpart CD—Income from equity

Income

CD 1 Dividend 187
CD 2 Distribution excluded from being dividend 187

What is a dividend?

CD 3 Meaning of dividend 187
CD 4 Transfers of value generally 187
CD 5 What is a transfer of value? 187
CD 6 When is a transfer caused by a shareholding relationship? 189
CD 7 Bonus issues in lieu of dividend 190
CD 7B Shares issued under profit distribution plans 190
CD 8 Elections to make bonus issue into dividend 190
CD 9 Interests in money or property of foreign unit trust 191
CD 10 Bonus issue by foreign unit trust instead of money or property 192
CD 11 Avoidance arrangements 192
CD 12 Superannuation schemes entering trust rules 192
CD 13 Notional distributions of producer boards and co-operative companies
192
CD 14 Notional distributions of emigrating companies 193
CD 15 Tax credits linked to dividends 193
CD 16 Certain dividends not increased by tax credits 194
CD 17 Credit transfer notice 195
CD 18 Dividend reduced if foreign tax paid on company’s income 195
CD 19 Foreign tax credits and refunds linked to dividends 196
CD 20 Benefits of shareholder-employees or directors 197
CD 21 Attributed repatriations from controlled foreign companies

[Repealed]

197

What is not a dividend?

CD 22 Returns of capital: off-market share cancellations 198
CD 23 Ordering rule and slice rule 201
CD 23B Returns of capital: shares repurchased under profit distribution plans
202
CD 24 Returns of capital: on-market share cancellations 202

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CD 25 Treasury stock acquisitions 203
CD 26 Capital distributions on liquidation or emigration 204
CD 27 Property made available intra-group 205
CD 28 Transfers of certain excepted financial arrangements within wholly-owned groups
207
CD 29 Non-taxable bonus issues 207
CD 29B Issues to shareholders of rights to subscribe for or sell back shares 207
CD 30 Transfer by unit trust of legal interest after beneficial interest vests 208
CD 31 Flat-owning companies 208
CD 32 Employee benefits 209
CD 33 Payments corresponding to notional distributions of producer boards and co-operative companies
CD 34 Distribution to member of co-operative company based on member’s transactions [Repealed]
209
210
CD 34B Distributions to members of co-operative companies 210
CD 35 Resident’s restricted amalgamations 212
CD 36 Foreign investment fund income 213
CD 36B Foreign superannuation withdrawals and pensions from foreign superannuation scheme
214
CD 37 Maori authority distributions 215

Calculation rules

CD 38 General calculation rule for transfers of value 215
CD 39 Calculation of amount of dividend when property made available 215
CD 40 Adjustment if dividend recovered by company 219
CD 41 Adjustment if amount repaid later 221
CD 42 Adjustment if additional consideration paid 222
CD 43 Available subscribed capital (ASC) amount 222
CD 44 Available capital distribution amount 231

Attributed repatriation calculation rules

[Repealed]

CD 45 When does a person have attributed repatriation from a controlled foreign company? [Repealed]
238
CD 46 New Zealand repatriation amount [Repealed] 238
CD 47 New Zealand property amount [Repealed] 238
CD 48 Cost of tangible property [Repealed] 238
CD 49 Cost of associated party equity [Repealed] 239
CD 50 Outstanding balances of financial arrangements [Repealed] 239
CD 51 Property transfers between associated persons [Repealed] 239
CD 52 Unrepatriated income balance [Repealed] 239

Prevention of double taxation

CD 53 Prevention of double taxation of share cancellation dividends 239

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Returning share transfers

CD 54 Replacement payments 241
Subpart CE—Employee or contractor income

Employment income

CE 1 Amounts derived in connection with employment 242
CE 1B General rule: accommodation provided by employers 244
CE 1C Exception: overseas accommodation 245
CE 1D Exception: accommodation provided by Defence Force 246
CE 1E Exception: accommodation provided to ministers of religion 247
CE 2 Value and timing of benefits under share purchase agreements 249
CE 3 Restrictions on disposal of shares under share purchase agreements 251
CE 4 Adjustments to value of benefits under share purchase agreements 252

Definitions

CE 5 Meaning of expenditure on account of an employee 252
CE 6 Meaning of share: when share acquired 254
CE 7 Meaning of share purchase agreement 254

Attributed income

CE 8 Attributed income from personal services 254

Restrictive covenants and exit inducement payments

Income protection insurance

CE 11 Proceeds from claims under policies of income protection insurance
256

Tax credits

CE 12 Tax credits for personal service rehabilitation payments 256
Subpart CF—Income from living allowances, foreign superannuation, compensation, and government grants
CF 1 Benefits, pensions, compensation, and government grants 257
CF 2 Remission of specified suspensory loans 260
CF 3 Withdrawals from foreign superannuation scheme 260
Subpart CG—Recoveries
CG 1 Amount of depreciation recovery income 269
CG 2 Remitted amounts 269
CG 2B Remitted amounts on discharge from bankruptcy [Repealed] 270
CG 2C Remitted and other amounts: companies in liquidation 270
CG 2D Remitted and other amounts: companies leaving groups 272
CG 2E Remitted and other amounts: income apportionment 273
CG 3 Bad debt repayment 274

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CG 4 Receipts for expenditure or loss from insurance, indemnity, or otherwise
274
CG 5 Recoveries or receipts by employers from superannuation schemes 275
CG 5B Receipts from insurance, indemnity, or compensation for interruption or impairment of business activities
CG 6 Receipts from insurance, indemnity, or compensation for trading stock
275
276
CG 7 Recoveries after deduction of payments under lease 277
CG 7B Disposals or applications after earlier deductions 277
CG 7C Disposal or rerecognition of derecognised non-depreciable assets 278
CG 8 Capital contributions 279
CG 9 Recovery of deductions for aircraft engine overhaul 280
Subpart CH—Adjustments

Matching rules: revenue account property, prepayments, and deferred payments

CH 1 Adjustment for closing values of trading stock, livestock, and excepted financial arrangements
280
CH 2 Adjustment for prepayments 281
CH 3 Adjustment for deferred payment of employment income 281

Change to accounting practice

CH 4 Adjustment for change to accounting practice 282

Goods and services tax (GST)

CH 5 Adjustment for GST 282

Finance leases

CH 6 Adjustments for certain finance and operating leases 282

Avoidance and non-market transactions

CH 7 Adjustment for avoidance arrangements 283
CH 8 Market value substituted 283

Interest apportionment on thin capitalisation

CH 9 Interest apportionment: excess debt entity 284
CH 10 Interest apportionment: reporting bank 284

Expenditure other than for entities’ purposes

CH 11 Te Awa Tupua and Te Pou Tupua 284
Subpart CO—Income from voluntary activities
CO 1 Income from voluntary activities 285
Subpart CP—Income from portfolio investment entities
CP 1 Attributed income of investors in multi-rate PIEs 285

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Subpart CQ—Attributed income from foreign equity

Attributed controlled foreign company income

CQ 1 Attributed controlled foreign company income 286
CQ 2 When attributed CFC income arises 286
CQ 3 Calculation of attributed CFC income 289

Foreign investment fund income

CQ 4 Foreign investment fund income 289
CQ 5 When FIF income arises 289
CQ 6 Calculation of FIF income 294
CQ 7 Treatment of attributing interests subject to returning share transfer

[Repealed]

294
Subpart CR—Income from insurance
CR 1 Policyholder base income of life insurer 294
CR 2 Shareholder base income of life insurer 294
CR 3 Income of non-resident general insurer 295
CR 4 Income for general insurance outstanding claims reserve 296
Subpart CS—Superannuation funds

[Repealed] Withdrawals [Repealed]

CS 1 Withdrawals [Repealed] 299

Exclusions

[Repealed]

CS 2 Exclusions of withdrawals of various kinds [Repealed] 299
CS 3 Exclusion of withdrawal on grounds of hardship [Repealed] 299
CS 4 Exclusion of withdrawal to settle division of relationship property

[Repealed]

299
CS 5 Exclusion of withdrawal paid as annuity or pension [Repealed] 299
CS 6 Exclusion of withdrawal on partial retirement [Repealed] 299
CS 7 Exclusion of withdrawal when member ends employment

[Repealed]

CS 8 Exclusion of withdrawal when member ends employment: lock-in rule [Repealed]
CS 9 Exclusion of withdrawal from defined benefit fund when member ends employment [Repealed]
299
300
300
CS 10 When member treated as not ending employment [Repealed] 300
CS 10B Exclusion of permitted withdrawals from KiwiSaver schemes and complying superannuation funds [Repealed]
300

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Transfers to or from superannuation funds and superannuation schemes

[Repealed]

CS 11 Transfer by superannuation fund to another superannuation fund

[Repealed]

CS 12 Transfer from superannuation scheme to superannuation fund

[Repealed]

CS 13 Investment by superannuation fund in another superannuation fund

[Repealed]

Treatment of amounts when superannuation fund becomes superannuation scheme or vice versa

[Repealed]

300
300
300
CS 14 Superannuation fund becomes superannuation scheme [Repealed] 301
CS 15 Superannuation fund becomes foreign superannuation scheme

[Repealed]

301
CS 16 Superannuation scheme becomes superannuation fund [Repealed] 301

Treatment of distributions when superannuation fund wound up

[Repealed]

CS 17 Superannuation fund wound up [Repealed] 301

Treatment of loans to members

[Repealed]

CS 18 Value of loan treated as fund income [Repealed] 301
Subpart CT—Income from petroleum mining
CT 1 Disposal of exploratory material or petroleum mining asset 302
CT 2 Damage to assets 303
CT 3 Exploratory well used for commercial production 303
CT 4 Partnership interests and disposal of part of asset 304
CT 5 Petroleum mining operations outside New Zealand 304

Definitions

CT 6 Meaning of petroleum miner 304
CT 6B Meaning of petroleum mining operations 305
CT 7 Meaning of petroleum mining asset 306
Subpart CU—Income from mineral mining
CU 1 Mineral miner’s income 308
CU 2 Treatment of mining land 308
CU 3 Disposal of mineral mining assets 309
CU 4 Recovery of certain expenditure 309
CU 5 Partnership interests and disposal of part of asset 310

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Definitions

CU 6 Meaning of mineral miner 310
CU 7 Some definitions 311
CU 8 Meaning of listed industrial mineral 312
CU 9 Some definitions 313
CU 10 Mining asset used to derive income other than income from mining

[Repealed]

313
CU 11 Meaning of asset for sections CU 3 to CU 10 [Repealed] 314
CU 12 Application of sections to resident mining operators [Repealed] 314
CU 13 Application of sections to non-resident mining operators

[Repealed]

CU 14 Recovery of reinvestment profit on disposal of mining shares

[Repealed]

CU 15 Recovery of reinvestment profit not used for mining purposes

[Repealed]

314
314
314
CU 16 Recovery of reinvestment profit on repayment of loans [Repealed] 314
CU 17 Repayment by mining company of amount written off [Repealed] 314
CU 18 Amount treated as repayment for purposes of section CU 17:
excess [Repealed]
CU 19 Amount treated as repayment for purposes of section CU 17: net income [Repealed]
CU 20 Mining company or mining holding company liquidated

[Repealed]

314
315
315

Definitions

[Repealed]

CU 21 Meaning of income from mining [Repealed] 315
CU 22 Meaning of mining company [Repealed] 315
CU 23 Meaning of mining development expenditure [Repealed] 315
CU 24 Meaning of mining exploration expenditure [Repealed] 315
CU 25 Meaning of mining operations [Repealed] 315
CU 26 Meaning of mining venture [Repealed] 316
CU 27 Meaning of resident mining operator [Repealed] 316
CU 28 Meaning of specified mineral [Repealed] 316
CU 29 Other definitions [Repealed] 316
Subpart CV—Income specific to certain entities
CV 1 Group companies 317
CV 2 Consolidated groups: income of company in group 317
CV 3 Consolidated groups: arrangement for disposal of shares 318
CV 4 Amalgamated companies: amount derived after amalgamation 318
CV 5 Statutory producer boards 318
CV 6 Crown Research Institutes 318
CV 7 Australian wine producer rebate 319
CV 8 Regulations: Australian wine producer rebate 319

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CV 9 Supplementary dividend holding companies 320
CV 10 Foreign dividend payment account companies or conduit tax relief companies [Repealed]
320
CV 11 Maori authorities 320
CV 12 Trustees: amounts received after person’s death 321
CV 13 Amounts derived from trusts 321
CV 14 Distributions from community trusts 321
CV 15 Amounts derived from trusts while person absent from New
Zealand
321
CV 16 Non-resident shippers 322
CV 17 Non-exempt charities: taxation of tax-exempt accumulation 322
CV 18 Hedging of currency movements in Australian non-attributing shares and attributing FDR method interests
322
CV 19 Additional income for certain imputation credits 322
Subpart CW—Exempt income

Income from business or trade-like activities

CW 1 Forestry companies established by the Crown, Maori owners, and holding companies acquiring land with standing timber from founders
326
CW 1B Treaty of Waitangi claim settlements: rights to take timber 327
CW 2 Forestry encouragement agreements 328
CW 3 Forestry companies and Maori investment companies 328
CW 3B Pre-1990 forest land units: emissions trading scheme [Repealed] 329

Income from holding property (excluding equity)

CW 4 Annuities under life insurance policies 329
CW 5 Payments of interest: post-war credits 329
CW 6 Payments of interest: farm mortgages 329
CW 7 Foreign-sourced interest 330
CW 8 Money lent to government of New Zealand 330
CW 8B Certain amounts derived from use of assets 331

Income from equity

CW 9 Dividend derived from foreign company 332
CW 10 Dividend within New Zealand wholly-owned group 333
CW 11 Dividend of conduit tax relief holding company [Repealed] 334
CW 12 Proceeds of share disposal by qualifying foreign equity investor 334
CW 13 Proceeds from share or option acquired under venture investment agreement
339
CW 14 Dividends derived by qualifying companies 341
CW 15 Dividends paid by qualifying companies 341

Employee or contractor income

CW 16 Allowance of Governor-General and other benefits and privileges 342

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CW 16B Accommodation expenditure: out-of-town secondments and projects
342
CW 16C Time periods for certain accommodation expenditure 344
CW 16D Accommodation expenditure: conferences and overnight stays 346
CW 16E Accommodation expenditure: new employees 347
CW 16F Accommodation expenditure: multiple workplaces 348
CW 17 Expenditure on account, and reimbursement, of employees 348
CW 17B Relocation payments 351
CW 17C Payments for overtime meals and certain other allowances 352
CW
17CB CW
17CC
Payments for certain work-related meals 353
Payments for distinctive work clothing 355
CW 18 Allowance for additional transport costs 355
CW 19 Amounts derived during short-term visits 357
CW 20 Amounts derived by visiting entertainers including sportspersons 357
CW 21 Amounts derived by visiting crew of pleasure craft 358
CW 22 Amounts derived by overseas experts and trainees in New Zealand by government arrangement
359
CW 23 Income for military or police service in operational area 361
CW 24 Deferred military pay for active service 362
CW 25 Value of board for religious society members 362
CW 26 Jurors’ and witnesses’ fees 362

Certain income of transitional resident

CW 27 Certain income derived by transitional resident 362

Income from living allowances, foreign superannuation, compensation, and government grants

CW 28 Pensions 363
CW 28B Foreign superannuation withdrawal in initial period of residency 364
CW 28C Foreign superannuation withdrawal exceeding given amount 364
CW 29 Reinvested amounts from foreign superannuation schemes in
Australia
CW 29B Amounts from Australian complying superannuation schemes reinvested in KiwiSaver schemes
365
365
CW 30 Annuities from Crown Bank Accounts 365
CW 31 Services for members and former members of Parliament 365
CW 32 Maintenance payments 366
CW 33 Allowances and benefits 366
CW 34 Compensation payments 367
CW 35 Personal service rehabilitation payments 368
CW 36 Scholarships and bursaries 369
CW 37 Film production grants [Repealed] 369

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Income of certain entities

CW 38 Public authorities 369
CW 39 Local authorities 370
CW 40 Local and regional promotion bodies 371
CW 40B Te Urewera Board 372
CW 40C Te Pou Tupua 372
CW 41 Charities: non-business income 372
CW 42 Charities: business income 375
CW 42B Community housing trusts and companies 378
CW 43 Charitable bequests 380
CW 44 Friendly societies 382
CW 45 Funeral trusts 382
CW 46 Bodies promoting amateur games and sports 382
CW 47 TAB and racing clubs 383
CW 48 Income from conducting gaming-machine gambling 383
CW 49 Bodies promoting scientific or industrial research 384
CW 50 Veterinary services bodies 384
CW 51 Herd improvement bodies 384
CW 52 Community trusts 385
CW 53 Distributions from complying trusts 385
CW 54 Foreign-sourced amounts derived by trustees 385
CW 55 Maori authority distributions 385
CW
55BA CW
55BAB CW
55BB
Tertiary education institutions and subsidiaries 385
Rebate of fees paid by FIF 386
Minors’ income, to limited extent 387

Partners and partnerships

CW 55B Amounts of exempt income for partners 388

Income from certain activities

CW 56 Non-resident aircraft operators 388
CW 57 Non-resident company involved in exploration and development activities
389
CW 58 Disposal of companies’ own shares 390
CW 59 New Zealand companies operating in Niue 390
CW 59B Income of and distributions by certain international funds 391
CW 59C Life reinsurance outside New Zealand 392
CW 60 Stake money 392
CW 61 Providing standard-cost household service 392
CW 62 Interest paid under the KiwiSaver Act 2006 393
CW 62B Voluntary activities 393
CW 63 Avoidance arrangements 394

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CW 64 Exemption under other Acts 394

Restructuring under New Zealand Railways Corporation

Restructuring Act 1990

CW 65 New Zealand Railways Corporation restructure: exempt income 394
Subpart CX—Excluded income

Goods and services tax

CX 1 Goods and services tax 398

Fringe benefits

Introductory provisions

CX 2 Meaning of fringe benefit 398
CX 3 Excluded income 399
CX 4 Relationship with assessable income 399
CX 5 Relationship with exempt income 399

Fringe benefits

CX 6 Private use of motor vehicle 400
CX 7 Employer or associated person treated as having right to use vehicle under arrangement
401
CX 8 Private use of motor vehicle: use by more than 1 employee 401
CX 9 Subsidised transport 402
CX 10 Employment-related loans 402
CX 11 Employment-related loans: loans by life insurers 403
CX 12 Services for members and former members of Parliament 403
CX 13 Contributions to superannuation schemes 404
CX 14 Contributions to sickness, accident, or death benefit funds 404
CX 15 Contributions to funeral trusts 404
CX 16 Contributions to life or health insurance 404
CX 17 Benefits provided to employees who are shareholders or investors 406
CX 18 Benefits provided to associates of both employees and shareholders
409

Exclusions and limitations

CX 19 Benefits provided instead of allowances 409
CX 19B Transport in vehicle other than motor vehicle 410
CX 20 Benefits to enable performance of duties 410
CX 21 Business tools 411
CX 22 Benefits to non-executive directors 411
CX 23 Benefits provided on premises 411
CX 24 Benefits related to health or safety 412
CX 25 Benefits provided by charitable organisations 412
CX 26 Non-liable payments 413
CX 27 Assistance with tax returns 414
CX 28 Accommodation 414

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CX 29 Entertainment 414
CX 30 Distinctive work clothing 415
CX 31 Contributions to income protection insurance 415
CX 32 Services provided to superannuation fund 415
CX 33 Goods provided at discount by third parties 415
CX 33B Benefits for members of Parliament 416

Definitions

Insurance

CX 39 Life insurers and fully reinsured persons [Repealed] 418
CX 40 Superannuation fund deriving amount from life insurance policy 419
CX 41 Resident insurance underwriters 419

Petroleum mining

CX 42 Disposal of ownership interests in controlled petroleum mining entities
419
CX 43 Farm-out arrangements for mining operations 420

Mineral mining

[Repealed]

CX 44 Disposal of mining shares [Repealed] 420
CX 45 Disposal of mining shares acquired with reinvestment profit

[Repealed]

420
CX 46 Repayment of loans made from reinvestment profit [Repealed] 420

Government grants

CX 47 Government grants to businesses 420
CX 48 Amounts remitted as condition of new start grant [Repealed] 422
CX 48B Issue of post-1989 forest land units [Repealed] 422

Government funding of film and television

CX 48C Government funding additional to government screen production payments
422

Research and development

[Repealed]

CX 48D Tax credits for expenditure on research and development

[Repealed]

423

Superannuation and savings

CX 49 Employer’s superannuation contributions 423

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CX 50 Tax credits for KiwiSaver and complying superannuation funds 423
CX 50B Contributions to retirement savings schemes 423

Farming, forestry, or fishing

CX 51 Income equalisation schemes 424

Emissions units under Climate Change Response Act 2002

CX 51B Disposal of pre-1990 forest land emissions units 424
CX 51C Disposal of fishing quota emissions units 425

Environmental restoration

CX 52 Refund from environmental restoration account 425

Inflation-indexed instruments

CX 53 Credits for inflation-indexed instruments 425

Share-lending arrangements

CX 54 Share-lending collateral under share-lending arrangements 426

Portfolio investment income

CX 55 Proceeds from disposal of investment shares 426
CX 56 Attributed income of certain investors in multi-rate PIEs 428
CX 56B Distributions to investors in multi-rate PIEs 430
CX 56C Distributions to investors by listed PIEs 430
CX 57 Credits for investment fees 431

Minors’ beneficiary income

CX 58 Amounts derived by minors from trusts 431
CX 59 Taxable distributions from non-complying trusts 432

Transactions between companies in consolidated groups

CX 60 Intra-group transactions 432

Avoidance arrangements

CX 61 Avoidance arrangements 432

Partners and partnerships

CX 62 Amounts of excluded income for partners 432

Look-through companies

CX 63 Dividends derived after company ceased to be look-through company
433
Subpart CZ—Terminating provisions
CZ 1 Share purchase agreement income before 19 July 1968 435
CZ 2 Mining company’s 1970–71 tax year [Repealed] 435
CZ 3 Exchange variations on 8 August 1975 435
CZ 4 Mineral mining: company making loan before 1 April 1979

[Repealed]

437

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CZ 5 Exempt interest: overseas money lent to government or local or public authority before 29 July 1983
437
CZ 6 Commercial bills before 31 July 1986 437
CZ 7 Primary producer co-operative companies: 1987–88 income year 438
CZ 8 Farm-out arrangements for petroleum mining before 16 December
1991
439
CZ 9 Available capital distribution amount: 1965 and 1985–1992 439
CZ 9B Available capital distribution amount: 1988 to 2010 [Repealed] 440
CZ 10 Transitional relief for calculation of attributed repatriation dividends: 2 July 1992 [Repealed]
440
CZ 11 Recovery of deductions for software acquired before 1 April 1993 440
CZ 12 General insurance with risk period straddling 1 July 1993 440
CZ 13 Treatment of units and interests in unit trusts and group investment funds on issue as at 1 April 1996
CZ 14 Treatment of superannuation fund interests in group investment funds on 1 April 1999
441
442
CZ 15 Accident insurance contracts before 1 July 2000 442
CZ 16 Interest payable to exiting company: 2001 442
CZ 17 Dividend of exiting company: 2001 442
CZ 18 Benefit provider approved within 6 months of 25 November 2003 443
CZ 19 Community trust receipts in 2004–05 or 2005–06 tax year 444
CZ 20 Disposal of personal property lease asset under specified lease 444
CZ 21 Superannuation fund loans made to members before 1 April 1989 445
CZ 21B Optional treatment of withdrawals from foreign superannuation schemes not included in return or assessed before 1 April 2014
445
CZ 22 Geothermal wells between 31 March 2003 and 17 May 2006 446
CZ 23 Insurance or compensation for buildings replaced as revenue account property affected by Canterbury earthquakes [Repealed]
CZ 23 Employee benefits for Canterbury earthquake relief: exempt income
CZ 24 Employee benefits for Canterbury earthquake relief: not fringe benefits
CZ 25 Land and buildings as revenue account property affected by Canterbury earthquakes and replaced—insurance or compensation, Government purchase
CZ 26 Land and buildings affected by Canterbury earthquakes—sections
CB 9 to CB 11 and CB 14 overridden for Crown purchases
447
447
448
449
452
CZ 27 Prior bad debt deductions clawback 452
CZ 28 Transitional provision for mineral mining: previously appropriated mining expenditure
453
CZ 29 Accommodation expenditure: Canterbury earthquake relief 454
CZ 30 Transitional provision: application of certain accommodation provisions
455
CZ 31 Accommodation expenditure: New Zealand Defence Force 456

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CZ 32 Treatment of certain petroleum storage facilities 457
CZ 33 Transitional exception for accommodation provided to ministers of religion
CZ 34 Income arising from tax accounting provision for aircraft engine overhauls
458
459

Part D Deductions

Subpart DA—General rules
DA 1 General permission 460
DA 2 General limitations 461
DA 3 Effect of specific rules on general rules 461
DA 4 Treatment of amount of depreciation loss 462
DA 5 Treatment of expenditure for commercial fit-out [Repealed] 462
Subpart DB—Specific rules for expenditure types

Taxes and other amounts

DB 1 Taxes, other than GST, and penalties 466
DB 2 Goods and services tax 467
DB 3 Determining tax liabilities 468
DB 3B Use of money interest 469
DB 4 Chatham Islands dues 469
DB 4B Fees to purchase funds in tax pooling accounts 470

Financing costs

DB 5 Transaction costs: borrowing money for use as capital 470
DB 6 Interest: not capital expenditure 471
DB 7 Interest: most companies need no nexus with income 471
DB 8 Interest: money borrowed to acquire shares in group companies 473
DB 9 Interest incurred on money borrowed to acquire shares in qualifying companies
475
DB 10 Interest or expenditure connected to profit-related debentures 476
DB 10B Interest or expenditure connected to stapled debt security 477

Financial arrangements adjustments

DB 11 Negative base price adjustment 477
DB 12 Base price adjustment under old financial arrangements rules 478
DB 13 Repayment of debt in certain circumstances 478
DB 14 Security payment 479
DB 15 Sureties 479

Share-lending arrangements

DB 16 Share-lending collateral under share-lending arrangements 480
DB 17 Replacement payments and imputation credits under share-lending arrangements
480

19

Income Tax Act 2007

Reprinted as at

1 October 2017

DB
18AA

Premises or land costs

Square metre rate method 481
DB 18A Ring-fenced allocations: disposal of residential land within 2 years 481
DB
18AB
Deduction cap: disposal of residential land within 2 years to associated persons
482
DB 18 Transaction costs: leases 483
DB 19 Expenses in application for resource consent 483
DB 20 Destruction of temporary building 484
DB 20B Consideration for agreement to grant, renew, extend, or transfer leasehold estate or licence
DB 20C Consideration for agreement to surrender leasehold estate or terminate licence
485
485
DB 21 Amounts paid for non-compliance with covenant for repair 486
DB 22 Amounts paid for non-compliance and change in use 487
DB 22B Amounts paid for commercial fit-out for building 488

Revenue account property

DB 23 Cost of revenue account property 488
DB 24 Share losses 489
DB 25 Cancellation of shares held as revenue account property 491
DB 26 Amount from profit-making undertaking or scheme and not already in income
DB 27 Amount from major development or division and not already in income
492
492
DB 28 Amount from land affected by change and not already in income 493
DB 29 Apportionment when land acquired with other property 494
DB 30 Cost of certain minerals 494

Bad debts

Research and development

DB 33 Scientific research 501
DB 34 Research or development 501
DB 35 Some definitions 504
DB 36 Patent expenses 505
DB 37 Expenses in application for patent or design registration 506
DB 38 Patent rights: devising patented inventions 507
DB 39 Patent rights acquired before 1 April 1993 507
DB 40 Patent applications or patent rights acquired on or after 1 April
1993
508
DB
40BA
Expenses in application for plant variety rights 509

20

Reprinted as at

1 October 2017 Income Tax Act 2007

Unsuccessful software development

DB 40B Expenditure in unsuccessful development of software 510

Marketing

DB 41 Charitable or other public benefit gifts by company 510

Theft and bribery

DB 42 Property misappropriated by employees or service providers 511
DB 43 Making good loss from misappropriation by partners 512
DB 44 Restitution of stolen property 513
DB 45 Bribes 513

Pollution control

DB 46 Avoiding, remedying, or mitigating effects of discharge of contaminant
514

Repayments

Matching rules: revenue account property, prepayments, and

deferred payments

DB 49 Adjustment for opening values of trading stock, livestock, and excepted financial arrangements
517
DB 50 Adjustment for prepayments 518
DB 51 Adjustment for deferred payment of employment income 518

Adjustments for leases that become finance leases

DB 51B Adjustments for leases that become finance leases 519

Change to accounting practice

DB 52 Adjustment for change to accounting practice 519

Investment income

DB 53 Attributed PIE losses of certain investors 520
DB 54 No deductions for fees relating to interests in multi-rate PIEs 520
DB 54B Expenditure incurred by foreign investment PIEs 521

Exempt income

[Repealed]

DB 55 Expenditure incurred in deriving exempt dividend [Repealed] 522

Use of motor vehicle under certain arrangements

DB 56 Expenditure incurred in operating motor vehicle under agreement or arrangement affected by section CX 7

Payments to spouses, civil union partners, or de facto partners

DB 57 Payments to spouses, civil union partners, or de facto partners other than for services
522
523

21

Income Tax Act 2007

Reprinted as at

1 October 2017

Avoidance and non-market transactions

DB 58 Adjustment for avoidance arrangements 523
DB 59 Market value substituted 524

Emissions units and liabilities under Climate Change Response

Act 2002

DB 60 Acquisition of emissions units 524
DB 60B Liabilities for emissions 525
DB 61 Surrender of certain emissions units for post-1989 forest land emissions
525

Legal expenses

DB 62 Deduction for legal expenses 526

Miscellaneous company administration costs

Capital contributions

DB 64 Capital contributions 527
DB 65 Allowance for certain commercial buildings 528
Subpart DC—Employee or contractor expenditure
DC 1 Lump sum payments on retirement 531
DC 2 Pension payments to former employees 531
DC 3 Pension payments to former partners 533
DC 3B Payments to working owners 533
DC 4 Payments to working partners 534
DC 5 Payments to spouses, civil union partners, or de facto partners:
services
535
DC 6 Contributions to employees’ benefit funds 536
DC 7 Contributions to employees’ superannuation schemes 536
DC 8 Attribution of personal services 537
DC 9 Restrictive covenants or exit inducements 537
DC 10 Disposal of business: transferred employment income obligations 538
DC 11 Transfers of employment income obligations to associates 539
DC 12 Loans to employees under share purchase schemes 540
DC 13 Criteria for approval of share purchase schemes: before period of restriction ends
DC 14 Criteria for approval of share purchase schemes: when period of restriction ends
541
543
DC 15 Some definitions 544
Subpart DD—Entertainment expenditure
DD 1 Entertainment expenditure generally 546
DD 2 Limitation rule 546

22

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DD 3 When limitation rule does not apply 548
DD 4 Employment-related activities 548
DD 5 Promoting businesses, goods, or services 549
DD 6 Entertainment as business or for charitable purpose 550
DD 7 Entertainment outside New Zealand 550
DD 8 Entertainment that is income or fringe benefit 550
DD 9 Relationship with fringe benefit tax rules 550
DD 10 Interpretation: reimbursement and apportionment 551
DD 11 Some definitions 551
Subpart DE—Motor vehicle expenditure

Introductory provisions

DE 1 What this subpart does 552
DE 2 Deductions for business use 553
DE 2B Election to use kilometre rate method or costs method 556
DE 3 Methods for calculating proportion of business use 556
DE 4 Default method for calculating proportion of business use 557

Actual records

DE 5 Actual records 557

Logbook

Kilometre rates

DE 12 Kilometre rate method 560
Subpart DF—Government grants, funding, and compensation
DF 1 Government grants to businesses 561
DF 2 Repayment of grant-related suspensory loans 563
DF 3 Identifying expenditure for purposes of sections DF 1 and DF 2 564
DF 4 Payments for social rehabilitation 564
DF 5 Government funding additional to government screen production payments
Subpart DG—Expenditure related to use of certain assets

Introductory provisions

565
DG 1 What this subpart does 567
DG 2 Application of this subpart 567
DG 3 Meaning of asset for this subpart 568
DG 4 Meaning of private use for this subpart 570

23

Income Tax Act 2007

Reprinted as at

1 October 2017

DG 5 Meaning and treatment of interest expenditure for this subpart 572
DG 6 Associated persons: company rule modified 573

When assets held simply

DG 7 Expenditure related to income-earning use 573
DG 8 Expenditure limitation rule 574
DG 9 Apportionment formula 575

When assets held in corporate structures

DG 10 Interest expenditure rules 576
DG 11 Interest expenditure: close companies 578
DG 12 Interest expenditure: group companies 583
DG 13 Interest expenditure: corporate shareholders 586
DG 14 Interest expenditure: non-corporate shareholders 590

Quarantined expenditure

DG 15 Quarantined expenditure rules 591
DG 16 Quarantined expenditure when asset activity negative 591
DG 17 Allocation of amounts quarantined under section DG 16 594
DG 18 Quarantined expenditure: group companies and shareholders 595
DG 19 Allocation of amounts quarantined under section DG 18 597

Certain modifications to rules

DG 20 When income cannot be separately attributed 599
DG 21 Opting out of treatment under this subpart 600
DG 22 Application of rules to part years 600
Subpart DN—Attributed losses from foreign equity

Attributed controlled foreign company (CFC) loss

DN 1 Attributed controlled foreign company loss 602
DN 2 When attributed CFC loss arises 602
DN 3 Calculation of attributed CFC loss 604
DN 4 Ring-fencing cap on deduction 604

Foreign investment fund (FIF) loss

DN 5 Foreign investment fund loss 606
DN 6 When FIF loss arises 607
DN 7 Calculation of FIF loss 611
DN 8 Ring-fencing cap on deduction: attributable FIF income method 611
Subpart DO—Farming and aquacultural business expenditure

Farming

DO 1 Enhancements to land 613
DO 2 Plantings for erosion, shelter, and water protection purposes 614
DO 3 Trees on farms 615
DO 4 Improvements to farm land 615
DO 5 Expenditure on land: planting of listed horticultural plants 617

24

Reprinted as at

1 October 2017 Income Tax Act 2007

DO 6 Expenditure on land: horticultural replacement planting 619
DO 7 Accounting for expenditure on listed horticultural plants under sections DO 5 and DO 6
621
DO 8 Meaning of planting and plot 621
DO 9 Meaning of replaced area fraction 622
DO 10 Farming or horticulture expenditure of lessor or sublessor 622
DO 11 Improvement destroyed or made useless 623
DO 11B Entering partners’ livestock deduction [Repealed] 624

Aquaculture

DO 12 Improvements to aquacultural business 624
DO 13 Improvement destroyed or made useless 625
Subpart DP—Forestry expenditure
DP 1 Expenditure of forestry business 626
DP 2 Plant or machinery 627
DP 3 Improvements to forestry land 628
DP 4 Improvement destroyed or made useless 629
DP 5 Forestry encouragement agreement: deductions 630
DP 6 Forestry encouragement agreement: no deduction 631
DP 7 Land contouring: no deduction 631
DP 8 Forestry business on land acquired from the Crown, Maori owners, or holding company: no deduction
DP 9 Cost of acquiring timber: forestry business on land acquired from the Crown, Maori owners, or holding company
631
633
DP 9B Treaty of Waitangi claim settlements: rights to take timber 634
DP 10 Cost of acquiring timber or right to take timber: other cases 634
DP 11 Cost of timber 635
Subpart DQ—Income equalisation schemes and environmental restoration accounts schemes
DQ 1 Main income equalisation scheme 636
DQ 2 Adverse event income equalisation scheme 637
DQ 3 Thinning operations income equalisation scheme 637
DQ 4 Environmental restoration accounts scheme 638
Subpart DR—Life insurance business expenditure
Subpart DS—Film industry expenditure

Income Tax Act 2007

Reprinted as at

1 October 2017

DS 4 Meaning of film reimbursement scheme 646
Subpart DT—Petroleum mining expenditure

Petroleum exploration expenditure

DT 1A Ring-fenced allocations 648
DT 1 Petroleum exploration expenditure 648
DT 2 Arrangement for petroleum exploration expenditure and disposal of property
649
DT 3 Acquisition of privileges and permits 651
DT 4 Acquisition of exploratory material 651

Petroleum development expenditure

DT 5 Petroleum development expenditure 652
DT 6 Expenditure on petroleum mining assets 652
DT 7 Exploratory well expenditure 653
DT 8 Acquisition of certain petroleum mining assets 653
DT 9 Disposal of petroleum mining asset to associate 654
DT 10 Disposal of petroleum mining asset outside association 655
DT 11 Association ending 656

Other expenditure

DT 12 Damage to assets 657
DT 13 Disposal of ownership interests in controlled petroleum mining entities
657
DT 14 Farm-out arrangements 657
DT 15 Persons associated with petroleum miner 658
DT 16 Removal or restoration operations 658

General provisions

DT 17 Attribution of expenditure 659
DT 18 Replacement permits 659
DT 19 Partnership interests and disposal of part of asset 660
DT 20 Petroleum mining operations outside New Zealand 660
Subpart DU—Mineral mining expenditure
DU 1 Mining expenditure: prospecting and exploration expenditure 661
DU 2 Mining expenditure: rehabilitation expenditure 661
DU 3 Acquisition of land for mining operations 662
DU 4 Acquisition of mineral mining assets 663
DU 5 Farm-out arrangements 663
DU 6 Deduction for certain mining expenditure spread over assumed life of mine
DU 7 Deduction for certain mining expenditure spread on basis of units of production
664
664

Classes of mining expenditure

DU 8 Classes of mineral mining expenditure 665

26

Reprinted as at

1 October 2017 Income Tax Act 2007

DU 9 Some definitions 666
DU 10 Meaning of mining exploration expenditure 666
DU 11 Meaning of mining development expenditure: exclusion of operational expenditure
667
DU 12 Meaning of mining rehabilitation expenditure 668
Subpart DV—Expenditure specific to certain entities

Superannuation funds

DV 1 Publicising superannuation funds 670
DV 2 Transfer of expenditure to master fund 671
DV 3 Formula for calculating maximum deduction 673
DV 4 Carry forward of expenditure 673
DV 4B Carry forward of expenditure by member funds investing in portfolio investment entities

Other entities

675
DV 5 Investment funds: transfer of expenditure to master funds 676
DV 6 Formula for calculating maximum deduction 678
DV 7 Carry forward of expenditure 679
DV 8 Non-profit organisations 680
DV 9 Trusts 680
DV 10 Building societies 681
DV 11 Distribution to member of co-operative company, excluded from being dividend
681
DV 12 Maori authorities: donations 682
DV 13 Group companies 683
DV 14 Amalgamated company: expenditure on improvements for farming, horticultural, aquacultural, and forestry businesses
DV 15 Amalgamated companies: property passing on resident’s restricted amalgamation
683
684
DV 16 Consolidated groups: intra-group transactions 684
DV 17 Consolidated groups: expenditure or loss incurred by group companies
685
DV 18 Statutory producer boards and co-operative companies 686
DV 18B Cost base for shares when debt forgiven within economic group 686
DV 19 Association rebates 686

Partners and partnerships

DV 20 Partners 688
DV 21 Losses for QCs entering partnership regime 688

Look-through companies

DV 22 Owners of look-through companies 690
DV 23 Losses for QCs entering look-through companies rules 690

27

Income Tax Act 2007

Reprinted as at

1 October 2017

Sole traders

DV 24 Losses for QCs becoming sole traderships 691
DV 25 Hedging of currency movements in Australian non-attributing shares and attributing FDR method interests

Reinstatement of R&D tax losses

693
DV 26 Deduction for reinstatement of R&D tax losses 693
Subpart DW—Expenditure specific to certain industries
DW 1 Airport operators 694
DW 2 Bloodstock racing 694
DW 3 Non-resident general insurers and shippers 695
DW 4 Deduction for general insurance outstanding claims reserve 695
DW 5 Aircraft operators: aircraft engines and aircraft engine overhauls 698
DW 6 Aircraft operators: payments and adjustments under finance leases 700
Subpart DX—Other expenditure
DX 1 Testamentary annuities 701
DX 2 Tax credits: conduit financing arrangements [Repealed] 703
DX 3 Tax credits: supplementary dividend holding companies

[Repealed]

703
Subpart DZ—Terminating provisions
DZ 1 Commercial bills before 31 July 1986 704
DZ 2 Life insurers acquiring property before 1 April 1988 704
DZ 3 Petroleum mining: development expenditure from 1 October 1990 to 15 December 1991
DZ 4 Expenditure on abandoned exploratory well before 16 December
1991
DZ 5 Farm-out arrangements for petroleum mining before 16 December
1991
DZ 6 Partnership interests and disposal of part of asset before
16 December 1991
DZ 7 Petroleum mining operations outside New Zealand before
16 December 1991
705
706
707
708
709
DZ 8 Acquiring patent rights before 1 April 1993 709
DZ 9 Premium paid on land leased before 1 April 1993 710
DZ 10 General insurance with risk period straddling 1 July 1993 710
DZ 11 Film reimbursement scheme on or before 30 June 2001 710
DZ 12 Mineral mining: 1954–2005 [Repealed] 712
DZ 13 Enhancements to land unamortised at end of 2004–05 year 712
DZ 14 Deductions under specified leases 713
DZ 15 Patent applications before 1 April 2005 713
DZ 16 Geothermal wells between 31 March 2003 and 17 May 2006 714
DZ 17 Expenditure on improvements to aquacultural business before
1995–96 income year
715

28

Reprinted as at

1 October 2017 Income Tax Act 2007

DZ 18 Expenditure on improvements to forestry land before 1995–96 income year
715
DZ 19 Attributed CFC loss carried back under section EZ 32C [Repealed] 716
DZ 20 Expenditure incurred while income-earning activity interrupted by
Canterbury earthquake
DZ 21 Transfer in 2013–14 income year of assets to which subpart DG
applies
DZ 22 Aircraft maintenance: aircraft engines acquired before 2017–18 income year
DZ 23 Aircraft maintenance: tax accounting provisions for expenditure incurred after 2016–17 income year

Part E

Timing and quantifying rules

Subpart EA—Matching rules: revenue account property, prepayments, and deferred payments
716
717
719
720
EA 1 Trading stock, livestock, and excepted financial arrangements 722
EA 2 Other revenue account property 723
EA 3 Prepayments 724
EA 4 Deferred payment of employment income 726
Subpart EB—Valuation of trading stock (including dealer’s livestock)

Introductory provisions

EB 1 When this subpart applies 730
EB 2 Meaning of trading stock 730
EB 3 Valuation of trading stock 732
EB 4 Trading stock valuation methods 732
EB 5 Transfers of trading stock within wholly-owned groups 733

Standard valuation

Low-turnover valuation

Income Tax Act 2007

Reprinted as at

1 October 2017

EB 19 Discounted selling price for low-turnover traders 741
EB 20 Replacement price for low-turnover traders 742
EB 21 Market selling value for low-turnover traders 742
EB 22 Valuing closing stock consistently for low-turnover traders 743

Low value trading stock

EB 23 Valuing closing stock under $10,000 744

Disposal of business assets

EB 24 Apportionment on disposal of business assets that include trading stock
744
Subpart EC—Valuation of livestock

Introductory provisions

EC 1 Application of this subpart 747
EC 2 Valuation of livestock 747
EC 3 Livestock valuation methods 748
EC 4 Transfers of livestock within wholly-owned groups 748
EC 4B Compulsory use of herd scheme method for associated persons 749
EC 4C Value and timing of transfers 750
EC 5 Transfer of livestock because of self-assessed adverse event 751

Valuation of specified livestock

EC 6 Application of sections EC 7 to EC 27 752
EC 7 Valuation methods 752
EC 8 Restrictions arising from use of herd scheme 753
EC 9 Restrictions on use of national standard cost scheme 755
EC 10 Restrictions on use of cost price method 756
EC 11 Restrictions on making of elections 757
EC 12 Interests in livestock 758
EC 13 Changes in partnership interests 759

Herd scheme

EC 14 Herd scheme 760
EC 15 Determining national average market values 760
EC 16 Valuation under herd scheme 761
EC 17 Herd value ratio 761
EC 18 Inaccurate herd value ratio 763
EC 19 Chatham Islands adjustment to herd value 763
EC 20 Herd livestock disposed of before values determined 763
EC 21 Herd livestock on death before values determined [Repealed] 764

National standard cost scheme

EC 22 National standard cost scheme 764
EC 23 Determining national standard costs 765
EC 24 Methods for determining costs using national standard cost scheme 765

30

Reprinted as at

1 October 2017 Income Tax Act 2007

Other methods

EC 25 Cost price, replacement price, or market value 766
EC 26 Bailee’s treatment of livestock 766

Partnerships: cost price and national standard cost scheme

EC 26B Entering partners’ cost base 767

Definitions

EC 27 Some definitions 768

Valuation of non-specified livestock

EC 28 Application of sections EC 29 to EC 31 769
EC 29 Determining standard values 769
EC 30 Closing value methods 769
EC 31 Enhanced production 770

Valuation of high-priced livestock

EC 32 Application of sections EC 33 to EC 37 771
EC 33 Determining depreciation percentages 771
EC 34 General rule 771
EC 35 Livestock reaching national average market value and livestock no longer used for breeding
772
EC 36 Immature livestock and recently acquired livestock 773
EC 37 Bailment 774

Valuation of bloodstock

EC 38 Application of sections EC 39 to EC 48 774
EC 39 First income year in breeding business 774
EC 40 Later income years in breeding business 775
EC 41 Reduction: bloodstock not previously used for breeding in New
Zealand other than as shuttle stallions
EC 42 Reduction: bloodstock previously used for breeding in New
Zealand
776
777
EC 43 Accident, birth deformity, or infertility 778
EC 44 Other bloodstock 778
EC 45 Residual value of bloodstock 778
EC 46 Use of bloodstock for racing 778
EC 47 Change of use of bloodstock in course of business 779
EC 48 Replacement breeding stock 780
Subpart ED—Valuation of excepted financial arrangements
ED 1 Valuation of excepted financial arrangements 782
ED 1B Valuation of emissions units issued for zero price 787
ED 2 Transfers of certain excepted financial arrangements within wholly-owned groups
790
ED 3 Part-year tax calculations for transfers: general insurance OCR 791

31

Income Tax Act 2007

Reprinted as at

1 October 2017

ED 4 Valuation of certain excepted financial arrangements denominated in foreign currency
792
Subpart EE—Depreciation

Introductory provision

EE 1 What this subpart does 795

Meaning of own

EE 2 Nature of ownership of item 797
EE 3 Ownership of goods subject to reservation of title 797
EE 4 Ownership of lessee’s improvements: lessee 798
EE 5 Ownership of lessee’s improvements: other person 799

Meaning of depreciable property

EE 6 What is depreciable property? 799
EE 7 What is not depreciable property? 800
EE 8 Election that property not be depreciable 801

How amounts of depreciation loss and depreciation recovery income are calculated

EE 9 Description of elements of calculation 803
EE 10 Calculation rule: item temporarily not available 804
EE 11 Calculation rule: income year in which item disposed of 804

Methods

EE 12 Depreciation methods 805

Amount of depreciation loss under diminishing value method or straight-line method

EE 13 Application of sections EE 14 to EE 19 806
EE 14 Diminishing value or straight-line method: calculating amount of depreciation loss
806
EE 15 Amount of adjusted tax value 807
EE 16 Amount resulting from standard calculation 807
EE 17 Amount resulting from petroleum-related depreciable property calculation
809
EE 18 Cost: change from diminishing value to straight-line method 810
EE 18B Cost: some depreciable intangible property 810
EE 19 Cost: fixed life intangible property 811

Amount of depreciation loss under pool method

EE 20 Application of sections EE 21 to EE 24 812
EE 21 Pool method: calculating amount of depreciation loss 812
EE 22 Cases affecting pool 813
EE 23 Combined pools 815
EE 24 Property ceasing to qualify for pool 815

32

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1 October 2017 Income Tax Act 2007

EE 25 Depreciation loss for plant variety rights application granted in
2005–06 or later income year

Depreciation rates

815
EE 26 Setting of economic depreciation rate 816
EE 27 Economic rate for certain depreciable property 817
EE 28 Economic rate for buildings 818
EE 29 Economic rate for certain aircraft and motor vehicles 820
EE 30 Economic rate for plant, equipment, or building, with high residual value
EE 31 Annual rate for item acquired in person’s 1995–96 or later income year
EE 32 Election in relation to certain depreciable property acquired on or after 1 April 2005
820
822
825
EE 33 Annual rate for fixed life intangible property 826
EE 34 Annual rate for patent granted in 2005–06 or later income year 827
EE 34B Annual rate for design registrations 828
EE 35 Special rate or provisional rate 829
EE 36 Using economic rate or provisional rate instead of special rate 830

Improvements, items of low value, or items no longer used

EE 37 Improvements 830
EE 38 Items of low value 832
EE 39 Items no longer used 834

Transfers of depreciable property: associated persons and certain amalgamations

EE 40 Transfer of depreciable property on or after 24 September 1997 835
EE 41 Transfer of depreciable property on certain amalgamations on or after 14 May 2002
EE 42 Transfer of radiocommunications licence right on or after
24 September 1997
837
839
EE 43 Transfer of depreciable intangible property on or after 1 July 1997 839

Disposals and similar events

EE 44 Application of sections EE 48 to EE 51 840
EE 45 Consideration for purposes of section EE 44 841
EE 46 Items for purposes of section EE 44 844
EE 47 Events for purposes of section EE 44 845
EE 48 Effect of disposal or event 847
EE 49 Amount of depreciation recovery income when item partly used for business
EE 50 Amount of depreciation loss when item partly used to produce income
EE 51 Amount of depreciation recovery income when lost or stolen items recovered
848
850
852

33

Income Tax Act 2007

Reprinted as at

1 October 2017

EE 52 Amount of depreciation recovery income when compensation received
853
EE 53 Unused geothermal well brought into use 854

Interpretation provisions

EE 54 Cost: GST 854

Adjusted tax value

EE 55 Meaning of adjusted tax value 855
EE 56 Formula 855
EE 57 Base value in section EE 56 when none of sections EE 58, EE 59, and EZ 22(1) applies
856
EE 58 Base value in section EE 56 when no previous deduction 857
EE 59 Base value in section EE 56 when property is petroleum-related depreciable property
858
EE 60 Total deductions in section EE 56 859

Definitions

EE 61 Meaning of annual rate 862
EE 62 Meaning of depreciable intangible property 864
EE 63 Meaning of estimated useful life 865
EE 64 Meaning of excluded depreciable property 865
EE 65 Meaning of maximum pooling value 866
EE 66 Meaning of poolable property 867
EE 67 Other definitions 867
Subpart EF—Taxes and levies
EF 1 Fringe benefit tax 870
EF 2 Employer’s superannuation contribution tax 870
EF 3 Accident compensation levies and premiums 871
EF 4 Use of money interest payable by Commissioner 873
EF 5 Use of money interest payable by person 874
EF 6 Different tax years [Repealed] 875
Subpart EG—Recognition of accounting treatment
EG 1 Election to use balance date used in foreign country 876
EG 2 Adjustment for changes to accounting practice 878
EG 3 Allocation of income, deductions, and tax credits by portfolio tax rate entity [Repealed]
Subpart EH—Income equalisation schemes

Introductory provisions

879
EH 1 Income equalisation schemes 883
EH 2 Income Equalisation Reserve Account 883

34

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1 October 2017 Income Tax Act 2007

Main income equalisation scheme

Application

EH 3 Persons to whom main income equalisation scheme applies 884

Deposits and accounts

EH 4 Main deposit 884
EH 5 Main income equalisation account 886

Interest

EH 6 Interest on deposits in main income equalisation account 886

Deduction

EH 7 Deduction of deposit 887

Refunds: automatic

EH 8 Refund of excess deposit 887
EH 9 Income does not include excess deposit 888
EH 10 Refund at end of 5 years 888
EH 11 Income when refund given at end of 5 years 888

Refunds: on application

EH 12 Application for refund by person, trustee of estate, Official
Assignee, or liquidator
888
EH 13 Refund on application 889
EH 14 Income when refund given on application 889
EH 15 Refund for development or recovery 890
EH 16 Income when refund given for development or recovery 891
EH 17 Refund on retirement 891
EH 18 Income when refund given on retirement, and election to allocate amount to earlier year
892
EH 19 Refund on death 892
EH 20 Income when refund given on death 893
EH 21 Income when refund given on death, and election to allocate amount to earlier year
EH 22 Income when refund given on death, and election to allocate amount to later year or years
893
894
EH 23 Refund on bankruptcy 895
EH 24 Income when refund given on bankruptcy 895
EH 25 Refund on liquidation 895
EH 26 Income when refund given on liquidation 896

Refunds: general provisions

EH 27 Amendment of assessment 896
EH 28 Minimum refund 896
EH 29 Deposits from which refunds come 896

35

Income Tax Act 2007

Reprinted as at

1 October 2017

Tax credit

EH 30 When person entitled to tax credit 896
EH 31 Kind and amount of refund that entitles person to tax credit 897
EH 32 Kind of person entitled to tax credit 897
EH 33 Amount of tax credit 898

Definitions

EH 34 Meaning of income from forestry 898
EH 35 Meaning of main maximum deposit 899
EH 36 Other definitions 900

Adverse event income equalisation scheme

Application

EH 37 Persons to whom adverse event income equalisation scheme applies
901

Deposits and accounts

EH 38 Adverse event deposit 902
EH 39 Adverse event income equalisation account 902

Interest

EH 40 Interest on deposits in adverse event income equalisation account 903

Deduction

EH 41 Deduction of deposit 904

Refunds: automatic

EH 42 Refund of excess deposit 904
EH 43 Income does not include excess deposit 904

Refunds: on application

EH 44 Application for refund by person, trustee of estate, Official
Assignee, or liquidator
905
EH 45 Refund on application 905
EH 46 Income when refund given on application 906
EH 47 Refund on retirement 906
EH 48 Income when refund given on retirement, and election to allocate amount to earlier year
906
EH 49 Refund on death 907
EH 50 Income when refund given on death 907
EH 51 Income when refund given on death, and election to allocate amount to earlier year
EH 52 Income when refund given on death, and election to allocate amount to later year or years
907
908
EH 53 Refund on bankruptcy 909
EH 54 Income when refund given on bankruptcy 909
EH 55 Refund on liquidation 909

36

Reprinted as at

1 October 2017 Income Tax Act 2007

EH 56 Income when refund given on liquidation 910

Refunds: general provisions

EH 57 Amendment of assessment 910
EH 58 Minimum refund 910
EH 59 Deposits from which refunds come 910

Transfers

EH 60 Transfer of deposit 911

Definitions

EH 61 Meaning of adverse event maximum deposit 911
EH 62 Other definitions 913

Thinning operations income equalisation scheme

Application

EH 63 Persons to whom thinning operations income equalisation scheme applies
914

Deposits and accounts

EH 64 Thinning operations deposit 915
EH 65 Thinning operations income equalisation account 916

Interest

EH 66 Interest on deposits in thinning operations income equalisation account
917

Deductions

EH 67 Deduction of deposit 917

Refunds: automatic

EH 68 Refund of excess deposit 918
EH 69 Income does not include excess deposit 918

Refunds: on application

EH 70 Application for refund by person or liquidator 918
EH 71 Refund on application 919
EH 72 Income when refund given on application 919
EH 73 Refund for development or recovery 920
EH 74 Income when refund given for development or recovery 920
EH 75 Refund on liquidation 921
EH 76 Income when refund given on liquidation 921

Refunds: general provisions, and tax credits

EH 77 Sections of main income equalisation scheme that apply to thinning operations income equalisation scheme

Definitions

922
EH 78 Meaning of thinning operations maximum deposit 922

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EH 79 Other definitions 922
Subpart EI—Spreading of specific income

Farming and forestry

EI 1 Spreading backward of income from timber 924

Inflation-indexed instruments

EI 2 Interest from inflation-indexed instruments 924

Intellectual property

EI 3 Assigning or granting copyright 925
EI 4 Spreading income from patent rights 927

Land

EI 4B Consideration for agreement to grant, renew, extend, or transfer leasehold estate or licence
927
EI 5 Amount paid to lessor for non-compliance with covenant for repair 929
EI 6 Amount paid for non-compliance: when lessor ceases to own land 930
EI 7 Leases: income derived in anticipation 930
EI 8 Disposal of land to the Crown 931

Shareholder-employees

EI 9 Matching rule for employment income of shareholder-employee 933
Subpart EJ—Spreading of specific expenditure

Farming and forestry

EJ 1 Spreading backward of deductions for costs of timber 935
EJ 2 Spreading forward of deductions for repairs to fishing boats 935
EJ 3 Spreading forward of fertiliser expenditure 937

Films

EJ 4 Expenditure incurred in acquiring film rights in feature films 938
EJ 5 Expenditure incurred in acquiring film rights in films other than feature films
940
EJ 6 Certification of New Zealand films 941
EJ 7 Film production expenditure for New Zealand films having no large budget film grant
EJ 8 Film production expenditure for other films having no large budget film grant
941
942
EJ 9 Avoidance arrangements 943

Leases

EJ 10 Personal property lease payments 944
EJ 11 Amount paid by lessee for non-compliance with covenant for repair
944

Petroleum mining

EJ 12 Petroleum development expenditure: default allocation rule 945

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EJ 12B Petroleum development expenditure: reserve depletion method 946
EJ 13 Relinquishing petroleum mining permit 947
EJ 13B Dry well drilled 948
EJ 13C Well not producing 948
EJ 14 Spreading deduction backwards 949
EJ 15 Disposal of petroleum mining asset 949
EJ 16 Disposal of petroleum mining asset to associate 950
EJ 17 Partnership interests and disposal of part of asset 950
EJ 18 Petroleum mining operations outside New Zealand 950

Definitions

EJ 19 Meaning of offshore development [Repealed] 951
EJ 20 Meaning of petroleum mining development 951

Mineral mining

EJ 20B Certain mining expenditure spread over assumed life of mine 952
EJ 20C Length of spreading period 953
EJ 20D Measurement of assumed life of mine and application to rate 953
EJ 20E Certain mining expenditure spread on basis of units of production 954

Superannuation contributions

EJ 21 Contributions to employees’ superannuation schemes 956

Research, development, and resulting market development

EJ 22 Deductions for market development: product of research, development
EJ 23 Allocation of deductions for research, development, and resulting market development

Aircraft engine overhauls

957
957
EJ 24 Allocation of expenditure on aircraft engine overhauls 958
EJ 25 Allocation of expenditure on aircraft engine overhauls: election by
IFRS user
EJ 26 Allocation of expenditure on aircraft engine overhauls: election by operator of single aircraft
959
960
EJ 27 Disposal of aircraft engine or aircraft 961
Subpart EK—Environmental restoration accounts
EK 1 Environmental Restoration Funds Account 963
EK 2 Persons who may make payment to environmental restoration account
964
EK 3 Payments to environmental restoration account 964
EK 4 Environmental restoration account 965
EK 5 Details to be provided with payment to environmental restoration account
966
EK 6 Interest on payments to environmental restoration account 966
EK 7 Deduction for payment 967

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EK 8 Deduction for transfer 968
EK 9 Refund of payment if excess, lacking details 968
EK 10 Certain refunds not income 969
EK 11 Application for refund 969
EK 12 Refund if application or excess balance 970
EK 13 Income when refund given on application 971
EK 14 Application for transfer 972
EK 15 Transfer on application 972
EK 16 Transfer on death, bankruptcy, or liquidation 973
EK 17 Minimum refund or transfer 974
EK 18 Payments from which refunds come 974
EK 19 Environmental restoration account of amalgamating company 974
EK 20 Environmental restoration account of consolidated group company 975
EK 21 Notices in electronic format 976
EK 22 Meaning of maximum payment 976
EK 23 Other definitions 977
Subpart EM—Hedging of currency movements in Australian non- attributing shares and attributing FDR method interests
EM 1 Australian non-attributing shares and attributing FDR method interests
978
EM 2 Who does this subpart apply to? 979
EM 3 What hedges does this subpart apply to? 980
EM 4 Irrevocable elections 980
EM 5 Fair dividend rate hedge portions 981
EM 6 Income and expenditure for fair dividend rate hedge portions 983
EM 7 Quarterly test of fair dividend rate hedge portions 984
EM 8 Some definitions 985
Subpart EW—Financial arrangements rules

Introductory provisions

EW 1 What this subpart does 988
EW 2 Relationship of financial arrangements rules with other provisions 989

Meaning of financial arrangement and excepted financial arrangement

EW 3 What is a financial arrangement? 990
EW 4 What is not a financial arrangement? 991
EW 5 What is an excepted financial arrangement? 991
EW 6 Relationship between financial arrangements and excepted financial arrangements
996
EW 7 Change from private or domestic purpose 996
EW 8 Election to treat certain excepted financial arrangements as financial arrangements
997

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Application of financial arrangements rules

EW 9 Persons to whom financial arrangements rules apply 999
EW 10 Financial arrangements to which financial arrangements rules apply
1000
EW 11 What financial arrangements rules do not apply to 1001

Calculation and allocation of income and expenditure over financial arrangement’s term

EW 12 When use of spreading method required 1001
EW 13 When use of spreading method not required 1001
EW 14 What spreading methods do 1002
EW 15 What is included when spreading methods used 1003
EW 15B Applying IFRSs to financial arrangements 1004
EW 15C Preparing and reporting methods 1005
EW 15D IFRS financial reporting method 1005
EW 15E Determination alternatives 1008
EW 15F Expected value method 1010
EW 15G Modified fair value method 1012
EW 15H Mandatory use of some determinations 1015
EW 15I Mandatory use of yield to maturity method for some arrangements 1016
EW 16 Yield to maturity method or alternative 1018
EW 17 Straight-line method 1018
EW 18 Market valuation method 1019
EW 19 Choice among some spreading methods 1020
EW 20 Determination method or alternative 1021
EW 21 Financial reporting method 1022
EW 22 Default method 1022
EW 23 Failure to use method for financial reporting purposes 1023
EW 24 Consistency of use of spreading method 1024
EW 25 Consistency of use of straight-line method and market valuation method
1024
EW 25B Consistency of use of IFRS method 1025
EW 26 Change of spreading method 1026
EW 27 Spreading method adjustment formula 1028

Calculation and allocation of income and expenditure when rights and obligations under financial arrangement cease

EW 28 How base price adjustment calculated 1030
EW 29 When calculation of base price adjustment required 1030
EW 30 When calculation of base price adjustment not required 1032
EW 31 Base price adjustment formula 1033

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Consideration

Consideration when financial arrangement involves property or services

EW 32 Consideration for agreement for sale and purchase (ASAP) of property or services, hire purchase agreement, specified option, or finance lease
1035
EW 33 Consideration for hire purchase agreement or finance lease 1040
EW 33B Foreign ASAPs: designated FX hedges 1040
EW 33C Consideration in foreign currency: some agreements for sale and purchase
1042
EW 34 Consideration in foreign currency 1042
EW 35 Value relevant for non-financial arrangements rule 1043

Consideration treated as paid to person

EW 36 Consideration when person exits from rules: accrued entitlement 1044
EW 37 Consideration when person enters rules: accrued obligation 1044
EW 38 Consideration when disposal for no, or inadequate, consideration 1045
EW 39 Consideration affected by unfavourable factors 1046

Consideration treated as paid by person

EW 40 Consideration when person exits from rules: accrued obligation 1047
EW 41 Consideration when person enters rules: accrued entitlement 1047
EW 42 Consideration when acquisition for no, or inadequate, consideration
EW 43 Consideration when debt disposed of at discount to associate of debtor
1048
1049
EW 44 Consideration when debt forgiven for natural love and affection 1049
EW 45 Consideration when debtor released from obligation 1050
EW 46 Consideration when debtor released as condition of new start grant

[Repealed]

1051
EW 46B Consideration when party changes from fair value method 1051
EW 46C Consideration when debt forgiven within economic group 1052

Consideration when legal defeasance has occurred

EW 47 Legal defeasance 1054

Consideration when anti-avoidance provision applies

EW 48 Anti-avoidance provisions 1054

Income and deduction provisions specifically related to financial arrangements

EW 49 Income and deduction when debt disposed of at discount to associate of debtor
1055
EW 49B Guarantees for associated persons 1056
EW 50 Income when debt forgiven to trustee 1057
EW 51 Deduction for security payment 1058

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Treatment of original share acquired under financial arrangement

EW 52 Share supplier under share-lending arrangement 1059

One kind of avoidance

EW 53 Adjustment required 1059

Application of financial arrangements rules to cash basis persons

EW 54 Meaning of cash basis person 1061
EW 55 Effect of being cash basis person 1061
EW 56 Natural person [Repealed] 1061
EW 57 Thresholds 1062
EW 58 Financial arrangements, income, and expenditure relevant to criteria
1064
EW 59 Exclusion by Commissioner 1065
EW 60 Trustee of deceased’s estate 1065
EW 61 Election to use spreading method 1066
EW 62 When and how calculation of cash basis adjustment required 1067
EW 63 Cash basis adjustment formula 1068
Subpart EX—Controlled foreign company and foreign investment fund rules

Controlled foreign company (CFC) rules

When is a company a controlled foreign company?

EX 1 Meaning of controlled foreign company 1073

Calculation of person’s control interest

EX 2 Four categories for calculating control interests 1074
EX 3 Control interest: total of direct, indirect, and associated person interests
1074
EX 4 Limits to requirement to include associated person interests 1075
EX 5 Direct control interests 1076
EX 6 Direct control interests include options and similar rights 1077
EX 7 Indirect control interests 1078

Calculation of person’s income interest

EX 8 Income interests: total of direct and indirect interests 1079
EX 9 Direct income interests 1080
EX 10 Indirect income interests 1081
EX 11 Options and similar rights in certain cases 1081
EX 12 Reduction of total income interests 1082
EX 13 Income interests of partners [Repealed] 1083

Ten percent threshold and variations in income interest level

EX 14 Attribution: 10% threshold, not PIE 1083

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EX 15 Associates and 10% threshold 1083
EX 16 Income interests for certain purposes 1084
EX 17 Income interest if variations within period 1084

Calculation of attributed CFC income or loss

EX 18A Scheme for finding person’s attributed CFC income or loss 1085
EX 18 Formula for calculating attributed CFC income or loss 1086
EX 19 Taxable distribution from non-complying trust 1087
EX 20 Reduction in attributed CFC loss 1088

Attributable CFC amount and net attributable CFC income or loss

EX 20B Attributable CFC amount 1088
EX 20C Net attributable CFC income or loss 1099
EX 20D Adjustment of cost fraction for excessively debt funded CFC 1104
EX 20E Relative debt-asset ratio for CFC 1107

Calculation of branch equivalent income or loss

[Repealed]

EX 21 Attributable CFC amount and net attributable CFC income or loss:
calculation rules
1109

Non-attributing active CFCs

EX 21B Non-attributing active CFCs 1118

Tests for non-attributing active CFCs

EX 21C Applicable accounting standards for section EX 21E 1119
EX 21D Non-attributing active CFC: default test 1121
EX 21E Non-attributing active CFC: test based on accounting standard 1125

Non-attributing Australian CFCs

EX 22 Non-attributing Australian CFCs 1134
EX 23 Tax concession grey list CFCs [Repealed] 1135

Change of residence of companies

EX 24 Companies moving to or from New Zealand 1135

Change of CFC’s balance date

EX 25 Change of CFC’s balance date 1136

Ownership measurement concession

EX 26 Use of quarterly measurement 1137

Anti-avoidance rule: stapled stock

EX 27 Anti-avoidance rule: stapled stock 1138

Foreign investment fund (FIF) rules

What is a foreign investment fund?

EX 28 Meaning of FIF 1138

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Attributing interests in FIFs

Calculation of FIF income or loss

Income Tax Act 2007

Reprinted as at

1 October 2017

Relationship with other provisions in Act

EX 59 Codes: comparative value method, deemed rate of return method, fair dividend rate method, and cost method
1193
EX 60 Top-up FIF income: deemed rate of return method 1195
EX 61 Top-up FIF income: 1 April 1993 uplift interests 1196

Changing calculation method

EX 62 Limits on changes of method 1197
EX 63 Consequences of changes in method 1202

Cases of entry into and exit from FIF rules

EX 64 Migration of persons holding FIF interests 1204
EX 65 Changes in application of FIF exemptions 1206
EX 66 Entities emigrating from New Zealand 1208
EX 66B Entities ceasing to be FIFs 1210
EX 67 FIF rules first applying to interest on or after 1 April 2007 1211
EX 67B Revaluation of inherited interests in grey list companies 1212

Measurement of cost

EX 68 Measurement of cost 1213

Change of FIF’s balance date

EX 69 Change of FIF’s balance date 1215

Market value rules

EX 70 Market value of life policy and superannuation entitlements 1217
EX 71 Non-market transactions in FIF interests 1217

Commissioner’s default assessment power

EX 72 Commissioner’s default assessment power 1217

Election relating to CFC or FIF

EX 73 Election that CFC not non-attributing active CFC or FIF not non- attributing active FIF
Subpart EY—Life insurance rules

Introductory provisions

1219
EY 1 What this subpart does 1225
EY 2 Policyholder base 1225
EY 3 Shareholder base 1227
EY 4 Apportionment of income of particular source or nature, and of tax credits
1228
EY 5 Part-year tax calculations 1229
EY 6 Actuarial advice and guidance 1231
EY 7 Meaning of claim 1231
EY 8 Meaning of life insurance 1232
EY 9 Meaning of life insurance policy 1234

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EY 10 Meaning of life insurer 1234
EY 11 Superannuation schemes providing life insurance 1234
EY 12 Meaning of life reinsurance 1238
EY 13 Meaning of life reinsurance policy 1240
EY 14 Life insurance and life reinsurance: how sections relate 1240

Policyholder base

Non-participation policies

EY 15 Policyholder base income: non-participation policies 1241
EY 16 Policyholder base allowable deductions: non-participation policies 1242
EY 16B Policyholder base allowable deductions: consideration for investment management services

Profit participation policies

1243
EY 17 Policyholder base income: profit participation policies 1244
EY 18 Policyholder base allowable deductions: profit participation policies
1245

Shareholder base

Non-participation policies

EY 19 Shareholder base income: non-participation policies 1246
EY 19B Shareholder base income: consideration credited for investment management services
1247
EY 20 Shareholder base allowable deductions: non-participation policies 1247

Profit participation policies

EY 21 Shareholder base income: profit participation policies 1248
EY 22 Shareholder base allowable deductions: profit participation policies
1250

Non-participation policies: reserves

EY 23 Reserving amounts for life insurers: non-participation policies 1250
EY 24 Outstanding claims reserving amount: non-participation policies not annuities
EY 25 Premium smoothing reserving amount: non-participation policies not annuities
EY 26 Unearned premium reserving amount: non-participation policies not annuities
EY 27 Capital guarantee reserving amount: non-participation policies not annuities

Shareholder base other profit: profit participation policies

EY 28 Shareholder base other profit: profit participation policies that are existing business
EY 29 Shareholder base other profit: profit participation policies that are new business
1252
1253
1255
1256
1257
1260

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Transitional adjustments and annuities

EY 30 Transitional adjustments: life risk 1263
EY 31 Annuities 1272
EY 32 Mortality profit formula: when partial reinsurance exists

[Repealed]

EY 33 Mortality profit formula: individual result may be negative only in some cases [Repealed]
1272
1272
EY 34 Mortality profit formula: negative result [Repealed] 1272
EY 35 How discontinuance profit is calculated [Repealed] 1273
EY 36 Discontinuance profit for income year [Repealed] 1273
EY 37 Discontinuance profit formula (existing policies) [Repealed] 1273
EY 38 Discontinuance profit formula (new policies) [Repealed] 1273
EY 39 Discontinuance profit formula (existing policies): when partial reinsurance exists [Repealed]
EY 40 Discontinuance profit formula (new policies): when partial reinsurance exists [Repealed]
EY 41 Discontinuance profit formulas: individual result may never be negative [Repealed]
1273
1273
1273
EY 42 How policyholder income is calculated [Repealed] 1273
EY 43 Policyholder income formula [Repealed] 1274
EY 43B Policyholder income formula: FDR adjustment [Repealed] 1274
EY 43C Policyholder income formula: PILF adjustment [Repealed] 1274
EY 44 Policyholder income formula: when partial reinsurance exists

[Repealed]

EY 45 Policyholder income formula: when life insurance business transferred [Repealed]
1274
1274
EY 46 Income from disposal of property [Repealed] 1274
EY 47 Deductions for disposal of property [Repealed] 1274

Non-resident life insurers

EY 48 Non-resident life insurers with life insurance policies in New
Zealand
1274
EY 49 Non-resident life insurer becoming resident 1275
Subpart EZ—Terminating provisions

Life insurance

EZ 1 Life insurers acquiring property before 1 April 1988 1281
EZ 2 Deductions for disposal of property: 1982–83 and 1989–90 income years
1282

Petroleum mining

EZ 3 Petroleum development expenditure from 1 October 1990 to
15 December 1991
1283

Livestock

EZ 4 Valuation of livestock bailed or leased as at 2 September 1992 1283

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EZ 5 Reduction: bloodstock not previously used for breeding in New
Zealand: pre-1 August 2006
EZ 6 Reduction: broodmare previously used for breeding in New
Zealand: pre-1 August 2006

Patent rights

1284
1286
EZ 7 Acquiring patent rights before 1 April 1993 1287

Leases of land

EZ 8 Premium paid on land leased before 1 April 1993 1288

Depreciation

EZ 9 Pool method for items accounted for by globo method for 1992–93 income year
EZ 10 Pool items accounted for by globo method for 1992–93 income year
EZ 11 Amounts of depreciation recovery income and depreciation loss for part business use up to 2004–05 income year
EZ 12 Amount of depreciation loss for item acquired from associated person on or before 23 September 1997
EZ 13 Annual rate for item acquired on or after 1 April 1993 and before end of person’s 1994–95 income year
1289
1289
1289
1290
1291
EZ 14 Pre-1993 depreciation rate 1292
EZ 15 Annual rate for excluded depreciable property: 1992–93 tax year 1293
EZ 16 Amount of depreciation loss for plant or machinery additional to section EZ 15 amount
EZ 17 Additional amount of depreciation loss: between 16 December
1991 and 1 April 1994
EZ 18 Section EZ 17 amount of depreciation loss when items transferred between companies in wholly-owned group before 1 April 1993
EZ 19 Section EZ 17 amount of depreciation loss when person previously exempt from tax acquires item
1295
1296
1296
1297
EZ 20 Adjusted tax value for software acquired before 1 April 1993 1298
EZ 21 Sections EE 45 and EE 47: permanent removal: allowance before
1 April 1995
EZ 22 Base value and total deductions in section EE 56: before 1 April
1995
EZ 23 Economic rate for plant or equipment acquired before 1 April 2005 and buildings acquired before 19 May 2005
1298
1299
1299
EZ
23BA
Aircraft acquired before 2017–18 income year: adjusted tax value, base value, reduced; total deductions increased
1301
EZ 23B Property acquired after depreciable property affected by
Canterbury earthquakes
1302
EZ
23BB
Interest in property acquired after depreciable property affected by
Canterbury earthquakes
1308

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EZ
23BC
Property acquired after depreciable property affected by Hurunui/ Kaikōura earthquakes
1313
EZ 23C Insurance for Canterbury earthquake damage of property:
treatment as disposal and reacquisition [Repealed]
EZ 23D Insurance for Canterbury earthquake damage of property: limit on depreciation recovery income [Repealed]
EZ 23E Item treated as available for use if access restricted due to
Canterbury earthquake [Repealed]
EZ 23F Insurance for Canterbury earthquake damage causing disposal:
optional timing rule for income, deductions [Repealed]
EZ 23G Insurance for repairs of Canterbury earthquake damage: optional timing rule for income, deductions [Repealed]

Definitions

1318
1318
1318
1318
1319
EZ 24 Meaning of new asset 1319
EZ 25 Meaning of New Zealand-new asset 1320
EZ 26 Meaning of qualifying capital value 1321
EZ 27 Meaning of qualifying improvement 1322
EZ 28 Meaning of qualifying asset 1323

Accident insurance

EZ 29 Private insurers under Accident Insurance Act 1998 1323
EZ 30 Base premium for 1998–99 premium year under Accident
Insurance Act 1998

Controlled foreign company and foreign investment fund rules

EZ 31 Disclosure restrictions on grey list CFCs before 2011–12

[Repealed]

EZ 32 Terminating exemption for grey list FIF investing in Australasian listed equities [Repealed]
1324
1325
1325
EZ 32B Transitional rule for IFRS reporting [Repealed] 1325
EZ 32C Treatment in section EX 20C of currency effects on CFC’s borrowing [Repealed]
EZ 32D Value of asset fraction: CFC with excessive debt funding and loan entered before 21 June 2012
EZ 32E Change in section EX 20B for income of CFC insurer: interest on terminal tax
EZ 32F Applicable accounting standard for section EX 21E: former generally accepted accounting practice without IFRS
EZ 32G Person deriving pension from foreign superannuation scheme and returning as income before 1 April 2014

Old financial arrangements rules

1325
1325
1326
1327
1329
EZ 33 Application of old financial arrangements rules 1330
EZ 34 Election to apply financial arrangements rules in subpart EW 1330

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EZ 35 Accruals in relation to income and expenditure in respect of financial arrangements
EZ 36 Excepted financial arrangement that is part of financial arrangement
1330
1336
EZ 37 Cash basis holder 1336
EZ 38 Income and expenditure where financial arrangement redeemed or disposed of
1340
EZ 39 Forgiveness of debt 1344
EZ 40 Accrued income written off 1345
EZ 41 Disposal of debt to associate of debtor 1346
EZ 42 Post facto adjustment 1347
EZ 43 Variable principal debt instruments 1348
EZ 44 Relationship with rest of Act 1348
EZ 45 Application of old financial arrangements rules 1349
EZ 46 Election to treat short term trade credit as financial arrangement 1350
EZ 47 Election to continue to treat certain excepted financial arrangements as financial arrangements
1351
EZ 48 Definitions 1351
EZ 49 Determination of core acquisition price where consideration for property denominated in foreign currency
1362
EZ 50 Rules for non-market transactions 1363
EZ 51 Transitional adjustment when changing to financial arrangements rules
1363
EZ 52 References to new rules include old rules 1365
EZ 52B Consistency of use of IFRS method: Determination G3 change allowed
EZ 52C Change of spreading method: Determination G22 to Determination

G22A

EZ 52D Base price adjustment: financial arrangements to which

Determination G22 and Determination G22A applied

Life insurance transitional adjustment: expected death strain

Expected death strain formulas

1366
1367
1367
EZ 53 How expected death strain is calculated 1369
EZ 54 Expected death strain formulas 1369
EZ 55 Expected death strain formulas: option when more than 1 life insured
EZ 56 Expected death strain formula (life): when annuity payable on death
EZ 57 Expected death strain formulas: when annuity payable on survival to date or age specified in policy
EZ 58 Expected death strain formula (life): when partial reinsurance exists
1370
1371
1371
1372

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Actuarial reserves

Entry to new life insurance regime: transitional and

miscellaneous provisions

EZ 61 Allowance for cancelled amount: spreading 1374
EZ 62 Reinsurance transition: life financial reinsurance may be life reinsurance
1375
EZ 63 Disposal and acquisition upon entry 1376

Restructuring under New Zealand Railways Corporation

Restructuring Act 1990

EZ 64 New Zealand Railways Corporation restructure: purpose and initial amounts for tax purposes
1376
EZ 65 Expenditure or loss incurred, and amounts derived 1377
EZ 66 Prepayments 1378
EZ 67 Leased assets 1378
EZ 68 Definitions 1379

IFRS financial reporting method

EZ 69 IFRS financial reporting method: interest-free and low-interest loans
EZ 69B IFRS financial reporting method: equity or other comprehensive income
1380
1380

Damage from Canterbury earthquakes

EZ 70 Insurance for Canterbury earthquake damage of property:
treatment as disposal and reacquisition
EZ 71 Insurance for Canterbury earthquake damage of property: limit on depreciation recovery income
EZ 72 Item treated as available for use if access restricted due to
Canterbury earthquake
EZ 73 Insurance for Canterbury earthquake damage causing disposal:
optional timing rule for income, deductions
EZ 74 Insurance for repairs of Canterbury earthquake damage: optional timing rule for income, deductions
EZ 75 Consideration for property or services: IFRS foreign ASAPs before 2014–15 income year
EZ 76 Consideration for property or services: non-IFRS foreign ASAPs before 2014–15 income year
1381
1382
1383
1383
1384
1386
1386
EZ 77 Substituting debentures repeal: transitional rules 1387

Damage from Hurunui/Kaikōura earthquakes

EZ 78 Insurance for Hurunui/Kaikōura earthquake damage of property:
treatment as disposal and reacquisition
1388

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EZ 79 Insurance for Hurunui/Kaikōura earthquake damage of property:
limit on depreciation recovery income

Part F Recharacterisation of certain transactions

Subpart FA—Recharacterisation of certain commercial arrangements

Introductory provision

1389
FA 1 What this subpart does 1391

Debentures and shares

FA 2 Recharacterisation of certain debentures 1391
FA 2B Stapled debt securities 1394
FA 3 Recharacterisation of certain dividends: recovery of cost of shares held on revenue account
FA 4 Recharacterisation of shareholder’s base: company reacquiring share
1395
1396

Leases

FA 5 Assets acquired and disposed of after deduction of payments under lease
1397

Finance leases

FA 6 Recharacterisation of amounts derived under finance leases 1399
FA 7 Determining amount of loan 1399
FA 8 Deductibility of expenditure under finance lease 1399
FA 9 Treatment when lease ends: lessee acquiring asset 1400
FA 10 Treatment when lease ends: lessor acquiring asset 1401
FA 11 Adjustments for leases that become finance leases 1402
FA 11B Adjustments for certain operating leases 1404

Hire purchase agreements

FA 12 Recharacterisation of amounts derived under hire purchase agreements
1405
FA 13 Agreements recharacterised as sale with finance provided 1405
FA 14 Deductibility of expenditure or loss under hire purchase agreement 1406
FA 15 Treatment when agreement ends: seller acquiring property 1406
FA 16 Treatment when agreement ends: when seller is cash basis person 1408
FA 17 Treatment when agreement ends: when buyer is cash basis person 1408
FA 18 Treatment of amounts paid in income years after agreement ends 1409
Subpart FB—Transfers of relationship property
FB 1 When this subpart applies 1410
FB 1B Meaning of settlement of relationship property and property 1410
FB 1C Obligations for periods before and from transfer of property 1411
FB 2 Personal property 1411

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FB 3A Residential land 1412
FB 3 Land acquired for certain purposes or under certain conditions 1412
FB 4 Land under scheme for major development or division 1413
FB 5 Disposal of land 1414
FB 6 Timber or right to take timber 1414
FB 7 Land with standing timber 1414
FB 8 Patent applications and patent rights 1415
FB 9 Financial arrangements rules 1415
FB 10 Continuity provisions: shares and options 1415
FB 10B Look-through companies 1416
FB 11 Pension payments to former employees 1416
FB 12 Pension payments to former partners 1416
FB 13 Trading stock 1417
FB 14 Specified livestock 1418
FB 15 Specified livestock valued under herd scheme 1419
FB 16 Non-specified livestock 1419
FB 17 High-priced livestock 1420
FB 18 Bloodstock 1420
FB 19 Leased assets 1421
FB 20 Mining assets [Repealed] 1421
FB 21 Depreciable property 1421
Subpart FC—Distribution, transmission, and gifts of property

Introductory provisions

FC 1 Disposals to which this subpart applies 1424
FC 2 Transfer at market value 1425

Exceptions for property transferred on death of person

FC 3 Property transferred to spouse, civil union partner, or de facto partner
1426
FC 4 Property transferred to charities or to close relatives and others 1426
FC 5 Land transferred to close relatives 1427
FC 6 Forestry assets transferred to close relatives 1428
FC 7 Transfer of prepaid property 1428
FC 8 Transfer of certain financial arrangements 1429
FC 9 Residential land transferred to executor, administrator, or beneficiary on death of person

Bankruptcy or insolvency of person under Insolvency Act 2006

FC 10 Transfers from person to Official Assignee under Insolvency Act
2006
Subpart FE—Interest apportionment on thin capitalisation

Introductory provisions

1429
1430
FE 1 What this subpart does 1433
FE 2 When this subpart applies 1434

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FE 3 Interest apportionment for individuals 1438
FE 4 Some definitions 1441

Interest apportionment rules

FE 5 Thresholds for application of interest apportionment rules 1442
FE 6 Apportionment of interest by excess debt entity 1448
FE 6B Alternative apportionment of interest by some excess debt entities 1451
FE 7 Apportionment of interest by reporting bank 1451
FE 8 Measurement dates 1453
FE 9 Elections 1453
FE 10 Currency 1454
FE 11 Temporary increases or decreases in value 1454

Calculations

FE 12 Calculation of debt percentages 1455
FE 12B Calculations for group for test and apportionment using interest- income ratio
1457
FE 13 Financial arrangements entered into with persons outside group 1457

Debt percentage of New Zealand group

FE 14 Consolidation of debts and assets 1459
FE 15 Total group debt 1461
FE 16 Total group assets 1463

Debt percentage of worldwide group

FE 17 Consolidation of debts and assets 1467
FE 18 Measurement of debts and assets of worldwide group 1467

New Zealand banking group

FE 19 Banking group’s equity threshold 1470
FE 20 Financial value and regulatory value 1471
FE 21 Banking group’s New Zealand net equity 1471
FE 22 Notional offshore investment 1476
FE 23 Banking group’s funding debt 1477
FE 24 Regulations 1477

Determining membership of groups

New Zealand group

FE 25 New Zealand group for excess debt entity that is a company or non-resident owning body
1478
FE 26 Identifying New Zealand parent 1479
FE 27 Establishing companies under parent’s control 1484
FE 28 Identifying members of New Zealand group 1485
FE 29 Combining New Zealand groups owned by natural persons and trustees
1487
FE 30 Ownership interests in companies outside New Zealand group 1488

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Worldwide group

FE 31 Worldwide group for corporate excess debt entity if not excess debt outbound company
1490
FE 31B Worldwide group for excess debt outbound companies 1491
FE 31C CFCs in worldwide group for natural persons or trustees described in section FE 2(1)(g)
FE 31D Worldwide group for entity controlled by non-resident owning body or trustee
1492
1493
FE 32 Joint venture parties 1493

New Zealand banking group

FE 33 New Zealand banking group 1494
FE 34 Identifying ultimate parent 1494
FE 35 Persons who may be excluded from banking groups 1494
FE 36 Identifying members of New Zealand banking group in usual case 1496
FE 36B Identifying members of New Zealand banking group: Crown- owned, no interest apportionment
1497
FE 37 Reporting bank for New Zealand banking group 1498

Measuring ownership interests in companies

FE 38 Measuring ownership interests in companies 1499
FE 39 Direct ownership interests 1500
FE 40 Tiered ownership interests 1500
FE 41 Treatment of associated persons’ interests 1500
Subpart FF—Interest apportionment for conduit investment

[Repealed] Introductory provisions [Repealed]

FF 1 What this subpart does [Repealed] 1502
FF 2 When interest apportionment rule applies [Repealed] 1502
FF 3 Steps required to determine treatment of excessive interest expenditure [Repealed]

Interest apportionment rule

[Repealed]

FF 4 Threshold for application of interest apportionment rule

[Repealed]

FF 5 Determination of excess amount of interest expenditure of group

[Repealed]

1502
1502
1502
FF 6 Conduit tax relief [Repealed] 1503
FF 7 Surplus to foreign dividends [Repealed] 1503

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Membership and debt percentages of foreign groups

[Repealed]

FF 8 Identifying members of foreign groups [Repealed] 1503
FF 9 Calculating debt percentage of New Zealand foreign groups

[Repealed]

FF 10 Calculating debt percentage of consolidated foreign groups

[Repealed]

1503
1503
FF 11 Changes in foreign group membership [Repealed] 1503
Subpart FG—Treatment of notional loans to New Zealand branches of foreign banks
FG 1 When this subpart applies 1504
FG 2 Notional loans 1504
FG 3 Notional interest 1505
Subpart FL—Emigration of resident companies
FL 1 What this subpart does 1506
FL 2 Treatment of emigrating companies and their shareholders 1506
Subpart FM—Consolidated groups of companies

Introductory provisions

FM 1 What this subpart applies to 1508
FM 2 Consolidation rules 1508
FM 3 Liability of consolidated groups and group companies 1509
FM 4 Limiting joint and several liability of group companies 1510
FM 5 Liability when company leaves consolidated group 1511
FM 6 Some general rules for treatment of consolidated groups 1513

Calculating taxable income for consolidated group returns

Accounting generally

FM 7 Treatment of amounts derived or expenditure incurred 1514
FM 8 Transactions between group companies: income 1515
FM 9 Amounts that are company’s income 1515
FM 10 Expenditure: intra-group transactions 1516
FM 11 Expenditure: nexus with income derivation 1516
FM 12 Expenditure when deduction would be denied to consolidated group
1517
FM 13 Capital expenditure 1518
FM 14 Part-year financial statements 1518

Accounting for particular property

FM 15 Amortising property and revenue account property 1519
FM 16 Land or business: certain farming or forestry expenditure 1520
FM 17 Trading stock 1521
FM 18 Financial arrangements: transfer from company A to company B 1521

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FM 19 Financial arrangements: transfer for fair and reasonable consideration
1522
FM 20 Financial arrangements: transfer at market value 1523
FM 21 Property transfers when companies leave consolidated groups 1523
FM 22 Arrangements to avoid consolidation rules 1524
FM 23 Arrangements for disposal of shares 1524

Treatment of foreign dividends

[Repealed]

FM 24 General treatment of foreign dividends [Repealed] 1525
FM 25 Reduction in payments for foreign dividends [Repealed] 1525
FM 26 Using tax losses to pay FDP [Repealed] 1525
FM 27 Refunds of FDP [Repealed] 1525
FM 28 Refund when consolidated group has loss [Repealed] 1526
FM 29 Treatment of credit balance in consolidated group’s FDP account

[Repealed]

1526
FM 30 Application of certain provisions to consolidated groups 1526

Membership of consolidated groups

Eligibility and restrictions

FM 31 Eligibility rules 1528
FM 32 Restriction on membership of consolidated groups 1530
FM 33 When membership is reduced 1530

Nominated companies

FM 34 Nominated companies 1530

Forming, joining, or leaving consolidated groups

FM 35 Forming consolidated group 1531
FM 36 Joining existing consolidated group 1531
FM 37 Leaving consolidated group 1532

When membership starts and stops

FM 38 Notice requirements on forming or joining consolidated group 1532
FM 39 Choosing to leave consolidated group 1533
FM 40 Losing eligibility or entitlement to be part of consolidated group 1534
FM 41 No nominated company 1535
FM 42 When company liquidated 1535
Subpart FN—Imputation groups of companies
FN 1 When this subpart applies 1536
FN 2 Imputation rules 1536
FN 3 Liabilities of companies in imputation group 1537
FN 4 Eligibility rules 1537
FN 5 Imputation groups with reduced numbers 1539
FN 6 Nominated companies 1539

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FN 7 Forming imputation groups 1540
FN 8 Trans-Tasman imputation groups and resident imputation subgroups
1541
FN 9 Joining existing imputation group 1541
FN 10 When membership of imputation group ends 1542
FN 11 Company choosing to leave imputation group 1542
FN 12 Company no longer eligible or entitled to membership 1543
FN 13 Imputation group with no nominated company 1543
FN 14 Effect of liquidation of company 1544
Subpart FO—Amalgamation of companies

Introductory provisions

FO 1 What this subpart does 1545
FO 2 Amalgamation rules 1545
FO 3 Resident’s restricted amalgamations 1546
FO 4 Rights and obligations of amalgamated companies 1547
FO 5 Amalgamations and remitted liabilities 1547

Treatment of shares, income, expenditure, and bad debts

FO 6 Cancellation of shares 1548
FO 7 Income derived after amalgamation 1548
FO 8 Bad debts and expenditure or loss on resident’s restricted amalgamation
1549
FO 9 Unexpired portion of prepaid expenditure 1549

Property passing to amalgamated company on amalgamation

FO 10 When property passes on resident’s restricted amalgamation 1549
FO 11 When property passes on amalgamation other than resident’s restricted amalgamation
FO 12 Financial arrangements: resident’s restricted amalgamation, companies in wholly-owned group
FO 13 Financial arrangements: resident’s restricted amalgamation, calculation method unchanged
FO 14 Financial arrangements: resident’s restricted amalgamation, other cases
FO 15 Financial arrangements: amalgamation other than resident’s restricted amalgamation
1551
1551
1552
1555
1555
FO 16 Amortising property 1555
FO 17 Land 1556

Treatment of financial arrangements between amalgamating companies

FO 18 When amalgamating companies are parties to financial arrangement
FO 19 Calculation of outstanding accrued balance: consideration for discharge
1557
1559

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FO 20 Calculation of outstanding accrued balance: amounts remitted 1560
FO 21 When amalgamating companies are parties to financial arrangements: economic groups
Subpart FZ—Terminating provisions

Debentures

FZ 1 Treatment of interest payable under debentures issued before certain date
1561
1562

Leases

FZ 2 Effect of specified lease on lessor and lessee 1563
FZ 3 Income of lessor under specified lease 1565
FZ 4 Deductions under specified leases 1566

Relationship property

FZ 5 Commercial bills 1566

Estate property

FZ 6 Transitional valuation rule for estate property 1567

Earthquake-affected group property

FZ 7 Valuation of group assets: insurance proceeds from Canterbury earthquake
1568

Part G

Avoidance and non-market transactions

Subpart GA—Avoidance: general
GA 1 Commissioner’s power to adjust 1570
GA 2 Commissioner’s power to adjust: fringe benefit tax 1571
Subpart GB—Avoidance: specific

Arrangements involving dividend stripping

GB 1 Arrangements involving dividend stripping 1574

Arrangements involving transfer pricing

GB 2 Arrangements involving transfer pricing 1575

Arrangements involving tax losses

GB 3 Arrangements for carrying forward loss balances: companies 1576
GB 4 Arrangements for grouping tax losses: companies 1576

Arrangements to defeat continuity provisions

GB 5 Arrangements involving trust beneficiaries 1577

Arrangements involving qualifying companies

GB 6 Arrangements involving qualifying companies 1577

Arrangements involving controlled foreign companies

GB 7 Arrangements involving CFC control interests 1578

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GB 8 Arrangements involving attributed repatriation from CFCs

[Repealed]

1578
GB 9 Temporary disposals of direct control or income interests 1578
GB 10 Temporary acquisitions of direct control or income interests 1579
GB 11 Temporary increases in totals for control interest categories 1580
GB 12 Temporary reductions in totals for control interest categories 1581
GB 13 When combination of changes reduces income 1582
GB 14 When combination of changes increases loss 1583
GB 15 CFC income or loss: arrangements related to quarterly measurement
1584
GB
15BA
CFC income or loss: arrangements for inclusion of CFC in test group
1584
GB 15B Supplies affecting default test for non-attributing active CFC 1585
GB 15C Arrangements related to accounting test for non-attributing active
CFC
1585

Arrangements involving foreign investment funds

GB 16 FIF income or loss: arrangements for measurement day concessions
1586

Arrangements involving film rights

GB 17 Excessive amounts for film rights or production expenditure 1586
GB 18 Arrangements to acquire film rights or incur production expenditure
1587
GB 19 When film production expenditure payments delayed or contingent 1588

Arrangements involving petroleum and mineral mining

GB 20 Arrangements involving petroleum and mineral mining 1588

Arrangements involving financial arrangements

GB 21 Dealing that defeats intention of financial arrangements rules 1590

Arrangements involving trust beneficiary income

GB 22 Arrangements involving trust beneficiary income 1591

Excessive remuneration

GB 23 Excessive remuneration to relatives 1591
GB 24 Exemption for genuine contracts 1593
GB 25 Close company remuneration to shareholders, directors, or relatives
1594
GB 25B Excessive effective look-through interests 1594

Arrangements involving repatriation of commercial bills

GB 26 Arrangements involving repatriation of commercial bills 1595

Attribution rule for income from personal services

GB 27 Attribution rule for income from personal services 1596
GB 28 Interpretation of terms used in section GB 27 1599

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GB 29 Attribution rule: calculation 1601

Arrangements involving restrictive covenants

GB 30 Arrangements to avoid taxation of restrictive covenant payments 1603

Arrangements involving fringe benefit tax

GB 31 FBT arrangements: general 1603
GB 32 Benefits provided to employee’s associates 1604

Arrangements involving depreciation loss

GB 33 Arrangements involving depreciation loss 1606

Arrangements involving imputation rules

GB 34 ICA arrangements for carrying amounts forward 1606
GB 35 Imputation arrangements to obtain tax advantage 1607
GB 36 Reconstruction of imputation arrangements to obtain tax advantage 1608
GB 37 Arrangements for payment of dividend by other companies 1609
GB 38 When sections GB 35 to GB 37 apply to consolidated groups 1610

Arrangements involving foreign dividends

GB 39 FDP arrangements: general [Repealed] 1610
GB 40 BETA arrangements for carrying amounts forward [Repealed] 1611
GB 41 FDPA arrangements for carrying amounts forward [Repealed] 1611

Arrangements involving Maori authority credits

GB 42 Maori authority credit arrangements to obtain tax advantage 1611
GB 43 Reconstruction of Maori authority credit arrangements to obtain tax advantage

Arrangements involving tax credits for families

1612
GB 44 Arrangements involving tax credits for families 1613

Arrangements involving money not at risk

GB 45 Arrangements involving money not at risk 1613
GB 46 Deferral of surplus deductions from arrangements 1615
GB 47 Calculation rules for sections GB 45 and GB 46 1617
GB 48 Defined terms for sections GB 45 and GB 46 1618

Arrangements involving returning share transfers

GB 49 Arrangements involving returning share transfers 1619

Arrangements involving partners and owners

GB 50 Arrangements involving partners and owners 1620

Arrangements involving interest apportionment rules

GB 51 Proportionality between amount of debt and ownership interests 1621

Arrangements involving residential land

GB 52 Arrangements involving residential land: companies’ shares 1621
GB 53 Arrangements involving residential land: trusts 1622

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Subpart GC—Market value substituted

Disposals of trading stock or similar property

GC 1 Disposals of trading stock at below market value 1623
GC 2 Disposals of timber rights or standing timber 1624
GC 3 Disposals by life insurers 1625
GC 3B Disposals of emissions units 1625
GC 4 Disposals and acquisitions of FIF attributing interests 1625
GC 4B Disposals of ETS units at below market value [Repealed] 1626

Leases

GC 5 Leases for inadequate rent 1626

Transfer pricing arrangements

GC 6 Purpose of rules and nature of arrangements 1628
GC 7 Excess amount payable by person 1629
GC 8 Insufficient amount receivable by person 1629
GC 9 Compensating arrangement: person paying less than arm’s length amount
GC 10 Compensating arrangement: person receiving more than arm’s length amount
1630
1631
GC 11 Applications for matching treatment 1632
GC 12 Effect on person’s withholding obligations 1633
GC 13 Calculation of arm’s length amounts 1633
GC 14 Definitions for sections GC 6 to GC 13 1634
Subpart GZ—Terminating provisions
GZ 1 Limitation on section GB 20: petroleum and mineral mining arrangements
GZ 2 Arrangements involving cancellation of conduit tax relief credits

[Repealed]

1635
1635
GZ 3 Donations of trading stock for relief of Canterbury earthquakes 1635

Part H

Taxation of certain entities Subpart HA—Qualifying companies (QC) Introductory provisions

HA 1 What this subpart does 1638
HA 2 Meaning of qualifying company 1640
HA 3 Meaning of loss-attributing qualifying company [Repealed] 1640
HA 4 Conditions applying 1640

Qualifying company status

HA 5 Elections to become qualifying company 1640
HA 6 Corporate requirements 1642
HA 7 Shareholding requirements 1643

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HA 7B Grandparenting requirement 1645
HA 8 Shareholders’ personal liability 1645
HA 8B No CFC income interests or FIF direct income interests of 10% or more
1646
HA 9 Limit on foreign non-dividend income 1646
HA 10 Nature of LAQC shares [Repealed] 1647
HA 11 When requirements no longer met: qualifying companies 1647
HA 11B When requirements no longer met: LAQCs [Repealed] 1649
HA 12 Avoidance arrangements [Repealed] 1649

Treatment of profits, dividends, and tax losses

HA 13 Qualifying companies’ distributions 1649
HA 14 Dividends paid by qualifying companies 1649
HA 15 Fully imputed distributions 1650
HA 16 Dividends paid by qualifying companies to trustee shareholders 1652
HA 17 Dividends derived by qualifying companies 1652
HA 18 Treatment of dividends when qualifying company status ends 1653
HA 19 Credit accounts and dividend statements 1654
HA 20 Attribution of tax losses [Repealed] 1655
HA 21 Loss balances not carried forward 1655
HA 22 Group companies using tax losses 1655
HA 23 Treatment of tax losses on amalgamation 1655

Special tax matters for loss-attributing qualifying companies

[Repealed]

HA 24 Treatment of tax losses other than certain foreign losses

[Repealed]

1656
HA 25 Treatment of certain foreign losses [Repealed] 1656
HA 26 Attribution when balance dates differ [Repealed] 1656
HA 27 Attribution when loss results in reduction in value of shares

[Repealed]

1656

Elections: qualifying companies

HA 28 Elections by trustee shareholders 1656
HA 29 Elections by majority shareholders 1657
HA 30 When elections take effect 1657
HA 31 Revocation of directors’ elections 1658
HA 32 Revocation of shareholders’ elections: by notice 1658
HA 33 Revocation of shareholders’ elections: by event 1659
HA 33B Transitional rules for look-through companies, partnerships, and sole traderships
1660
HA 34 Period of grace following death of shareholder 1660
HA 35 Period of grace following revocation of election 1661
HA 36 Period of grace following revocation of joint election 1661
HA 37 Period of grace for new shareholder 1662

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Elections: loss-attributing qualifying companies

[Repealed]

HA 38 Elections by directors and shareholders required [Repealed] 1662
HA 39 Revocation of elections [Repealed] 1662

Qualifying company election tax

HA 40 Liability for qualifying company election tax 1663
HA 41 Calculating qualifying company election tax 1663
HA 42 Paying qualifying company election tax 1665

Effective interests in qualifying companies

Subpart HB—Look-through companies
HB 1 Look-through companies are transparent 1667
HB 2 Previous income and expenditure or loss 1669
HB 3 Loss balances extinguished 1669
HB 4 General provisions relating to disposals 1670
HB 5 Disposal of owner’s interests 1671
HB 6 Disposal of trading stock 1672
HB 7 Disposal of depreciable property 1673
HB 8 Disposal of financial arrangements and certain excepted financial arrangements
1674
HB 9 Disposal of short-term agreements for sale and purchase 1675
HB 10 Disposal of livestock 1676
HB 11 Limitation on deductions by persons with interests in look-through companies
HB 12 Limitation on deductions by owners of look-through companies:
carry-forward
1676
1681
HB 13 LTC elections 1682
Subpart HC—Trusts

Introductory provisions

HC 1 What this subpart does 1685
HC 2 Obligations of joint trustees for calculating income and providing returns
1686
HC 3 Multiple settlements 1687
HC 4 Corpus of trust 1687

Trust income

HC 5 Amounts derived by trustees 1688
HC 6 Beneficiary income 1688
HC 7 Trustee income 1690
HC 8 Amounts received after person’s death 1690

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Classification of trusts

HC 9 Classifying trusts 1690
HC 10 Complying trusts 1691
HC 11 Foreign trusts 1692
HC 12 Non-complying trusts 1692
HC 13 Charitable trusts 1692

Distributions from trusts

HC 14 Distributions from trusts 1693
HC 15 Taxable distributions from non-complying and foreign trusts 1693
HC 16 Ordering rule for distributions from non-complying and foreign trusts

Tax treatment of amounts that beneficiaries derive from trusts

1695
HC 17 Amounts derived as beneficiary income 1697
HC 18 Taxable distributions from foreign trusts 1697
HC 19 Taxable distributions from non-complying trusts 1698
HC 20 Distributions from complying trusts 1698
HC 21 Distributions from community trusts 1698
HC 22 Use of tax losses to reduce taxable distributions from non- complying trusts
1699
HC 23 Temporary absences of beneficiaries 1700

Tax treatment of trustee income

HC 24 Trustees’ obligations 1700
HC 25 Foreign-sourced amounts: non-resident trustees 1701
HC 26 Foreign-sourced amounts: resident trustees 1703

Settlors and their liabilities

HC 27 Who is a settlor? 1705
HC 28 Activities treated as those of settlor 1707
HC 29 Settlors’ liability to income tax 1708

Treatment of transition situations

HC 30 Treatment of foreign trusts when settlor becomes resident 1709

Valuation of property, trading stock, and financial arrangements

HC 31 When existing trusts come into tax base 1710

Rate and payment of income tax

HC 32 Liability of trustee as agent 1712
HC 33 Choosing to satisfy income tax liability of trustee 1712
HC 34 Taxable distributions from non-complying trusts 1714
HC 35 Beneficiary income of minors 1714
HC 36 Trusts and minor beneficiary rule 1715
HC 37 Testamentary trusts and minor beneficiary rule 1717

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Subpart HD—Agents

Introductory provisions

HD 1 What this subpart does 1718
HD 2 Joint liability of principal and agent for tax obligations 1719
HD 3 Agents’ duties and liabilities 1719
HD 4 Treatment of principals 1720
HD 5 Matters between principals and agents 1720
HD 6 When relationship effectively that of principal and agent 1721
HD 7 Rate and amount of tax 1721

Particular cases

HD 8 Circumstances giving rise to agency 1721
HD 9 Guardians 1722
HD 10 Mortgagees in possession 1722
HD 11 Nominated companies 1722
HD 12 Trusts 1722
HD 13 Unit trusts 1723
HD 14 Companies issuing debentures 1723
HD 15 Asset stripping of companies 1724
HD 16 Non-resident general insurers 1727
HD 17 Agent paying premiums to residents of Switzerland 1728

Absentees

HD 18 Agency in relation to absentees generally 1728
HD 19 Persons receiving absentees’ income 1729
HD 20 Persons carrying on business for absentees 1729
HD 20B General partners and partners carrying on with or managing business involving absentees
1729
HD 21 Companies 1730
HD 22 Banking companies 1730
HD 23 Trustees of group investment funds 1730
HD 24 Shipping businesses 1730
HD 25 Persons remitting amounts outside New Zealand 1731

Non-residents

Subpart HE—Mutual associations

Income Tax Act 2007

Reprinted as at

1 October 2017

HE 5 Association rebates paid by shares or credit 1735
Subpart HF—Maori authorities

Introductory provisions

HF 1 Maori authorities and the Maori authority rules 1736
HF 2 Who is eligible to be a Maori authority? 1737
HF 3 Applying provisions to Maori authorities 1738

Maori authority distributions

HF 4 What constitutes a Maori authority distribution? 1739
HF 5 Notional distributions of co-operative companies 1740
HF 6 Tax treatment of Maori authority distributions 1740
HF 7 Taxable Maori authority distributions 1740
HF 8 Proportional allocation 1741

Changing status

Table H1
Consequences of change in entity status for purposes of Maori authority rules
HF 9 Treatment of companies and trusts that choose to apply this subpart 1741
HF 10 Market value calculations 1742
HF 11 Choosing to become Maori authority 1742
Subpart HG—Joint venturers, partners, and partnerships

Joint venturers

HG 1 Joint venturers 1744

Partners and partnerships

HG 2 Partnerships are transparent 1744
HG 3 General provisions relating to disposals 1746
HG 4 Disposal upon final dissolution 1747
HG 5 Disposal of partner’s interests 1748
HG 6 Disposal of trading stock 1749
HG 7 Disposal of depreciable property 1750
HG 8 Disposal of financial arrangements and certain excepted financial arrangements
1751
HG 9 Disposal of short-term agreements for sale and purchase 1753
HG 10 Disposal of livestock 1754
HG 11 Limitation on deductions by partners in limited partnerships 1755
HG 12 Limitation on deductions by partners in limited partnerships: carry- forward
1760

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Subpart HL—Portfolio investment entities

[Repealed] Introductory provisions [Repealed]

HL 1 Intended effect on portfolio tax rate entities and investors

[Repealed]

1763
HL 2 Scheme of subpart [Repealed] 1763

Eligibility requirements: portfolio investment entities and foreign investment vehicles

[Repealed]

HL 3 Eligibility requirements for entities [Repealed] 1763
HL 4 Effect of failure to meet eligibility requirements for entities

[Repealed]

1763
HL 5 Foreign investment vehicles [Repealed] 1764
HL 5B Meaning of investor and portfolio investor class [Repealed] 1764
HL 5C Income interest requirement [Repealed] 1764
HL 6 Investor membership requirement [Repealed] 1764
HL 7 Investor return adjustment requirement: portfolio tax rate entity

[Repealed]

HL 8 Imputation credit distribution requirement: portfolio listed company [Repealed]
1764
1764
HL 9 Investor interest size requirement [Repealed] 1764
HL 10 Further eligibility requirements relating to investments [Repealed] 1764

Becoming and ceasing to be portfolio investment entity

[Repealed]

HL 11 Election to become portfolio investment entity and cancellation of election [Repealed]
HL 12 Unlisted company choosing to become portfolio listed company

[Repealed]

1765
1765
HL 13 Becoming portfolio investment entity [Repealed] 1765
HL 14 Tax consequences from transition [Repealed] 1765
HL 15 Ceasing to be portfolio investment entity [Repealed] 1765

Periods relevant to calculation of portfolio entity tax liability

[Repealed]

HL 16 Portfolio allocation period and portfolio calculation period

[Repealed]

1766

Allocation of income in some cases

[Repealed]

HL 17 Treatment of income from interest when entitlement conditional or lacking [Repealed]
1766

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HL 18 Certain new investors treated as part of existing portfolio investor class [Repealed]

Calculating portfolio entity tax liability

[Repealed]

HL 19 Portfolio class net income and portfolio class net loss for portfolio allocation period [Repealed]
HL 19B Treatment of certain provisions made by portfolio tax rate entity

[Repealed]

HL 20 Portfolio class taxable income and portfolio class taxable loss for portfolio allocation period [Repealed]
HL 21 Portfolio entity tax liability and tax credits of portfolio tax rate entity for period [Repealed]

Payment by portfolio tax rate entity of tax for tax year

[Repealed]

HL 22 Payments of tax by portfolio tax rate entity making no election

[Repealed]

HL 23 Payments of tax by portfolio tax rate entity choosing to pay provisional tax [Repealed]
HL 24 Payments of tax by portfolio tax rate entity choosing to make payments when investor leaves [Repealed]
1766
1766
1766
1767
1767
1767
1767
1767
HL 25 Optional payments of tax by portfolio tax rate entities [Repealed] 1768

Results for investors

[Repealed]

HL 26 Portfolio investor allocated income and portfolio investor allocated loss [Repealed]
HL 27 Treatment of portfolio investor allocated loss for zero-rated portfolio investors and investors with portfolio investor exit period [Repealed]
1768
1768

Tax credits for entity

[Repealed]

HL 28 Treatment of portfolio investor allocated loss for other investors

[Repealed]

HL 29 Credits received by portfolio tax rate entity or portfolio investor proxy [Repealed]
1768
1768

Treatment of losses for entity

[Repealed]

HL 30 Portfolio entity formation loss [Repealed] 1769
HL 31 Portfolio class taxable income and portfolio class taxable loss for tax year [Repealed]
1769

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HL 32 Treatment of portfolio class taxable loss and portfolio class land loss for tax year [Repealed]

Portfolio investor proxies

[Repealed]

1769
HL 33 Portfolio investor proxies [Repealed] 1769
Subpart HM—Portfolio investment entities

Introductory provisions

HM 1 Outline of subpart and relationship with other Parts 1773
HM 2 What is a portfolio investment entity? 1775
HM 3 Foreign PIE equivalents 1777
HM 4 Who is an investor? 1778
HM 5 What is an investor class? 1778
HM 6 Intended effects for multi-rate PIEs and investors 1779
HM 6B Optional look-through rules for certain PIEs 1781

Entry rules

HM 7 Requirements 1782

Requirements

HM 8 Residence in New Zealand 1782
HM 9 Collective schemes 1783
HM 10 Exclusion: life insurance business 1784
HM 11 Investment types 1784
HM 12 Income types 1785
HM 13 Maximum shareholdings in investments 1786
HM 14 Minimum number of investors 1788
HM 15 Maximum investor interests 1788
HM 16 Associates combined 1789
HM 17 Same rights to all investment proceeds 1789
HM 18 Requirements for listed PIEs: unlisted companies 1790
HM 19 Requirements for listed PIEs: fully crediting distributions 1791
HM 19B Modified rules for foreign investment zero-rate PIEs 1792
HM 19C Modified rules for foreign investment variable-rate PIEs 1792
HM 20 Re-entering as PIE: 5-year rule 1793

Exceptions

HM 21 Exceptions for certain investors 1793
HM 22 Exceptions for certain funds 1794
HM 23 Exceptions for foreign PIE equivalents 1795

Exit rules

HM 24 Immediate loss of PIE status 1795
HM 25 When entity no longer meets investment or investor requirements 1796
HM 26 Starting life insurance business 1797

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HM 27 When multi-rate PIE no longer meets investor interest adjustment requirements
1797
HM 28 When listed PIE no longer meets crediting requirement 1797
HM 29 Choosing to cancel status 1797
HM 30 When foreign PIE equivalent no longer meets requirements 1797

Rules for multi-rate PIEs

Introductory provisions

HM 31 Rules for multi-rate PIEs 1798
HM 32 Rules for and treatment of investors in multi-rate PIEs 1799
HM 33 Proxies for PIE investors 1800

Attributing income to investors

HM 34 Attribution periods 1801
HM 35 Determining net amounts and taxable amounts 1802
HM 35B Treatment of certain provisions made by multi-rate PIEs 1804
HM 35C Determining amounts for notified foreign investors 1805
HM 36 Calculating amounts attributed to investors 1806
HM 37 When income cannot be attributed 1808
HM 38 When superannuation fund investor has conditional entitlement 1809
HM 39 New investors in existing investor classes 1810
HM 40 Deductions for attributed PIE losses for zero-rated and exiting investors
1810

Calculating and paying tax liability

HM 41 Options for calculation and payment of tax 1811
HM 42 Exit calculation option 1812
HM 42B Part-year tax calculations for PIEs under the exit calculation option for the 2010–11 tax year
1813
HM 43 Quarterly calculation option 1814
HM 44 Provisional tax calculation option 1815
HM 44B NRWT calculation option 1815
HM 45 Voluntary payments 1817
HM 46 Calculation process 1818
HM 47 Calculation of tax liability or tax credit of multi-rate PIEs 1818

Adjusting investors’ interests

HM 48 Adjustments to investor interests or to distributions 1820

Using tax credits

HM 49 Tax credits: when sections HM 50 to HM 55 apply 1821
HM 50 Attributing credits to investors 1822
HM 51 Use of foreign tax credits by PIEs 1824
HM 52 Use of foreign tax credits by zero-rated and certain exiting investors
1825
HM 53 Use of tax credits other than foreign tax credits by PIEs 1826

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HM 54 Use of tax credits other than foreign tax credits by investors 1827
HM 55 Tax credits for losses 1828

Special rules for foreign investment PIEs

HM 55C Modified source rules 1828
HM 55D Requirements for investors in foreign investment PIEs 1829
HM 55E Changes in status of investors in foreign investment PIEs 1830
HM 55F Treatment of income attributed to notified foreign investors 1831
HM
55FB
Notified foreign investors and tax credits for supplementary dividends
1831
HM 55G Allowable amounts and thresholds for income with New Zealand source
HM 55H Treatment when certain requirements for foreign investment PIEs not met

Prescribed and notified rates for investors in multi-rate PIEs

1832
1833
HM 56 Prescribed investor rates: schedular rates 1834
HM 57 Prescribed investor rates for certain investors: 0% 1835
HM 57B Prescribed investor rates for new residents 1835
HM 58 Transition of rate for certain investors 1836
HM 59 Prescribed investor rates for certain investors: 0% [Repealed] 1836
HM 60 Notified investor rates 1836
HM 61 Certain exiting investors zero-rated 1839

Exit levels and periods

Treatment of losses by PIEs

Losses of certain multi-rate PIEs

HM 64 Use of investor classes’ losses 1841
HM 65 Use of land losses of investor classes 1842

Formation losses

HM 66 Formation losses carried forward to tax year 1844
HM 67 Formation losses carried forward to first quarter 1844
HM 68 When formation losses carried forward are less than 5% of formation investment value
HM 69 When formation losses carried forward are 5% or more of formation investment value: 3-year spread
HM 70 Maximum amount of formation losses allocated by multi-rate PIEs to investor classes
1844
1845
1846

Elections and consequences

HM 71 Choosing to become PIE 1846
HM 71B Choosing to become foreign investment PIE 1847
HM 72 When elections take effect 1847

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HM 73 Transition: provisional tax 1848
HM 74 Transition: entities with non-standard income years 1849
HM 75 Transition: treatment of shares held in certain companies 1849
HM 76 Transition: FDPA companies [Repealed] 1851
Subpart HR—Other entities Partnerships and joint ventures [Repealed]
HR 1 Partnerships and joint ventures [Repealed] 1852

Funds

HR 2 Group investment funds 1852
HR 3 Definitions for section HR 2: group investment funds 1852
HR 4 Government Superannuation Fund 1855
HR 4B Activities relating to New Zealand Superannuation Fund 1855

Airport operators

HR 5 Airport operators: general 1856
HR 6 Airport operator’s assets 1857
HR 7 Meaning of airport operator’s activities 1858

Transitional residents

HR 8 Transitional residents 1858

Financial institution special purpose vehicles

HR 9 Financial institution special purpose vehicles are transparent 1861
HR 9B Bankruptcy-remote property during application of section HR 9 1863
HR 10 What happens when vehicle stops being financial institution special purpose vehicle?

Non-exempt charities: cessation of tax-exempt status

1863
HR 11 Non-exempt charities: initial tax base 1865
HR 12 Non-exempt charities: taxation of tax-exempt accumulation 1866
Subpart HZ—Terminating provisions
HZ 1 Distributions from trusts of pre-1989 tax reserves 1868
HZ 2 Trusts that may become complying trusts 1868
HZ 3 Special partnerships: transition into limited partnerships and limited partnerships deduction rules
HZ 4 Overseas limited partnerships: transition into limited partnerships deduction rules
1869
1870
HZ 4B Qualifying companies: transition into partnership 1870
HZ 4C Qualifying companies: transition into look-through companies 1873
HZ 4D Qualifying companies: transition into sole traderships 1875
HZ 4E Transition out of LTC regime for Taxation (Annual Rates for
2016–17, Closely Held Companies, and Remedial Matters) Act
2017
1876

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HZ 5 Transitional provisions for PIE rules 1877
HZ 6 Saving of binding rules relating to portfolio investment entities 1878
HZ 7 Saving of binding rulings relating to settlements on trusts 1879
HZ 8 Retrospective transitional provision for market valuation under section HB 4
1880

Part I Treatment of tax losses

Subpart IA—General rules for tax losses
IA 1 What this subpart does 1881
IA 2 Tax losses 1881
IA 3 Using tax losses in tax year 1884
IA 3B Tax losses and procedures under Insolvency Act 2006 1885
IA 4 Using loss balances carried forward to tax year 1885
IA 5 Restrictions on companies’ loss balances carried forward 1886
IA 6 Restrictions on companies grouping tax losses 1887
IA 7 Restrictions relating to ring-fenced tax losses 1887
IA 8 Restrictions relating to schedular income 1891
IA 9 Ordering rules 1891
IA 10 Amended assessments 1892
Subpart IC—Grouping tax losses

Introductory provisions

IC 1 Company A making tax loss available to company B 1893
IC 2 Threshold levels for grouping tax losses in tax year 1894
IC 3 Common ownership: group of companies 1894
IC 4 Common ownership: wholly-owned groups of companies 1897

Requirements and methods

IC 5 Company B using company A’s tax loss 1897
IC 6 Common ownership for period 1899
IC 7 Residence of company A 1899
IC 8 Limitations on amounts used 1900
IC 9 Date for payment and notice to Commissioner 1900
IC 10 When companies have different balance dates 1901
IC 11 Reduction of amounts used by companies 1901
IC 12 Bad debts or decline in value of shares 1902
IC 13 Variation of requirements for development companies in Niue 1903
Subpart ID—Use of tax losses by consolidated groups
ID 1 Treatment of tax losses by consolidated groups 1904
ID 2 Pre-consolidation losses: general treatment 1905
ID 3 Pre-consolidation losses: use by group companies 1905
ID 4 Pre-consolidation losses on entry: part-year rule 1906
ID 5 Pre-consolidation losses on exit: part-year rule 1907

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Subpart IE—Treatment of tax losses on amalgamation of companies
IE 1 When this subpart applies 1908
IE 2 Treatment of tax losses by amalgamating company 1909
IE 3 Treatment of tax losses by amalgamated company 1909
IE 4 Group companies’ treatment of tax losses on amalgamation 1910
IE 5 Applying the continuity provisions when companies amalgamate 1911
Subpart IP—Meeting requirements for part-years

Introductory provisions

IP 1 When this subpart applies 1912
IP 2 Group companies’ common span 1912

Tax loss components carried forward

IP 3 Continuity breach: tax loss components of companies carried forward
1913

Grouping part-year tax losses

IP 4 Breach in income year in which tax loss component arises 1914
IP 5 Breach in tax year in which loss balance is grouped 1915

Statements and notices

IP 6 Financial statements required 1916
IP 7 Notices required 1917
Subpart IQ—Attributed controlled foreign company net losses and foreign investment fund net losses
IQ 1A When this subpart applies 1918
IQ 1 General treatment 1918
IQ 1B Losses carried forward to tax year 1919
IQ 2 Ring-fencing cap on attributed CFC net losses 1919
IQ 2B Effect of attributed CFC net loss and FIF net loss from before first affected year
1923
IQ 2C Effect of FIF net loss if attributed FIF income method not available 1928
IQ 3 Ring-fencing cap on FIF net losses 1929
IQ 4 Group companies using attributed CFC net losses 1930
IQ 5 Group companies using FIF net losses [Repealed] 1932
IQ 6 Pre-consolidation losses: general treatment 1933
IQ 7 When group membership lacking in loss period 1933
IQ 8 When group membership lacking in tax year of use 1935
IQ 9 When attributed CFC net loss becomes FIF net loss 1935
Subpart IS—Mineral miners’ and petroleum miners’ tax losses
IS 1 General treatment of mineral miners’ net losses 1936
IS 2 Treatment of net losses resulting from certain expenditure 1937
IS 3 Holding companies’ tax losses [Repealed] 1939

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IS 4 Adjustments in certain circumstances [Repealed] 1939
IS 5 Petroleum miners’ tax losses 1940
IS 6 When company stops being mineral miner 1940
Subpart IT—Cancellation of life insurer’s losses
IT 1 Cancellation of life insurer’s policyholder net losses 1941
IT 2 Cancellation of life insurer’s tax loss when allowed into policyholder base
Subpart IV—Treatment of certain supplementary dividends

[Repealed]

1942
IV 1 Supplementary dividend holding companies [Repealed] 1942
Subpart IW—Use of tax losses to pay shortfall penalties
IW 1 Shortfall penalties 1943
Subpart IZ—Terminating provisions
IZ 1 Use of specified activity net losses 1944
IZ 2 Petroleum mining companies: treatment of payments from shareholders
1948
IZ 3 Petroleum mining companies: use of loss balances 1949
IZ 4 Tax losses for tax years before 1977–78 tax year 1950
IZ 5 Companies’ tax losses for tax years before 1991–92 tax year 1951
IZ 6 Companies’ tax losses for 1990–91 and 1991–92 tax years 1951
IZ 7 Grouping tax losses for tax years before 1981–82 and between
1981–82 and 1991–92
1952

Part L

Tax credits and other credits

Subpart LA—General rules for tax credits
LA 1 What this Part does 1954
LA 2 Satisfaction of income tax liability 1954
LA 3 When total tax credit less than or equal to income tax liability 1954
LA 4 When total tax credit more than income tax liability 1955
LA 5 Treatment of remaining credits 1955
LA 6 Remaining refundable credits: PAYE, RWT, and certain other items
LA 7 Remaining refundable credits: tax credits for social policy and other initiatives
1956
1958
LA 8 Remaining refundable credits: non-resident withholding tax 1958
LA 8B General rules particular to life insurers 1959
LA 9 Use of tax credits 1960
LA 10 Meaning of tax credit 1960

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Subpart LB—Tax credits for payments, deductions, and family payments
LB 1 Tax credits for PAYE income payments 1961
LB 2 Tax credits for provisional tax payments 1961
LB 3 Tax credits for resident withholding tax 1962
LB 4 Tax credits for families 1963
LB 4B Tax credit for R&D tax losses 1964
LB 5 Tax credits for non-resident withholding tax 1964
LB 6 Tax credits for RSCT 1964
LB 6B Tax credits for RLWT 1965
LB 7 Tax credits related to personal service rehabilitation payments:
providers
LB 8 Tax credits related to personal service rehabilitation payments:
payers
1965
1966
Subpart LC—Tax credits for natural persons Tax credits for persons on low incomes [Repealed]
LC 1 When net income under low income amount [Repealed] 1968
LC 2 When net income in low income abatement range [Repealed] 1968

Tax credits for children

[Repealed]

LC 3 Child’s income [Repealed] 1968

Tax credits for transitional circumstances

[Repealed]

LC 4 Tax credits for transitional circumstances [Repealed] 1969
LC 5 Meaning of engaged in full-time work [Repealed] 1969

Tax credits for housekeeping

[Repealed]

LC 6 Tax credits for housekeeping [Repealed] 1969
LC 7 Meaning of housekeeper [Repealed] 1969
LC 8 Some definitions [Repealed] 1969

Tax credits for absentees

[Repealed]

LC 9 Tax credits for absentees [Repealed] 1970

Adjustments to certain tax credits

[Repealed]

LC 10 Adjustment for change in return date [Repealed] 1970
LC 11 Adjustment when person is non-resident for part of tax year

[Repealed]

1970

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LC 12 Assessment when person is non-resident [Repealed] 1970

Tax credits for independent earners

LC 13 Tax credits for independent earners 1970
Subpart LD—Tax credits for gifts and donations

Charitable and other public benefit gifts

LD 1 Tax credits for charitable or other public benefit gifts 1972
LD 2 Exclusions 1973
LD 3 Meaning of charitable or other public benefit gift 1973

Payroll donations

LD 4 Tax credits for payroll donations 1975
LD 5 Calculating amount of tax credit and filing particulars 1976
LD 6 When donation is paid to ineligible recipient 1977
LD 7 When donation returned to person 1977
LD 8 Meaning and ranking of payroll donation 1978
Subpart LE—Tax credits for imputation credits
LE 1 Tax credits for imputation credits 1979
LE 2 Use of remaining credits by companies and trustees 1981
LE 2B Use of remaining credits by life insurer on policyholder base 1982
LE 3 Use of remaining credits by others 1982
LE 4 Trustees for minor beneficiaries 1983
LE 5 Beneficiaries of trusts 1983
LE 6 Partners in partnerships 1984
LE 7 Credit transfer notices 1985
LE 7B Credit of RSCT for imputation credit 1985
LE 8 Application of imputation ratio 1985
LE 8B Dividends from certain FIF interests 1986
LE 9 Application of combined imputation and FDP ratio [Repealed] 1986
LE 10 When income tax unpaid 1987
LE 11 Evidential requirements 1987
Subpart LF—Tax credits for foreign dividend payment (FDP)
credits

[Repealed]

LF 1 Tax credits for FDP credits [Repealed] 1988
LF 2 Trustees for minor beneficiaries [Repealed] 1988
LF 3 Beneficiaries of trusts [Repealed] 1988
LF 4 Partners in partnerships [Repealed] 1988
LF 5 Credit transfer notices [Repealed] 1988
LF 6 Application of FDP ratio [Repealed] 1988
LF 7 Application of combined imputation and FDP ratio [Repealed] 1988
LF 8 Credits for persons who are non-resident or who receive exempt income [Repealed]
1988

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LF 9 When income tax unpaid [Repealed] 1989
LF 10 Evidential requirements [Repealed] 1989
Subpart LH—Tax credits for expenditure on research and development

[Repealed]

LH 1 Who this subpart applies to [Repealed] 1990
LH 2 Tax credits relating to expenditure on research and development

[Repealed]

1990
LH 3 Requirements [Repealed] 1990
LH 4 Calculation of amount of credit [Repealed] 1990
LH 5 Adjustments to eligible expenditure [Repealed] 1990
LH 6 Research and development activities outside New Zealand

[Repealed]

1990
LH 7 Research and development activities and related terms [Repealed] 1990
LH 8 Orders in Council [Repealed] 1990
LH 9 Internal software development: general [Repealed] 1990
LH 10 Internal software development: no associated internal software developer [Repealed]
LH 11 Internal software development: associated internal software developer with same income year [Repealed]
LH 12 Internal software development: associated internal software developer with different income year [Repealed]
1991
1991
1991
LH 13 Internal software development: limit [Repealed] 1991
LH 14 Treatment of depreciation loss for certain depreciable property

[Repealed]

1991
LH 14B Recovery of overpaid tax credit [Repealed] 1991
LH 15 Listed research providers [Repealed] 1991
LH 16 Industry research co-operatives [Repealed] 1991
LH 17 Some definitions [Repealed] 1992
Subpart LJ—Tax credits for foreign income tax
LJ 1 What this subpart does 1992
LJ 2 Tax credits for foreign income tax 1993
LJ 3 Meaning of foreign income tax 1995
LJ 4 Meaning of segment of foreign-sourced income 1995
LJ 5 Calculation of New Zealand tax 1996
LJ 6 Taxable distributions and NRWT rules 1998
LJ 7 Repaid foreign tax: effect on income tax liability 1999
LJ 8 Repaid foreign tax: effect on FDP liability [Repealed] 2000
Subpart LK—Tax credits relating to attributed controlled foreign company income

Amounts of credits

LK 1 Tax credits relating to attributed CFC income 2001

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LK 2 Calculation of amount of credit 2004
LK 3 Currency conversion 2004

Use of credits in later tax years

LK 4 Use of remaining credits 2005
LK 5 Companies’ credits carried forward 2005
LK 5B Credits from tax year before first affected year 2005
LK 6 Use of credits by group companies 2008

Treatment of taxable distributions

LK 7 Taxable distributions and NRWT rules 2009

Consolidated companies

LK 8 Tax credits of consolidated companies 2010
LK 9 Use of company’s credits carried forward 2011
LK 10 When group membership lacking in tax year in which credit arises 2011
LK 11 When group membership lacking in tax year in which credit used 2012

Amalgamations of companies

LK 12 Treatment of credits when companies amalgamate 2013
LK 13 Use of credits by amalgamated company 2013
LK 14 Use by amalgamated company of credits carried forward 2013
LK 15 Use of amalgamating company’s credits 2014
Subpart LL—Underlying foreign tax credits (UFTC)

[Repealed]

LL 1 What this subpart does [Repealed] 2015
LL 2 Tax credits for underlying foreign tax [Repealed] 2015
LL 3 Meaning of grey list dividend [Repealed] 2015
LL 4 Tracking accounts [Repealed] 2015
LL 5 Meaning of foreign dividend company net earnings [Repealed] 2015
LL 6 Foreign dividend company lower tier UFTCs [Repealed] 2015
LL 7 Conduit financing arrangements [Repealed] 2016
LL 8 Currency conversion [Repealed] 2016
LL 9 Some definitions [Repealed] 2016
Subpart LO—Tax credits for Maori authority credits
LO 1 Tax credits for Maori authority credits 2016
LO 2 Beneficiaries of trusts 2017
LO 2B Credit of RSCT for Maori authority credit 2017
LO 3 Application of Maori authority distribution ratio 2018
LO 4 When income tax unpaid 2018
LO 5 Evidential requirements 2019
Subpart LP—Tax credits for supplementary dividends

Introductory provision

LP 1 What this subpart does 2019

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Use of credits

LP 2 Tax credits for supplementary dividends 2020
LP 3 Use of remaining credits 2023
LP 4 Continuity rules for carrying credits forward 2024
LP 5 Application of benchmark dividend rules and imputation credit ratio
2025
LP 6 Deriving supplementary dividend and breach of terms of trust 2026

Supplementary dividend holding companies

[Repealed]

LP 7 Requirements for supplementary dividend holding companies

[Repealed]

2026
LP 8 Relationship with exempt income rules [Repealed] 2026
LP 9 Relationship with RWT rules [Repealed] 2026
LP 10 Limitation on deductions [Repealed] 2027
Subpart LQ—Tax credits of conduit tax relief companies

[Repealed]

LQ 1 Tax credits of CTR companies [Repealed] 2027
LQ 2 Limitation on amount of credit [Repealed] 2027
LQ 3 Determining percentage of non-resident shareholders [Repealed] 2027
LQ 4 Date for determining percentage of non-resident shareholders

[Repealed]

2027
LQ 5 CTR additional dividends [Repealed] 2028
Subpart LR—Tax credits for policyholder income

[Repealed]

LR 1 Tax credits for policyholder income [Repealed] 2028
Subpart LS—Tax credits for multi-rate PIEs and investors
LS 1 Tax credits for multi-rate PIEs 2028
LS 2 Tax credits for investors in multi-rate PIEs 2029
LS 3 Tax credits for zero-rated investors 2030
LS 4 Tax credits for certain exiting investors 2031
Subpart LU—Tax credits for mineral miners
LU 1 Tax credits for mineral miners 2032
Subpart LZ—Terminating provisions Underlying foreign tax credits [Repealed]
LZ 1 Low tax jurisdiction companies [Repealed] 2035

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Credits for certain non-resident investment companies

[Repealed]

LZ 2 Certain development projects [Repealed] 2035
LZ 3 Interest derived from development investments [Repealed] 2035
LZ 4 Dividends derived from development investments [Repealed] 2036
LZ 5 Some definitions [Repealed] 2036

Credits for interest on home vendor mortgages

LZ 6 Interest on home vendor mortgages 2036
LZ 7 Maximum amount of credit under section LZ 6 2037
LZ 8 Meaning of home vendor mortgage 2037

Credits for savings in special home ownership accounts

[Repealed]

LZ 9 Savings in special home ownership accounts [Repealed] 2038
LZ 10 Maximum amount for 1 special home ownership account for 1 tax year [Repealed]
LZ 11 Maximum amount for all special home ownership accounts for all tax years [Repealed]
2038
2038
LZ 12 Meaning of increase in savings [Repealed] 2038

Part M

Tax credits paid in cash

Subpart MA—General provisions
MA 1 What this Part does 2039
MA 2 Relationship with core provisions 2039
MA 3 Excluded income 2040
MA 4 Calculation of amounts of credit producing negative amounts 2040
MA 5 Advice from outside agencies 2040
MA 6 Avoidance arrangements 2040
MA 7 Meaning of full-time earner for family scheme 2040
MA 8 Some definitions for family scheme 2042
Subpart MB—Adjustment of net income for family scheme
MB 1 Adjustments for calculation of family scheme income 2045
MB 2 Adjustment for period that is less or more than 1 year 2049
MB 3 When person carries on 1 or more businesses or investment activities
2049
MB 4 Family scheme income of major shareholders in close companies 2050
MB 5 Treatment of distributions from superannuation schemes 2052
MB 6 Treatment of distributions from retirement savings schemes 2053
MB 7 Family scheme income of settlor of trust 2053
MB 7B Family scheme income from employment benefits: employees not controlling shareholders
2057

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MB 8 Family scheme income from fringe benefits: controlling shareholders
MB 9 Family scheme income from deposits in main income equalisation accounts [Repealed]
2058
2058
MB 10 Family scheme income from certain pensions and annuities 2059
MB 11 Family scheme income from amounts derived by dependent children
MB 12 Family scheme income from non-residents’ foreign-sourced income
2059
2060
MB 13 Family scheme income from other payments 2060
MB 14 Remission income of discharged bankrupt excluded 2063
Subpart MC—Entitlements under family scheme
MC 1 What this subpart does 2063
MC 2 Who qualifies for entitlements under family scheme? 2065
MC 3 First requirement: person’s age 2065
MC 4 Second requirement: principal care 2065
MC 5 Third requirement: residence 2065
MC 6 When person does not qualify 2066
MC 7 When spouse or partner entitled under family scheme 2067
MC 8 Continuing requirements 2068
MC 9 Credits for person aged 18 2069
MC 10 Principal caregiver 2070
MC 11 Relationship periods and entitlement periods 2072
Subpart MD—Abating WFF tax credits

Calculating amount of credit

MD 1 Abating WFF tax credit 2073
MD 2 Calculating net contributions to credits 2075

Family tax credit

MD 3 Calculation of family tax credit 2076

In-work tax credit

MD 4 Entitlement to in-work tax credit 2079
MD 5 First requirement: person’s age 2080
MD 6 Second requirement: principal care 2080
MD 7 Third requirement: residence 2081
MD 8 Fourth requirement: person not receiving benefit 2081
MD 9 Fifth requirement: full-time earner 2082
MD 10 Calculation of in-work tax credit 2085

Parental tax credit

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MD 12B Additional parental tax credit amount included in lump sum if 70- day period crosses 2 tax years

Credit abatement

2090
MD 13 Calculation of family credit abatement 2091
MD 14 Person receiving protected family tax credit 2093
MD 15 Family scheme income for purposes of section MD 14 2094
MD 16 Additional parental tax credit abatement amount for lump sum if
70-day period crosses 2 tax years
Subpart ME—Minimum family tax credit
2094
ME 1 Minimum family tax credit 2096
ME 2 Meaning of employment for this subpart 2097
ME 3 Meaning of net family scheme income 2098
Subpart MF—Payment of credits
MF 1 Application for payment of tax credit by instalment 2100
MF 2 When person not entitled to payment by instalment 2101
MF 3 Calculating amount of interim WFF tax credit 2102
MF 4 Requirements for calculating instalment of tax credit 2103
MF 4B Calculation of instalments: 1 April 2008 to 30 September 2008

[Repealed]

MF 4C Calculation of instalments: 1 October 2008 to 31 March 2009

[Repealed]

2103
2103
MF 4D Calculation of instalments: 1 April 2010 to 30 September 2010 2104
MF 4E Calculation of instalments: 1 October 2010 to 31 March 2011 2106
MF 5 Recovery of overpaid tax credit 2109
MF 6 Overpayment or underpayment of tax credit 2110
MF 7 Orders in Council 2111
Subpart MK—Tax credits for KiwiSaver schemes and complying superannuation funds
MK 1 Tax credits for superannuation contributions 2115

Tax credits for fund providers

MK 2 Eligibility requirements 2115
MK 3 Payment of tax credits 2116
MK 4 Amount of tax credit 2118
MK 5 Crown contributions for members 2119
MK 6 Credit given by fund providers 2119
MK 7 Amounts paid in excess 2119
MK 8 Treatment of tax credits on permanent emigration 2119

Tax credits for employers

[Repealed]

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MK 11 When tax credits arise [Repealed] 2121
MK 12 Using tax credits [Repealed] 2121
MK 13 When short payment and unpaid compulsory employer contributions found after tax credit used [Repealed]
2121
MK 14 Employees opting out [Repealed] 2121
MK 15 Groups of persons 2121
MK 16 Private domestic workers 2121
Subpart ML—Tax credits for redundancy payments

[Repealed]

ML 1 What this subpart does [Repealed] 2122
ML 2 Tax credit for redundancy payments [Repealed] 2122
ML 3 Payment by Commissioner [Repealed] 2122
Subpart MX—Tax credits for R&D tax losses
MX 1 When subpart applies 2123
MX 2 Corporate eligibility criteria 2124
MX 3 Wage intensity criteria 2124
MX 4 R&D loss tax credits 2126
MX 5 Cancellation of R&D tax losses 2127
MX 6 Deduction if increase in basic tax rate for company 2127
MX 7 Reinstatement of R&D tax losses and R&D repayment tax 2128
Subpart MZ—Terminating provisions
MZ 1 Entitlement to child tax credit 2131
MZ 2 Calculation of child tax credit 2131
MZ 3 Exclusions from determination of family scheme income 2132

Part O Memorandum accounts

Subpart OA—General provisions

Introductory provisions

OA 1 What this Part does 2134
OA 2 Memorandum accounts 2134
OA 3 General rules for maintaining memorandum accounts 2135
OA 4 Certain credits and debits arising only in group accounts 2136

Credits and debits

Opening balances

OA 7 Opening balances of memorandum accounts 2140

Shareholder continuity requirements

OA 8 Shareholder continuity requirements for memorandum accounts 2141

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Treatment of credits and debits on resident’s restricted amalgamation

General provision

OA 9 General treatment of credits and debits on resident’s restricted amalgamation
2144

When companies amalgamate

OA 10 When credits or debits due to amalgamating company but not recorded
2145
OA 11 FDP account on resident’s restricted amalgamation [Repealed] 2146
OA 12 CTR account on resident’s restricted amalgamation [Repealed] 2146
OA 13 Policyholder credit account on resident’s restricted amalgamation

[Repealed]

Amalgamation of companies in consolidated groups

2146
OA 14 Continuity of shareholding when group companies amalgamate 2146
OA 15 When credits or debits due to consolidated group but not recorded 2147
OA 16 When FDP account ends on resident’s restricted amalgamation

[Repealed]

OA 17 When policyholder credit account ends on resident’s restricted amalgamation [Repealed]

Maximum permitted ratios

2149
2149
OA 18 Calculation of maximum permitted ratios 2149
Subpart OB—Imputation credit accounts (ICA)

Introductory provisions

OB 1 General rules for companies with imputation credit accounts 2153
OB 2 Australian companies choosing to have imputation credit accounts 2155
OB 3 Imputation credit accounts 2157
OB 3B General rule for life insurer’s policyholder base 2158

Imputation credits

OB 4 ICA payment of tax 2158
OB 5 ICA deposit in tax pooling account 2160
OB 6 ICA transfer from tax pooling account 2160
OB 7 ICA payment of further income tax 2161
OB 7B ICA payment of qualifying company election tax 2161
OB 7C ICA expenditure on research and development [Repealed] 2162
OB 8 ICA resident withholding tax withheld 2162
OB 9 ICA dividend derived with imputation credit 2162
OB 9B ICA attributed PIE income with imputation credit 2163
OB 10 ICA dividend derived with FDP credit [Repealed] 2163
OB 11 ICA payment of FDP [Repealed] 2163
OB 12 ICA transfer from FDP account [Repealed] 2163
OB 13 ICA transfer of debit balance on leaving wholly-owned group 2163

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OB 14 ICA payment of tax on leaving wholly-owned group 2164
OB 15 ICA payment of tax on joining wholly-owned group 2165
OB 16 ICA attribution for personal services 2165
OB 17 ICA transfer from policyholder credit account [Repealed] 2166
OB 18 ICA transfer from ASC account 2166
OB 19 ICA transfer to master fund 2166
OB 19B ICA transfer to loss-using group company 2167
OB 20 ICA distribution with Maori authority credit 2167
OB 21 ICA balance of Maori authority credit account 2168
OB 22 ICA replacement payment to company under share-lending arrangement
2168
OB 23 ICA credit transfer to company 2168
OB 24 ICA credit on resident’s restricted amalgamation 2169
OB 25 ICA reversal of tax advantage arrangement 2170
OB 26 ICA elimination of double debit 2171
OB 27 ICA non-resident withholding tax withheld 2172
OB 28 ICA payment of amount of tax for schedular payment 2172
OB 29 ICA payment of schedular income tax 2173

Imputation debits

OB 30 ICA payment of dividend 2173
OB 31 ICA allocation of provisional tax 2173
OB 32 ICA refund of income tax 2174
OB 33 ICA amount applied to pay other taxes 2175
OB 34 ICA refund from tax pooling account 2176
OB 35 ICA transfer within tax pooling account 2178
OB 35B ICA debit for transfer from tax pooling account for policyholder base liability
2179
OB 36 ICA refund of FDP [Repealed] 2179
OB 37 ICA refund of tax credit 2179
OB 38 ICA overpayment of FDP [Repealed] 2180
OB 39 ICA transfer for net foreign attributed income [Repealed] 2181
OB 40 ICA attribution for personal services 2181
OB 41 ICA debit for loss of shareholder continuity 2181
OB 42 ICA on-market cancellation 2182
OB 43 ICA breach of imputation ratio 2183
OB 44 ICA debit on leaving wholly-owned group 2184
OB 45 ICA redemption debit 2184
OB 46 ICA transfer from member fund 2186
OB 46B ICA transfer from group company to loss-using group company 2187
OB 47 Debit for policyholder base imputation credits 2187
OB 47B Tax paid by recipients of R&D loss tax credits 2188
OB 48 ICA credit balance when Maori authority credit account starts 2189
OB 49 ICA replacement payment by company under share-lending arrangement
2189

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OB 50 ICA returning share transfer 2189
OB 51 ICA credit transfer by company 2190
OB 52 ICA imputation credit of consolidated imputation group 2190
OB 53 ICA debit on resident’s restricted amalgamation 2191
OB 54 ICA tax advantage arrangement 2192
OB 55 ICA retrospective imputation credit 2192
OB 56 ICA final balance 2193
OB 57 ICA refund of NRWT 2193
OB 58 ICA refund of amount of tax for schedular payment 2193
OB 59 ICA refund of schedular income tax 2194

Imputation credits attached to dividends

OB 60 Imputation credits attached to dividends 2194
OB 61 ICA benchmark dividend rules 2195
OB 62 Retrospective attachment of imputation credits 2197
OB 63 Australian dividends 2198
OB 64 Replacement payments 2199

Further income tax

OB 65 Further income tax for ICA closing debit balance 2200
OB 66 Further income tax when company stops being ICA company 2200
OB 67 Reduction of further income tax 2201
OB 68 Income tax paid satisfying liability for further income tax 2202
OB 69 Further income tax paid satisfying liability for income tax 2203
OB 70 Application of other provisions 2204

Imputation additional tax

OB 71 Imputation additional tax on leaving group of companies 2204
OB 72 Imputation additional tax on joining wholly-owned group 2208
OB 72B Limit on using entitlement to refund after joining wholly-owned group

Distributions of statutory producer boards and co-operative companies

OB 73 Statutory producer boards attaching imputation credits to cash distributions
OB 74 Statutory producer boards attaching imputation credits to notional distributions
2210
2214
2216
OB 75 Statutory producer boards’ notional distributions that are dividends 2217
OB 76 Statutory producer boards attaching FDP credits [Repealed] 2218
OB 77 When and how statutory producer board makes election 2218
OB 78 Co-operative companies attaching imputation credits to cash distributions
OB 79 Co-operative companies attaching imputation credits to notional distributions
2219
2220
OB 80 Co-operative companies’ notional distributions that are dividends 2221

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OB 81 Co-operative companies attaching FDP credits [Repealed] 2222
OB 82 When and how co-operative company makes election 2222

Election by group company for transfer of imputation credits with transfer of tax loss

OB 83 Group companies transferring imputation credits with transfer of tax loss
2223

FDP credits

[Repealed]

OC 6 FDPA payment of FDP [Repealed] 2232
OC 7 FDPA dividend derived with FDP credit [Repealed] 2232
OC 8 FDPA payment of FDP for transfer from CTR account [Repealed] 2232
OC 9 FDPA transfer for net foreign attributed income [Repealed] 2233
OC 10 FDPA payment of FDP for conduit debit balance [Repealed] 2233
OC 11 FDPA credit transfer to company [Repealed] 2233
OC 12 FDPA reversal of tax advantage arrangement [Repealed] 2233

FDP debits

[Repealed]

OC 13 FDPA payment of dividend [Repealed] 2233
OC 14 FDPA refund of FDP [Repealed] 2233
OC 15 FDPA overpayment of FDP [Repealed] 2233
OC 16 FDPA refund of tax credit [Repealed] 2233
OC 17 FDPA credit transfer by company [Repealed] 2234
OC 18 FDPA transfer to imputation credit account [Repealed] 2234
OC 19 FDPA transfer to CTR account [Repealed] 2234
OC 20 Debit for policyholder base FDP credits [Repealed] 2234
OC 21 FDPA transfer to group account [Repealed] 2234

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OC 22 FDPA breach of FDP ratio [Repealed] 2234
OC 23 FDPA breach of FDP ratio by PCA company [Repealed] 2234
OC 24 FDPA debit for loss of shareholder continuity [Repealed] 2234
OC 25 FDPA tax advantage arrangement [Repealed] 2234
OC 26 FDPA final balance [Repealed] 2235

FDP credits attached to dividends

[Repealed]

OC 27 FDP credits attached to dividends [Repealed] 2235
OC 28 FDPA benchmark dividend rules [Repealed] 2235
OC 29 FDP credits and imputation credits attached to dividends

[Repealed]

2235

Further income tax

[Repealed]

OC 30 Payment of further income tax for closing debit balance

[Repealed]

OC 31 Payment of further income tax when company no longer New
Zealand resident [Repealed]
2235
2235
OC 32 Reduction of further income tax [Repealed] 2235
OC 33 Income tax paid satisfying liability for further income tax

[Repealed]

OC 34 Further income tax paid satisfying liability for income tax

[Repealed]

2236
2236

Some definitions

[Repealed]

OC 35 Meaning of FDP reference period [Repealed] 2236
OC 36 Meaning of maximum deficit debit [Repealed] 2236
OC 37 Meaning of policyholder FDP ratio [Repealed] 2236
OC 38 Meaning of reduced deficit debit [Repealed] 2236
OC 39 Meaning of shareholder FDP ratio [Repealed] 2236
Table O3: FDP credits

[Repealed]

Table O4: FDP debits

[Repealed]

Subpart OD—Conduit tax relief accounts (CTRA)

[Repealed] Introductory provisions [Repealed]

OD 1 General rules for companies with CTR accounts [Repealed] 2239
OD 2 CTR accounts [Repealed] 2239

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OD 3 Choosing to become CTR company [Repealed] 2239
OD 4 When company stops being CTR company [Repealed] 2239

CTR credits

[Repealed]

OD 5 CTRA tax credit for conduit tax relief [Repealed] 2240
OD 6 CTRA transfer from FDP account [Repealed] 2240
OD 7 CTRA dividend derived with CTR credit [Repealed] 2240
OD 8 CTRA reduction of FDP [Repealed] 2240
OD 9 CTRA reversal of tax advantage arrangement [Repealed] 2240

CTR debits

[Repealed]

OD 10 CTRA payment of dividend [Repealed] 2240
OD 11 CTRA transfer to FDP account [Repealed] 2241
OD 12 CTRA transfer to group account [Repealed] 2241
OD 13 CTRA adjustment for conduit tax relief [Repealed] 2241
OD 14 CTRA break in shareholding chain for group company [Repealed] 2241
OD 15 CTRA break in shareholding chain for company [Repealed] 2241
OD 16 CTRA increase in resident shareholding [Repealed] 2241
OD 17 CTRA breach of CTR ratio [Repealed] 2241
OD 18 CTRA tax advantage arrangement [Repealed] 2241
OD 19 CTRA final balance [Repealed] 2242

CTR credits attached to dividends

[Repealed]

OD 20 CTR credits attached to dividends [Repealed] 2242
OD 21 CTRA benchmark dividend rules [Repealed] 2242
OD 22 CTR credits and imputation credits attached to dividends

[Repealed]

2242

Payment of FDP and refunds

[Repealed]

OD 23 FDP payable for CTR debits [Repealed] 2242
OD 24 FDP payable on resident’s restricted amalgamation [Repealed] 2242
OD 25 Refunds on transfers to CTR account [Repealed] 2243
Table O5: conduit tax relief credits

[Repealed]

Table O6: conduit tax relief debits

[Repealed]

Subpart OE—Branch equivalent tax accounts (BETA)

Introductory provision

OE 1 General rules for persons with branch equivalent tax accounts 2244

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Companies with branch equivalent tax accounts

[Repealed] Introductory provisions [Repealed]

OE 2 Branch equivalent tax accounts of companies [Repealed] 2245
OE 3 Choosing to become BETA company [Repealed] 2246
OE 4 When company stops being BETA company [Repealed] 2246
OE 5 Treatment of attributed CFC income and FIF income in this subpart
2246

Branch equivalent tax credits

[Repealed]

OE 6 BETA payment of income tax on foreign income [Repealed] 2246
OE 7 BETA payment of income tax [Repealed] 2246
OE 8 BETA unused amount of debit balance [Repealed] 2247
OE 9 BETA refund of FDP [Repealed] 2247
OE 10 BETA credit for loss of shareholder continuity [Repealed] 2247
OE 11 BETA final balance [Repealed] 2247

Treatment of debits from conduit relief

[Repealed]

OE 11B Company with debit balance, including debits from conduit relief, in some income years [Repealed]

Branch equivalent tax debits

[Repealed]

2247
OE 12 BETA payment of FDP [Repealed] 2248
OE 13 BETA reduction in FDP [Repealed] 2248
OE 14 BETA refund of income tax [Repealed] 2248
OE 15 BETA debit for loss of shareholder continuity [Repealed] 2248
OE 16 BETA final balance [Repealed] 2248

Debit if credit balance at beginning of first affected income year

[Repealed]

OE 16B Company with credit balance at beginning of first affected income year [Repealed]

Persons with branch equivalent tax accounts

Introductory provisions

2248
OE 17 Person choosing to become BETA person 2249
OE 18 When person stops being BETA person 2249

Branch equivalent tax credits

OE 19 BETA person’s payment of income tax on foreign income 2250

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Branch equivalent tax debits

OE 20 BETA person’s payment of income tax 2251
OE 21 BETA person’s refund of income tax 2251
OE 22 BETA person’s final balance 2252
Table O7: branch equivalent tax credits

[Repealed]

Table O8: branch equivalent tax debits

[Repealed]

Table O9: person’s branch equivalent tax credits
Table O10: person’s branch equivalent tax debits Subpart OF—Available subscribed capital accounts (ASCA) Introductory provisions
OF 1 General rules for companies with ASC accounts 2254
OF 2 ASC accounts 2255
OF 3 Choosing to become ASC account company 2255

ASC credits

OF 4 ASCA redemption credit 2255

ASC debits

OF 5 ASCA transfer to imputation credit account 2256
Table O11: ASC credits
Table O12: ASC debits
Subpart OJ—Policyholder credit accounts (PCA)

[Repealed] Introductory provision [Repealed]

OJ 1 General rules for companies and other persons with policyholder credit accounts [Repealed]

Companies with policyholder credit accounts

[Repealed] Introductory provision [Repealed]

2260
OJ 2 Policyholder credit accounts of companies [Repealed] 2261

Policyholder credits of PCA company

[Repealed]

OJ 3 PCA transfer from imputation credit account [Repealed] 2261
OJ 4 PCA transfer from FDP account [Repealed] 2261

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OJ 5 PCA transfer of life insurance business [Repealed] 2261
OJ 6 PCA credit for maximum deficit in FDP account [Repealed] 2261
OJ 7 PCA credit for reduced deficit in FDP account [Repealed] 2261

Policyholder debits of PCA company

[Repealed]

OJ 8 PCA payment of tax relating to policyholder base [Repealed] 2261
OJ 9 PCA transfer to imputation credit account [Repealed] 2262
OJ 10 PCA transfer to group account [Repealed] 2262
OJ 11 PCA company’s transfer of life insurance business [Repealed] 2262

Persons with policyholder credit accounts

[Repealed] Introductory provisions [Repealed]

OJ 12 Choosing to become PCA person [Repealed] 2262
OJ 13 Choosing to stop being PCA person [Repealed] 2262

Policyholder credits of PCA person

[Repealed]

OJ 14 PCA person’s equivalent credit [Repealed] 2262
OJ 15 PCA person’s credit for transfer of life insurance business

[Repealed]

2263

Policyholder debits of PCA person

[Repealed]

OJ 16 PCA person’s payment of tax relating to policyholder base

[Repealed]

2263
OJ 17 PCA person’s equivalent debit [Repealed] 2263
OJ 18 PCA person’s debit for transfer of life insurance business

[Repealed]

2263

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Table O13: policyholder credits

[Repealed]

Table O14: policyholder debits

[Repealed]

Table O15: person’s policyholder credits

[Repealed]

Table O16: person’s policyholder debits

[Repealed]

Subpart OK—Maori authority credit accounts (MACA)

Introductory provision

OK 1 General rules for Maori authorities with Maori authority credit accounts
2265

Maori authority credits

OK 2 MACA payment of tax 2266
OK 3 MACA payment of tax to other Maori authorities 2266
OK 4 MACA payment of further income tax 2267
OK 4B MACA expenditure on research and development [Repealed] 2267
OK 5 MACA distribution with Maori authority credit 2267
OK 6 MACA dividend derived with imputation credit 2267
OK 6B MACA attributed PIE income with imputation credit 2268
OK 7 MACA dividend derived with FDP credit [Repealed] 2268
OK 8 MACA resident withholding tax withheld 2268
OK 9 MACA reversal of tax advantage arrangement 2269

Maori authority debits

OK 10 MACA distribution 2269
OK 11 MACA allocation of provisional tax 2269
OK 12 MACA refund of income tax 2270
OK 13 MACA payment of other taxes 2271
OK 14 MACA refund of FDP [Repealed] 2272
OK 14B MACA refund of tax credit 2272
OK 15 MACA debit for loss of shareholder continuity 2273
OK 16 MACA breach of Maori authority credit ratio 2273
OK 17 MACA tax advantage arrangement 2274
OK 18 MACA final balance 2274

Maori authority credits attached to distributions

OK 19 Maori authority credits attached to distributions 2275
OK 20 MACA benchmark distribution rules 2276

Further income tax

OK 21 Further income tax for closing debit balance 2277

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OK 22 Further income tax paid when Maori authority no longer Maori authority
2277
OK 23 Further income tax paid satisfying liability for income tax 2278
OK 24 Income tax paid satisfying liability for further income tax 2278
Table O17: Maori authority credits
Table O18: Maori authority debits
Subpart OP—Memorandum accounts of consolidated groups

Introductory provisions

OP 1 Memorandum accounts of consolidated groups 2287
OP 2 When credits and debits arise only in group accounts 2287

Consolidated groups and imputation credit accounts

Introductory provisions

Imputation credits of consolidated imputation groups

Income Tax Act 2007

Reprinted as at

1 October 2017

OP 24 Consolidated ICA reversal of tax advantage arrangement 2302
OP 25 Consolidated ICA non-resident withholding tax withheld 2302
OP 26 Consolidated ICA payment of amount of tax for schedular payment
2302
OP 27 Consolidated ICA payment of schedular income tax liability 2303

Imputation debits of consolidated imputation groups

OP 28 Consolidated ICA payment of dividend 2304
OP 29 Consolidated ICA allocation of provisional tax 2304
OP 30 Consolidated ICA refund of income tax 2304
OP 31 Consolidated ICA amount applied to pay other taxes 2305
OP 32 Consolidated ICA refund from tax pooling account 2306
OP 33 Consolidated ICA transfer within tax pooling account 2307
OP 33B Consolidated ICA debit for transfer from tax pooling account for policyholder base liability
2308
OP 34 Consolidated ICA refund of FDP [Repealed] 2308
OP 35 Consolidated ICA refund of tax credit 2309
OP 36 Consolidated ICA overpayment of FDP [Repealed] 2310
OP 37 Consolidated ICA group company’s debit 2310
OP 38 Consolidated ICA transfer for net foreign attributed income

[Repealed]

OP 39 Consolidated ICA replacement payment by company under share- lending arrangement
2310
2311
OP 40 Consolidated ICA returning share transfer 2311
OP 41 Consolidated ICA credit transfer by company 2311
OP 42 Consolidated ICA debit for loss of shareholder continuity 2312
OP 43 Consolidated ICA breach of imputation ratio 2312
OP 44 Consolidated ICA debit for policyholder base imputation credits 2313
OP 45 Consolidated ICA redemption debit 2313
OP 46 Consolidated ICA tax advantage arrangement 2315
OP 47 Consolidated ICA final balance 2316
OP 48 Consolidated ICA refund of NRWT 2316
OP 49 Consolidated ICA refund of amount of tax for schedular payment 2316
OP 50 Consolidated ICA refund relating to schedular income tax liability 2317
Table O19: imputation credits of consolidated imputation groups Table O20: imputation debits of consolidated imputation groups Consolidated groups and FDP accounts

[Repealed] Introductory provisions [Repealed]

OP 51 FDP accounts of consolidated FDP groups [Repealed] 2323
OP 52 Choosing to stop being consolidated FDP group [Repealed] 2323
OP 53 When group company emigrates [Repealed] 2323

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OP 54 When credits and debits arise only in consolidated FDP group accounts [Repealed]
2323
OP 55 Provisions applying to consolidated FDP groups [Repealed] 2323

FDP credits of consolidated FDP groups

[Repealed]

OP 56 Consolidated FDPA payment of FDP [Repealed] 2323
OP 57 Consolidated FDPA payment of further FDP [Repealed] 2324
OP 58 Consolidated FDPA dividend derived with FDP credit [Repealed] 2324
OP 59 Consolidated FDPA group company’s credit [Repealed] 2324
OP 60 Consolidated FDPA credit transfer to company [Repealed] 2324
OP 61 Consolidated FDPA transfer from group’s CTR account

[Repealed]

OP 62 Consolidated FDPA transfer for net foreign attributed income

[Repealed]

OP 63 Consolidated FDPA reversal of tax advantage arrangement

[Repealed]

2324
2324
2324

FDP debits of consolidated FDP groups

[Repealed]

OP 64 Consolidated FDPA payment of dividend [Repealed] 2324
OP 65 Consolidated FDPA credit transfer by company [Repealed] 2325
OP 66 Consolidated FDPA refund of FDP [Repealed] 2325
OP 67 Consolidated FDPA overpayment of FDP [Repealed] 2325
OP 68 Consolidated FDPA refund of tax credit [Repealed] 2325
OP 69 Consolidated FDPA transfer to imputation credit account

[Repealed]

2325
OP 70 Consolidated FDPA transfer to group’s CTR account [Repealed] 2325
OP 71 Consolidated FDPA group company’s debit [Repealed] 2325
OP 72 Consolidated FDPA breach of FDP ratio [Repealed] 2325
OP 73 Consolidated FDPA debit for loss of shareholder continuity

[Repealed]

OP 74 Consolidated FDPA debit for policyholder base FDP credits

[Repealed]

OP 75 Consolidated FDPA breach of FDP ratio by PCA company

[Repealed]

2325
2326
2326
OP 76 Consolidated FDPA tax advantage arrangement [Repealed] 2326
OP 77 Consolidated FDPA final balance [Repealed] 2326

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Table O21: FDP credits of consolidated FDP groups

[Repealed]

Table O22: FDP debits of consolidated FDP groups

[Repealed]

Consolidated groups and CTR credits

[Repealed] Introductory provisions [Repealed]

OP 78 CTR accounts of consolidated groups [Repealed] 2327
OP 79 When credits and debits arise only in CTR group accounts

[Repealed]

OP 80 Provisions applying to consolidated groups with CTR accounts

[Repealed]

2327
2327

CTR credits of consolidated groups

[Repealed]

OP 81 Consolidated CTRA tax credit for conduit tax relief [Repealed] 2328
OP 82 Consolidated CTRA reduction of FDP [Repealed] 2328
OP 83 Consolidated CTRA dividend derived with CTR credit [Repealed] 2328
OP 84 Consolidated CTRA group company’s credit [Repealed] 2328
OP 85 Consolidated CTRA transfer from group’s FDP account

[Repealed]

OP 86 Consolidated CTRA reversal of tax advantage arrangement

[Repealed]

2328
2328

CTR debits of consolidated groups

[Repealed]

OP 87 Consolidated CTRA payment of dividend [Repealed] 2328
OP 88 Consolidated CTRA transfer to group’s FDP account [Repealed] 2329
OP 89 Consolidated CTRA adjustment for conduit tax relief [Repealed] 2329
OP 90 Consolidated CTRA group company’s debit [Repealed] 2329
OP 91 Consolidated CTRA increase in resident shareholding [Repealed] 2329
OP 92 Consolidated CTRA breach of CTR ratio [Repealed] 2329
OP 93 Consolidated CTRA tax advantage arrangement [Repealed] 2329
OP 94 Consolidated CTRA final balance [Repealed] 2329

Consolidated groups’ FDP payments and refunds

[Repealed]

OP 95 FDP payable for credits and debits in group’s CTR account

[Repealed]

2330
OP 96 Refund on transfer from group’s FDP account [Repealed] 2330

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Table O23: conduit tax relief credits of consolidated groups

[Repealed]

Table O24: conduit tax relief debits of consolidated groups

[Repealed]

Consolidated groups and branch equivalent tax accounts

[Repealed] Introductory provisions [Repealed]

OP 97 Branch equivalent tax accounts of consolidated BETA groups

[Repealed]

2330
OP 98 Choosing to stop being consolidated BETA group [Repealed] 2330
OP 99 When credits and debits arise only in branch equivalent tax group accounts [Repealed]

Branch equivalent tax credits of consolidated BETA groups

[Repealed]

OP 100 Consolidated BETA payment of income tax on foreign income

[Repealed]

2331
2331
OP 101 Consolidated BETA payment of income tax [Repealed] 2331
OP 102 Consolidated BETA remaining debit balances [Repealed] 2331
OP 103 Consolidated BETA refund of FDP [Repealed] 2331
OP 104 Consolidated BETA credit for loss of shareholder continuity

[Repealed]

Treatment by consolidated BETA groups of BETA debits from conduit relief

[Repealed]

OP 104B Consolidated BETA group with debit balance, including debits from conduit relief, in certain income years [Repealed]

Branch equivalent tax debits of consolidated BETA groups

[Repealed]

2331
2332
OP 105 Consolidated BETA payment of FDP [Repealed] 2332
OP 106 Consolidated BETA reduction of FDP [Repealed] 2332
OP 107 Consolidated BETA refund of income tax [Repealed] 2332
OP 108 Consolidated BETA debit for loss of shareholder continuity

[Repealed]

Debit if credit balance at beginning of first affected income year

[Repealed]

OP 108B Consolidated BETA group with credit balance at beginning of first affected income year [Repealed]
2332
2333

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Table O25: branch equivalent tax credits of consolidated BETA
groups

[Repealed]

Table O26: branch equivalent tax debits of consolidated BETA
groups

[Repealed]

Consolidated groups and policyholder credit accounts

[Repealed] Introductory provision [Repealed]

OP 109 Policyholder credit accounts of consolidated groups [Repealed] 2333

Policyholder credits of consolidated groups

[Repealed]

OP 110 Consolidated PCA transfer from imputation credit account

[Repealed]

2333
OP 111 Consolidated PCA transfer from FDP account [Repealed] 2334
OP 112 Consolidated PCA group company’s credit [Repealed] 2334
OP 113 Consolidated PCA maximum deficit debit in FDP account

[Repealed]

OP 114 Consolidated PCA reduced deficit debit in FDP account

[Repealed]

2334
2334

Policyholder debits of consolidated groups

[Repealed]

OP 115 Consolidated PCA payment of tax relating to policyholder base

[Repealed]

OP 116 Consolidated PCA transfer to imputation credit account

[Repealed]

Table O27: policyholder credits of consolidated groups

[Repealed]

Table O28: policyholder debits of consolidated groups

[Repealed]

Subpart OZ—Terminating provisions
2334
2334
OZ 1 No imputation credit for pre-imputation tax paid 2335
OZ 2 No imputation debit for pre-imputation refund 2335
OZ 3 Overpaid income tax for pre-imputation income year 2336
OZ 4 Terminating modifications to debits for loss of shareholder continuity
2336
OZ 5 ASCA lost excess available subscribed capital 2337
OZ 6 ASCA redemption of unused investments 2339

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OZ 7 Memorandum accounts in transitional period 2339
OZ 7B Maori authority credit ratios for transitional period 2339
OZ 8 Attaching imputation credits: maximum permitted ratio 2341
OZ 9 Benchmark dividends: ratio change 2342
OZ 10 Modifying ratios for imputation credits 2343
OZ 11 Tax credits for imputation credits 2344
OZ 12 Tax credits for non-resident investors 2346
OZ 13 Fully credited dividends: modifying actual ratio 2348
OZ 14 Dividends from qualifying companies 2348
OZ 15 Attaching imputation credits and notional distributions: modifying amounts
2349
OZ 16 BETA reductions [Repealed] 2350
OZ 17 CTRA reductions [Repealed] 2350
OZ 18 Credit-back of PCA balance [Repealed] 2350

Part R

General collection rules

Subpart RA—General withholding and payment obligations

Introductory provisions

RA 1 What this Part does 2352
RA 2 Amounts treated as income tax 2353

Payment and withholding obligations

RA 3 Terminal tax obligations 2353
RA 4 Provisional tax obligations 2353
RA 5 Tax obligations for employment-related taxes 2353
RA 6 Withholding and payment obligations for passive income 2354
RA 6B Withholding and payment obligations for retirement scheme contributions
2355
RA 6C Withholding and payment obligations for residential land 2355
RA 7 Payment of tax by public authorities 2355
RA 8 Liability of persons receiving payments or benefits 2355
RA 9 Treatment of amounts withheld as received 2356
RA 10 When obligations not met 2356
RA 11 Adjustment to correct errors: certain underpayments 2357
RA 12 Adjustment to correct errors: certain excess amounts 2358

Payment dates

RA 13 Payment dates for terminal tax 2359
RA 14 Payment dates for provisional tax 2360
RA 15 Payment dates for interim and other tax payments 2361
RA 16 Payment date when taxable activity ends 2363
RA 17 Payment date when RWT exemption certificate expires 2364
RA 18 Payment date for emigrating companies 2364

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Refunds

RA 19 Refunds of excess amounts or when amounts mistakenly paid 2365

Amalgamations

RA 20 Amalgamation of companies 2365

Regulations

RA 21 Regulations 2366

Application of other provisions

RA 22 Limits on application of other provisions for purposes of PAYE
rules
RA 23 Application of other provisions for purposes of ESCT rules and
NRWT rules
2367
2368
RA 24 Application of other provisions for purposes of RSCT rules 2369
Subpart RB—Terminal tax
RB 1 Payment of terminal tax 2369
RB 2 Income tax liability for non-filing taxpayers for non-resident passive income [Repealed]
RB 3 Schedular income tax liability for filing taxpayers for non-resident passive income
2369
2370
RB 4 Using refunds to satisfy tax liabilities 2370
Subpart RC—Provisional tax

Introductory provisions

RC 1 What this subpart does 2372
RC 2 Provisional tax rules and their application 2373
RC 3 Who is required to pay provisional tax? 2373
RC 4 Choosing to pay provisional tax 2374

Calculating provisional tax liability

RC 5 Methods for calculating provisional tax liability 2374
RC 6 Standard method 2376
RC 7 Estimation method 2377
RC 8 GST ratio method 2378

Instalments of provisional tax

RC 9 Provisional tax payable in instalments 2381
Table R1: Summary of instalment dates and calculation methods for provisional tax
RC 10 Calculating amount of instalment under standard and estimation methods
2385
RC 11 Calculating amount of instalment using GST ratio 2386
RC 12 Voluntary payments 2387
RC 13 Paying 2 instalments for tax year 2387

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RC 14 Paying 1 instalment for tax year 2387

Requirements for using GST ratio

RC 15 Choosing to use GST ratio 2388
RC 16 Who may use GST ratio? 2388
RC 17 When GST ratio must not be used 2389
RC 18 Changing calculation method 2391
RC 19 Disposal of assets 2393

Transitional years

RC 20 Calculating residual income tax in transitional years 2394
RC 21 Paying provisional tax in transitional years 2395
RC 22 Calculating instalments in transitional years: standard method 2396
RC 23 Calculating instalments in transitional years: estimation method 2398
RC 24 Calculating instalments in transitional years: GST ratio method 2398
RC 25 Consequences of change in balance date 2399

When persons start or stop paying GST, or change taxable periods

RC 26 Registering for GST or cancelling registration 2400
RC 27 Payment of provisional tax instalments when GST cycle changed 2401

Treatment of groups of companies and amalgamated companies

RC 28 Provisional tax rules and consolidated groups 2402
RC 29 Residual income tax of consolidated groups 2403
RC 30 Consolidated groups using estimation method 2403
RC 31 Consolidated groups using GST ratio method 2404
RC 32 Wholly-owned groups of companies 2405
RC 33 Amalgamated companies: calculating residual income tax 2406

Attribution rule for income from personal services

RC 34 Attribution rule for income from personal services 2406

Credits

RC 35 Further income tax credited to provisional tax liability 2408

Disaster relief

[Repealed]

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Subpart RD—Employment-related taxes

Introductory provision

RD 1 What this subpart does 2414

PAYE rules and PAYE income payments

Introductory provisions

RD 2 PAYE rules and their application 2414
RD 3 PAYE income payments 2415
RD 3B Shareholders who are employees, for some companies: income other than PAYE
RD 3C Shareholders who are employees, for some companies: PAYE and income other than PAYE
2417
2417
RD 4 Payment of amounts of tax to Commissioner 2418

Types of PAYE income payments

RD 5 Salary or wages 2419
RD 6 Certain benefits and payments 2423
RD 7 Extra pay 2424
RD 7B Treatment of certain benefits under employee share agreements 2425
RD 8 Schedular payments 2426

Calculating amounts of tax

RD 9 Maximum amount 2427
RD 10 Amounts of tax for PAYE income payments 2428
RD 10B Amounts of tax for schedular payments 2429
RD 11 Reduction in certain circumstances 2430

Adjustments for certain PAYE income payments

RD 12 Multiple payments of salary or wages 2431
RD 13 Advance payments of salary or wages 2432
RD 13B Adjustments for payroll donations 2433
RD 14 Changes to tax rates for salary or wages 2433
RD 15 Payments of salary or wages in pay periods 2434
RD 16 Payments to private domestic workers 2435
RD 17 Payment of extra pay with other PAYE income payments 2435
RD 18 Schedular payments without notification [Repealed] 2437
RD 19 Schedular payments to non-resident entertainers 2437
RD 20 Schedular payments to subcontractors 2438

Paying amounts of tax

RD 21 When amounts of tax not withheld or payment insufficient 2438
RD 22 Returns for amounts of tax paid to Commissioner 2439
RD 23 Bonds given by employers of certain non-resident employees 2442
RD 24 Exemption certificates for non-resident contractors 2443

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Fringe benefit tax (FBT) rules and fringe benefits

Introductory provisions

Value of fringe benefits

RD 27 Determining fringe benefit values 2445
RD 28 Private use of motor vehicle: calculation methods 2445
RD 29 Private use of motor vehicle: formulas 2446
RD 30 Private use of motor vehicle: 24-hour period 2447
RD 31 Motor vehicle test period 2448
RD 32 Replacement motor vehicles 2450
RD 33 Subsidised transport 2450
RD 34 Employment-related loans: value using prescribed interest rates 2451
RD 35 Employment-related loans: value using market interest rates 2451
RD 36 Repayment of employment-related loans 2453
RD 37 Contributions to superannuation schemes 2454
RD 38 Contributions to funds, trusts, and insurance premiums 2455
RD 39 Benefits provided by charitable organisations 2455
RD 40 Goods 2456
RD 41 Services 2458
RD 42 Goods at staff discount 2459
RD 43 Goods on special with staff discount 2459
RD 44 Goods disposed of by group companies 2460
RD 45 Unclassified benefits 2460
RD 46 Adjustments for unclassified benefits on amalgamation 2462

Attributing fringe benefits to employees

RD 47 Attribution of certain fringe benefits 2463
RD 48 When attributed benefits provided to more than 1 employee 2464
RD 49 Application of thresholds to attributed benefits 2464
RD 50 Employer’s liability for attributed benefits 2465
RD 51 Calculation of all-inclusive pay 2466
RD 52 Calculation for certain employees when information lacking 2468
RD 53 Pooling non-attributed benefits 2469

Taxable value of fringe benefits

Options for payment of FBT

Income Tax Act 2007

Reprinted as at

1 October 2017

RD 60 Close company option 2474
RD 61 Small business option 2475
RD 62 Changes in payment periods 2477
RD 63 When employer stops employing staff 2478

Employer’s superannuation contribution tax (ESCT) rules and employer’s superannuation contributions

Introductory provisions

RD 64 ESCT rules and their application 2479
RD 65 Employer’s superannuation cash contributions 2479
RD 66 Complying fund rules [Repealed] 2482

Calculating amounts of tax

RD 67 Calculating amounts of tax for employer’s superannuation cash contributions
2482
RD 68 Choosing to have amount treated as salary or wages 2483
RD 69 Choosing different rates for employer’s superannuation cash contributions [Repealed]
2484
RD 70 Calculating amounts of tax on failure to withhold 2484
RD 71 Amounts of tax treated as paid to and received by superannuation funds

Tax on certain withdrawals from superannuation funds

[Repealed]

2485
RD 72 Recovery of tax paid by superannuation funds [Repealed] 2485
Subpart RE—Withholding tax on resident passive income (RWT)

Introductory provisions

RE 1 RWT rules and their application 2487
RE 2 Resident passive income 2487

Withholding obligations

RE 3 Obligation to withhold RWT 2492
RE 4 Persons who have withholding obligations 2492
RE 5 No withholding obligation in certain circumstances 2494
RE 6 When obligation to withhold unreasonable 2495
RE 7 When resident passive income paid to trustees 2495
RE 8 When resident passive income paid to nominees 2496
RE 9 Agents’ or trustees’ obligations in relation to certain dividends 2497
RE 10 Special rule relating to payments of interest 2497
RE 10B Amounts withheld from distributions to holders of FIF attributing interests
2498
RE 11 Notification by companies 2499

Calculating amounts of tax

RE 12 Interest 2499

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RE 13 Dividends other than non-cash dividends 2501
RE 14 Non-cash dividends other than certain share issues 2502
RE 14B Combined cash and non-cash dividends 2504
RE 15 Bonus issues in lieu and shares issued under profit distribution plans
2504
RE 16 Taxable Maori authority distributions 2506
RE 17 Replacement payments under share-lending arrangements 2507
RE 18 Payments made by RWT proxies 2507
RE 18B Capital value increase under inflation-indexed instruments: RWT
cap
2508
RE 19 Choosing other rates 2509

Paying amounts of tax

RE 20 Paying RWT 2510
RE 21 Basis for payment of RWT 2510
RE 22 When payment treated as non-resident passive income 2511
RE 23 When amount of tax treated as FDP credit [Repealed] 2511
RE 24 When amount of tax treated as Maori authority credit 2512
RE 25 When amount of tax treated as imputation credit 2512
RE 26 Payment by proxy 2512

RWT exemption certificates

RE 27 RWT exemption certificates 2512
RE 28 When certificates expire 2513
RE 29 Establishing whether person holds certificate 2513
RE 30 When unincorporated bodies hold certificates 2514
Subpart RF—Withholding tax on non-resident passive income
(NRWT)

Introductory provisions

RF 1 NRWT rules and their application 2517
RF 2 Non-resident passive income 2518
RF 2B Non-resident financial arrangement income: outline and concepts 2522
RF 2C Meaning of non-resident financial arrangement income 2523

Withholding obligations

RF 3 Obligation to withhold amounts of tax for non-resident passive income
2526
RF 4 Non-resident passive income received by agents and others 2526
RF 5 When amounts of tax already withheld 2527
RF 6 When amounts of tax not withheld or partly withheld 2527

Calculating amounts of tax

RF 7 General rate for NRWT 2528
RF 8 Certain dividends 2528
RF 9 When dividends fully imputed 2529

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RF 10 Non-cash dividends 2531
RF 11 Dividends paid to companies associated with non-residents 2533
RF 11B Dividends paid by companies in certain situations 2534
RF 12 Interest paid by approved issuers or transitional residents 2535
RF 12B Interest derived jointly with residents 2536
RF 12C Amount derived from non-resident life insurer becoming resident 2537

Certain financial arrangements involving related-party debt

RF 12D Determining amount of non-resident financial arrangement income 2537
RF 12E When non-resident financial arrangement income treated as paid 2538
RF 12F Adjustments: first year additional amounts 2539
RF 12G Choosing to treat income as non-resident financial arrangement income
2539
RF 12H Meaning of related-party debt 2540
RF 12I Concepts used for definition of related-party debt 2541
RF 12J Treatment of certain payments made under indirect associated funding arrangements
2542

Paying amounts of tax

RF 13 Basis for payment of amounts of tax for non-resident passive income
2543
RF 14 Treatment of FDP credits [Repealed] 2544
RF 15 Commissioner’s power to vary amounts of tax 2544
RF 16 Relationship with RSCT rules 2544
Subpart RG—Payments for foreign dividends (FDP)

[Repealed] Introductory provisions [Repealed]

RG 1 FDP rules and their application [Repealed] 2545
RG 2 Foreign dividends [Repealed] 2546

Obligation to make payments

[Repealed]

RG 3 Obligation to pay FDP [Repealed] 2546

Calculation of payments

[Repealed]

RG 4 Calculating amount of FDP [Repealed] 2546

Adjustments to payments

[Repealed]

RG 5 Credit balance in branch equivalent tax account [Repealed] 2546
RG 6 Using loss balances [Repealed] 2546
RG 7 Reduction of payments for conduit tax relief [Repealed] 2546

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Subpart RH—Withholding tax on retirement scheme contributions
RH 1 RSCT rules and their application 2547
RH 2 Retirement scheme contributions 2548
RH 3 Retirement savings schemes 2548
RH 4 Retirement scheme contributors 2549

Calculating amounts of tax

RH 5 Calculating amounts of tax for retirement scheme contribution 2550
RH 6 Calculating amounts of tax on failure to withhold 2550
Subpart RL—Residential land withholding tax
RL 1 Residential land withholding tax 2551
RL 2 Vendors: who must pay, and how? 2552
RL 3 Associated persons: who must pay, and how? 2554
RL 4 How much RLWT? 2554
RL 5 Paying RLWT 2555
RL 6 Commissioner repaying RLWT 2556
Subpart RM—Refunds

Introductory provision

RM 1 What this subpart does 2557

Refunds for overpaid amounts

RM 2 Refunds for overpaid tax 2558
RM 3 Refunds for overpaid FDP [Repealed] 2559
RM 4 Overpayment on amended assessment 2559
RM 5 Overpayment on income statements 2560
RM 6 Refunds after 4-year period ends [Repealed] 2560
RM 7 Refunds to PAYE intermediaries 2560
RM 8 Overpaid RWT or NRWT 2561
RM 9 Calculations for attributed and non-attributed fringe benefits 2563

Use of refunds

RM 10 Using refund to satisfy tax liability 2563
RM 11 Using GST refund to pay instalment of provisional tax 2564
RM 12 Reduction in provisional tax liability 2565

Limits on refunds and transfers

ICA companies

RM 13 Limits on refunds for ICA companies 2566
RM 14 Limits on refunds when company stops being ICA company 2567
RM 15 Changes in credit balances 2567
RM 16 Treatment of amounts not refunded 2568
RM 17 Treatment of further income tax paid 2568

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Companies receiving foreign dividends

[Repealed]

RM 18 Limits on refunds related to foreign dividends [Repealed] 2569
RM 19 Treatment of financial arrangements [Repealed] 2569
RM 20 Treatment of amounts not refunded [Repealed] 2569
RM 21 Refunds when loss balances used to reduce net income [Repealed] 2569

Maori authorities

RM 22 Limits on refunds for Maori authorities 2569
RM 23 Limits on refunds when Maori authority stops being Maori authority
2570
RM 24 Increase in credit balances 2571
RM 25 Treatment of amounts not refunded 2571
RM 26 Treatment of further income tax paid 2572
RM 27 Application when no credits arise 2572

Persons with policyholder credit accounts

[Repealed]

RM 28 Limits on refunds for PCA persons [Repealed] 2572
RM 29 Limits on refunds when person no longer PCA person [Repealed] 2572
RM 30 Changes in credit balances [Repealed] 2572
RM 31 Treatment of amounts not refunded [Repealed] 2572

Qualifying companies

RM 32 Application of sections RM 13 to RM 17 to qualifying companies 2573

Certain unit trusts and group investment funds

RM 33 Limits on refunds for certain unit trusts and group investment funds
2573
Subpart RP—Intermediaries

Introductory provision

RP 1 What this subpart does 2575

PAYE intermediaries

Obligations and treatment of PAYE intermediaries

RP 2 PAYE intermediaries 2575
RP 3 Requirements for listed PAYE intermediaries 2575
RP 4 Payment of subsidies to certain PAYE intermediaries 2576
RP 5 Subsidy claims 2577
RP 6 Operation of PAYE intermediaries’ trust accounts 2577

Employers’ responsibilities

RP 7 General responsibilities of employers 2579
RP 8 Information required from employers 2579
RP 9 Authorised transfers from accounts 2580

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RP 10 When transfers from accounts not authorised 2580
RP 11 Employer’s superannuation cash contributions 2580
RP 12 When payments made directly to employees 2581

PAYE intermediaries’ responsibilities

RP 13 General responsibilities of PAYE intermediaries 2581
RP 14 Collection, payment, and information requirements 2582
RP 15 When employers have authorised transfers from accounts 2582
RP 16 Obligations for employer’s superannuation contributions 2583

Tax pooling intermediaries

RP 17 Tax pooling intermediaries 2583
RP 17B Tax pooling accounts and their use 2584
RP 18 Deposits in tax pooling accounts 2589
RP 19 Transfers from tax pooling accounts 2591
RP 19B Transfers for certain expected tax liabilities 2592
RP 20 Declining, amending, or reversing transfers 2594
RP 21 Refunds from tax pooling accounts 2595
Subpart RZ—Terminating provisions

Provisional tax

RZ 1 Certain elections to become person with provisional tax liability 2596
RZ 2 Amount of provisional tax based on 1997–98 or earlier tax year 2596
RZ 3 Standard method: 2010–11 to 2012–13 income years 2596
RZ 4 GST ratio method: 2010–11 to 2013–14 income years 2597
RZ 5 Calculating amounts under standard method: 2010–11 to 2012–13 income years
RZ 5B Standard method: new personal tax rate persons from 1 October
2008 to end 2009–10 income year [Repealed]
RZ 5C GST ratio method: new personal tax rate persons from 1 October
2008 to end 2009–10 income year [Repealed]
2599
2600
2600
RZ 5D Standard method or GST method: transition for Maori authorities 2601

Refunds

RZ 6 Limits on refunds: transitional dates 2601

Withdrawal income

[Repealed]

RZ 7 Withdrawal income [Repealed] 2602
RZ 8 Payment and rate of withdrawal tax [Repealed] 2602
RZ 9 Relief in certain cases [Repealed] 2602
RZ 10 Recovery of amounts payable to Commissioner [Repealed] 2603

Refunds for life insurers

RZ 11 Refunds for life insurers 2603

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Tax pooling intermediaries

RZ 12 Adjustments to interest in requests made after commencement 2603

Non-resident financial arrangement income

RZ 13 Treatment of prepayments 2604

Part Y

Definitions and related matters

Subpart YA—General definitions
YA 1 Definitions 2606
YA 2 Meaning of income tax varied 2845
YA 3 Treatment of qualifying company election tax, FBT, FDP penalty tax, imputation penalty tax, and withdrawal tax [Repealed]
2847
YA 4 General rules for giving information or communicating matters 2847
Subpart YB—Associated persons and nominees Table Y1: Associated person rules [Repealed]

Associated persons

YB 1 What this subpart does 2849
YB 2 Two companies 2850
YB 3 Company and person other than company 2851
YB 4 Two relatives 2852
YB 5 Person and trustee for relative 2853
YB 6 Trustee and beneficiary 2853
YB 7 Two trustees with common settlor 2853
YB 8 Trustee and settlor 2853
YB 9 Settlor and beneficiary 2854
YB 10 Who is a settlor? 2854
YB 11 Trustee and person with power of appointment or removal 2854
YB 12 Partnership and partner 2855
YB 13 Look-through companies and owners of interests 2855
YB 14 Tripartite relationship 2856
YB 15 Exceptions for employee trusts 2857
YB 16 Exceptions for certain trusts and charitable organisations 2858
YB 17 Partnerships: partnership and associate of partner [Repealed] 2859
YB 18 Persons habitually acting together: 1988 version provisions

[Repealed]

YB 19 Person and controlled non-profit organisation: 1990 version provisions [Repealed]
2859
2859
YB 20 Some definitions [Repealed] 2859

Nominees

YB 21 Transparency of nominees 2859

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Subpart YC—Measurement of company ownership

Control

[Repealed]

YC 1 Meaning of control [Repealed] 2861

Voting and market value interests

YC 2 Voting interests 2861
YC 3 Market value interests 2861
YC 4 Look-through rule for corporate shareholders 2862
YC 5 Treatment of special corporate entities 2863
YC 5B Treatment of mixed-ownership enterprises 2864
YC 6 Disregarding certain securities 2864

Voting and market value interests: modifications for continuity provisions

YC 7 When sections YC 8 to YC 19B apply 2865
YC 8 Death of share or option holder 2865
YC 9 Shares or options held by trustees 2865
YC 10 Shareholders holding less than 10% direct interests 2866
YC 11 No look-through rule for companies in certain cases 2867
YC 12 Public unit trusts 2868
YC 13 Corporate spin-outs 2868
YC 14 Disregarding concessionary rules 2871
YC 15 Directors’ knowledge of failure to meet requirements of continuity provision
2871
YC 16 Disregarding market value changes 2872
YC 17 Demutualisation of insurers 2873
YC 18 Reverse takeovers 2876
YC 18B Corporate reorganisations not affecting economic ownership 2878
YC 18C Railways restructure not affecting Crown economic ownership 2880
YC 19 Legislative conversion of foreign company of proprietors 2880
YC 19B Treatment when certain trusts terminated 2881
YC 20 Credit account continuity provisions: excluded fixed rate securities 2882
Subpart YD—Residence and source in New Zealand

Residence

YD 1 Residence of natural persons 2883
YD 2 Residence of companies 2884
YD 3 Country of residence of foreign companies 2885
YD 3B Crown 2886

Source

YD 4 Classes of income treated as having New Zealand source 2886
YD 5 Apportionment of income derived partly in New Zealand 2889
YD 6 Apportionment of income from sea transport 2893

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YD 7 Apportionment of film rental income [Repealed] 2894
YD 8 Apportionment of premiums derived by non-resident general insurers

Conduit tax relief companies: special residence rules

[Repealed]

2894
YD 9 Residence of CTR company shareholders [Repealed] 2896
YD 10 Meaning of CTR holding company [Repealed] 2896
YD 11 Meaning of CTR group member [Repealed] 2896
Subpart YE—References to balance dates and years
YE 1 References to balance dates and years 2897
Subpart YF—Currency conversion
YF 1 General rules for currency conversion 2898
YF 2 Other rules for currency conversion: approved alternatives 2899
Subpart YZ—Terminating provisions
YZ 1 Source rule for interest 2900
YZ 2 Saving of effect of section 394L(4A) of Income Tax Act 1976 2901
YZ 3 Saving effect of section DF 5 of Income Tax Act 1994 2901
YZ 4 Saving of effect of certain terms defined in Canterbury Earthquake
Recovery Act 2011
2901

Part Z

Repeals, amendments, and savings

ZA 1 Repeals 2902
ZA 2 Consequential amendments to other enactments 2902
ZA 3 Transitional provisions 2902
ZA 4 Saving of binding rulings 2903
ZA 5 Saving of accrual determinations 2904
ZA 6 Comparative tables of old and new provisions 2905

Schedule 1

Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits

Schedule 2

Basic tax rates for PAYE income payments

Schedule 3

Payment of provisional tax and terminal tax

Schedule 4

Standard rates of tax for schedular payments

Schedule 5

Fringe benefit values for motor vehicles

2907
2917
2920
2922
2931

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Schedule 6

Prescribed rates: PIE investments and retirement scheme contributions

Schedule 10

Straight-line equivalents of diminishing value rates of depreciation

Schedule 11

New banded rates of depreciation

Schedule 12

Old banded rates of depreciation

Schedule 13

Depreciable land improvements

Schedule 14

Depreciable intangible property

Schedule 17

Types and classes of livestock

Schedule 18

Categories of livestock for which national standard costs to be declared

Schedule 19

Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant

Schedule 20

Expenditure on farming, horticultural, aquacultural, and forestry improvements

Schedule 21

Expenditure and activities related to research and development

[Repealed]

Schedule 22

Proscribed R&D activities

Schedule 24

International tax rules: grey list countries

Schedule 25

Foreign investment funds

Schedule 26

Low tax jurisdictions or territories

[Repealed]

Schedule 27

Countries and types of income with unrecognised tax

2935
2940
2943
2944
2945
2946
2948
2951
2952
2954
2958
2959
2960
2962
2962
2963

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s A 1 Income Tax Act 2007

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1 October 2017

Schedule 28

Requirements for complying fund rules

Schedule 29

Portfolio investment entities: listed investors

Schedule 31

Annualised equivalent amount for Part M Schedule 32

Recipients of charitable or other public benefit gifts

Schedule 33

Default fractions of foreign superannuation withdrawals

Schedule 34

Community housing trusts and companies: income and assets of beneficiaries and clients

Schedule 36

Government enterprises

Schedule 37

Statutory producer boards

Schedule 38

Acts exempting income from tax: income included in family scheme income

Schedule 39

Items for purposes of definition of special excluded depreciable property

Schedule 48

Enactments repealed

Schedule 49

Enactments amended

Schedule 50

Amendments to Tax Administration Act 1994

Schedule 51

Identified changes in legislation

Schedule 52

Comparative tables of old and rewritten provisions

2964
2967
2969
2971
2980
2982
2984
2986
2987
2988
2989
2990
3024
3112
3117

A 1 Title

This Act is the Income Tax Act 2007.

Compare: 2004 No 35 s A 1

118

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A 2 Commencement

1 April 2008

(1) This Act comes into force on 1 April 2008.

Charitable entities

(1B) Despite subsection (1), sections CW 41(2) and CW 42(1)(b) come into force on
1 July 2008.

Act effective for 2008–09 income year and later

(2) However, except when the context requires otherwise, this Act applies only with respect to the tax on income derived in the 2008–09 income year and later income years.

Defined in this Act: income year, tax

Compare: 2004 No 35 s A 2

Section A 2(1B) heading: inserted, on 1 April 2008, by section 307 of the Taxation (Business Taxa- tion and Remedial Matters) Act 2007 (2007 No 109).

Section A 2(1B): inserted, on 1 April 2008, by section 307 of the Taxation (Business Taxation and

Remedial Matters) Act 2007 (2007 No 109).

119

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Part A

Purpose and interpretation

Contents

Page
AA 1 Purpose of Act 120
AA 2 Interpretation 120
AA 3 Definitions 120
AA 4 Crown bound 121

AA 1 Purpose of Act

The main purposes of this Act are—
(a) to define, and impose tax on, net income: (b) to impose obligations concerning tax:
(c) to set out rules for calculating tax and for satisfying the obligations im- posed.

Defined in this Act: net income, tax

Compare: 2004 No 35 s AA 1

AA 2 Interpretation

Aids to interpretation

(1) Diagrams, flowcharts, readers’ notes, and the lists of defined terms following sections are included in this Act only as interpretational aids. If there is conflict between an interpretational aid and a provision of this Act, the provision pre- vails.

Defined terms

(2) If a defined term is used in a section and is not included in the list of defined terms following the section, the term is nevertheless used in the section as de- fined.

Compare: 1994 No 164 s AA 2

AA 3 Definitions

Role of Part Y

(1) Definitions of terms that apply generally for the purposes of this Act, and gen- eral provisions on the interpretation and construction of this Act, appear in Part Y (Definitions and related matters).

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Role of Interpretation Act

(2) The Interpretation Act 1999 also contains definitions of terms, including in par- ticular the term person, and other provisions that apply to the interpretation and construction of this Act.

Compare: 2004 No 35 s AA 3(2)

AA 4 Crown bound

This Act binds the Crown.

121

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Part B

Core provisions

Flowchart B1: Outline of Part

SUBPART BA

Purpose

SUBPART BG Avoidance

SUBPART BB Income tax and resulting

obligations

SUBPART BH

Double tax agreements

SUBPART BC

Calculating and satisfying income tax liabilities

SUBPART BE Withholding liabilities

SUBPART BF Other obligations

SUBPART BD

Income, deductions, and timing

122

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Subpart BA—Purpose

Contents

Page
BA 1 Purpose 123

BA 1 Purpose

The purposes of this Part are—
(a) to impose income tax, provisional tax, withholding liabilities, and other tax obligations concerning taxes:
(b) to set out procedures to be followed for calculating tax and satisfying the obligations imposed under this Act:
(c) to provide a basis for applying the other Parts:
(d) generally to set up the scheme of the Act and the main links between its
Parts.

Defined in this Act: income tax, provisional tax, tax

Compare: 2004 No 35 s BA 1

Subpart BB—Income tax and resulting obligations

Contents

Page
BB 1 Imposition of income tax 123
BB 2 Main obligations 123
BB 3 Overriding effect of certain matters 124

BB 1 Imposition of income tax

Income tax is imposed on taxable income, at the rate or rates of tax fixed by an annual taxing Act, and is payable to the Crown under this Act and the Tax Ad- ministration Act 1994.

Defined in this Act: annual taxing Act, income tax, pay, tax, taxable income

Compare: 2004 No 35 s BB 1

BB 2 Main obligations

Income tax liability

(1) A person’s income tax liability for a tax year must be calculated, and satisfied by the person, under subpart BC (Calculating and satisfying income tax liabil- ities).

123

Part B s BB 3 Income Tax Act 2007

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1 October 2017

Non-filing taxpayer

(2) Despite subsection (1), a non-filing taxpayer is not required to file a return of income.

Provisional tax

(3) A person liable to pay provisional tax must pay provisional tax for a tax year under the provisional tax rules.

Withholding liabilities

(4) A person who has a withholding liability must satisfy it under subpart BE (Withholding liabilities).

Other obligations

(5) A person who has an obligation in relation to another ancillary tax under sub- part BF (Other obligations) must satisfy it under that subpart.

Defined in this Act: ancillary tax, income tax liability, non-filing taxpayer, pay, provisional tax rules, provisional tax, return of income, tax year

Compare: 2004 No 35 s BB 2

BB 3 Overriding effect of certain matters

Tax avoidance arrangements: subpart BG

(1) Under Part G (Avoidance and non-market transactions), the Commissioner may counteract a tax advantage from a tax avoidance arrangement.

Double tax agreements: subpart BH

(2) Subpart BH (Double tax agreements) provides for the effect of a double tax agreement.

Defined in this Act: Commissioner, double tax agreement, income tax, tax, tax avoidance arrange- ment

Compare: 2004 No 35 s BB 3

Section BB 3(2): replaced, on 1 July 2014, by section 5 of the Taxation (Annual Rates, Employee

Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Subpart BC—Calculating and satisfying income tax liabilities

Contents

Page
BC 1 Non-filing and filing taxpayers 126
BC 2 Annual gross income 127
BC 3 Annual total deduction 127
BC 4 Net income and net loss 127
BC 5 Taxable income 128
BC 6 Income tax liability of filing taxpayer 130
BC 7 Income tax liability of person with schedular income 130
BC 8 Satisfaction of income tax liability 132

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Flowchart B2: Calculating and satisfying income tax liabilities

Transaction giving rise to inwards cash flow or gain

BD 1(1) Income?

No Capital and windfall gains not taxed

Yes

BD 1(2) Exempt income?

Yes

All or part not taxed

No

BD 1(3) Excluded income?

Yes

All or part not taxed

No

BD 1(4)

Non-residents’ foreign- sourced income?

Yes

All not taxed

No

BD 1(5) Assessable income

Continue to next page

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SUBPART BD

BD 1

Assessable income

BD 3

Allocation of assessable income

sum

BC 2

Annual gross income

BD 2

Deductions

BD 4

Allocation of deductions

sum

BC 3

Annual total deductions

PART I Tax losses

net loss if negative

BC 4 equals

net income if positive or zero

BC 5

Net income

less

Available tax losses

equals

Taxable income

BC 6

Income tax liability

Flowchart B2: amended (with effect on 1 April 2008), on 7 December 2009, by section 4 of the Taxa- tion (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

BC 1 Non-filing and filing taxpayers

Non-filing taxpayer

(1) The income tax liability of a non-filing taxpayer for a tax year is the total tax withheld from amounts of income included in the taxpayer’s annual gross in- come for the year.

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Filing taxpayer

(2) The income tax liability of a filing taxpayer for a tax year is calculated under sections BC 2 to BC 6.

Filing taxpayer with schedular income

(3) If a filing taxpayer has schedular income, their income tax liability calculation is modified by section BC 7.

Defined in this Act: amount, annual gross income, filing taxpayer, income, income tax liability, non- filing taxpayer, schedular income, tax, tax year

Compare: 2004 No 35 s BC 1

BC 2 Annual gross income

A person’s annual gross income for a tax year is the total of their assessable income that is allocated to the corresponding income year.

Defined in this Act: annual gross income, assessable income, corresponding income year, tax year

Compare: 2004 No 35 s BC 2

BC 3 Annual total deduction

A person’s annual total deduction for a tax year is the total of their deductions that are allocated to the corresponding income year.

Defined in this Act: annual total deduction, corresponding income year, deduction, tax year

Compare: 2004 No 35 s BC 3

BC 4 Net income and net loss

Income more than deductions

(1) If, for a tax year, a person’s annual gross income is more than their annual total deduction, the difference is their net income for the year.

Income equal to deductions

(2) If, for a tax year, a person’s annual gross income equals their annual total de- duction, their net income for the year is zero.

Deductions more than income

(3) If, for a tax year, a person’s annual total deduction is more than their annual gross income, the difference is their net loss for the year, and their net income for the year is zero.

Treatment of net loss

(4) A person’s net loss for a tax year is included under Part I (Treatment of tax los- ses) in their tax loss for the tax year that may, under Part I, be—
(a) subtracted from their net income for a future tax year:
(b) made available to another person to subtract from that other person’s net income for that or a future tax year:

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(c) used in certain other ways.

Defined in this Act: annual gross income, annual total deduction, net income, net loss, tax loss, tax year

Compare: 2004 No 35 s BC 4

BC 5 Taxable income

A person’s taxable income for a tax year is determined by subtracting any available tax loss that the person has from their net income under Part I (Treat- ment of tax losses).

Defined in this Act: available tax loss, net income, tax loss, taxable income, tax year

Compare: 2004 No 35 s BC 5

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Flowchart B3: Calculating income tax liability

Income tax liability calculated under this section

BC 6

Application

BC 6

Result negative income tax liability = 0

equals

BC 5

Taxable income

BC 6

Result positive income tax liability

BC 8

Satisfaction of income tax liability

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BC 6 Income tax liability of filing taxpayer

Calculation of amount

(1) The income tax liability of a filing taxpayer for a tax year is the amount calcu- lated by multiplying their taxable income for the tax year by the basic tax rate. The income tax liability of a filing taxpayer with schedular income is deter- mined under section BC 7.

When liability zero or negative

(2) If the income tax liability calculated under subsection (1) is zero or negative, the filing taxpayer’s income tax liability for the tax year is zero.

Defined in this Act: amount, basic tax rate, filing taxpayer, income tax liability, schedular income, tax year, taxable income

Compare: 2004 No 35 s BC 6

BC 7 Income tax liability of person with schedular income

Modified income tax liability

(1) The income tax liability for a tax year of a person who has schedular income for the year is the total of—
(a) their schedular income tax liability for the year calculated under subsec- tion (2) or (3); and
(b) the amount that would be their income tax liability for the year if they had no schedular income.

Schedular income tax liability

(2) If a person has 1 kind of schedular income for a tax year, their schedular in- come tax liability for the year is the amount that would be the income tax liability for the year if their only income for the year were that schedular in- come.

Multiple schedular income

(3) If a person has more than 1 kind of schedular income for a tax year, their schedular income tax liability for the year is the total of the amounts calcula- ted for each kind of schedular income.

Income tax liability of multi-rate PIEs

(4) The income tax liability for a tax year of a multi-rate PIE is determined under subpart HM (Portfolio investment entities).

Defined in this Act: amount, income, income tax liability, multi-rate PIE, schedular income, schedu- lar income tax liability, tax year

Compare: 2004 No 35 s BC 7

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Flowchart B4: Satisfying income tax liability

Credits to be set off against income tax liability

BC 8(2), LA 4

Income tax liability

BC 6

Income tax liability

less

Non-refundable credits

less

Credits for supplementary dividends

less

Imputation credits

less

Remaining credits

BC 8(4) Surplus credits

if negative

Result

if positive

BC 8(3) Terminal tax

LA 5

Credits

PART R Tax payments

Section BC 7(4) heading: added, on 1 April 2010 (applying for the 2010–11 and later income years), by section 4(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act

2009 (2009 No 34).

Section BC 7(4): added, on 1 April 2010 (applying for the 2010–11 and later income years), by sec- tion 4(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section BC 7 list of defined terms multi-rate PIE: inserted, on 1 April 2010, by section 4(2) of the

Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

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Part B s BC 8 Income Tax Act 2007

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BC 8 Satisfaction of income tax liability

Use of tax credits

(1) Credits for tax paid, tax withheld, or other circumstances, calculated under Parts L (Tax credits and other credits) and M (Tax credits paid in cash), satisfy a person’s income tax liability for a tax year as far as the credits extend.

Ordering rule

(2) The order in which the person uses their credits is set out in section LA 4 (When total tax credit more than income tax liability).

Terminal tax

(3) If the person’s income tax liability is more than the total of their credits, the difference is the person’s terminal tax. The person must pay the terminal tax to complete the satisfaction of their income tax liability.

Remaining credits

(4) The treatment of any credits remaining after the person’s income tax liability is satisfied is dealt with in section LA 5 (Treatment of remaining credits).

Defined in this Act: income tax liability, pay, tax, tax credit, tax year, terminal tax

Compare: 2004 No 35 s BC 9

Subpart BD—Income, deductions, and timing

Contents

BD 1 Income, exempt income, excluded income, non-residents’ foreign- sourced income, and assessable income
Page
132
BD 2 Deductions 133
BD 3 Allocation of income to particular income years 133
BD 4 Allocation of deductions to particular income years 134

BD 1 Income, exempt income, excluded income, non-residents’ foreign-sourced income, and assessable income

Amounts of income

(1) An amount is income of a person if it is their income under a provision in Part
C (Income).

Exempt income

(2) An amount of income of a person is exempt income if it is their exempt in- come under a provision in subpart CW (Exempt income) or CZ (Terminating provisions).

Excluded income

(3) An amount of income of a person is excluded income if—

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(a) it is their excluded income under a provision in subpart CX (Excluded income) or CZ; and
(b) it is not their non-residents’ foreign-sourced income.

Non-residents’ foreign-sourced income

(4) An amount of income of a person is non-residents’ foreign-sourced income
if—
(a) the amount is a foreign-sourced amount; and
(b) the person is a non-resident when it is derived; and
(c) the amount is not income of a trustee to which section HC 25(2) (For- eign-sourced amounts: non-resident trustees) applies.

Assessable income

(5) An amount of income of a person is assessable income in the calculation of their annual gross income if it is not income of any of the following kinds:
(a) their exempt income: (b) their excluded income:
(c) their non-residents’ foreign-sourced income.

Defined in this Act: amount, annual gross income, assessable income, excluded income, exempt in- come, foreign-sourced amount, income, non-resident, non-residents’ foreign-sourced income

Compare: 2004 No 35 s BD 1

BD 2 Deductions

An amount is a deduction of a person if they are allowed a deduction for the amount under Part D (Deductions).

Defined in this Act: amount, deduction

Compare: 2004 No 35 s BD 2

BD 3 Allocation of income to particular income years

Application

(1) Every amount of income must be allocated to an income year under this sec- tion.

General rule

(2) An amount of income is allocated to the income year in which the amount is derived, unless a provision in any of Parts C or E to I provides for allocation on another basis.

Interpretation of derive

(3) When the time of derivation of an amount of income is being determined, re- gard must be had to case law, which—
(a) requires some people to recognise income on an accrual basis; and
(b) requires other people to recognise income on a cash basis; and

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Part B s BD 4 Income Tax Act 2007

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(c) more generally, defines the concept of derivation.

Income credited in account

(4) Despite subsection (3), income that has not previously been derived by a per- son is treated as being derived when it is credited in their account or, in some other way, dealt with in their interest or on their behalf.

Role of Part E

(5) Part E (Timing and quantifying rules) contains a number of provisions that—
(a) specifically modify the allocation of income or have the effect of modi- fying the allocation of income; or
(b) allocate income as part of the process of quantifying it.

Single allocation

(6) An amount of income may be allocated only once.

Defined in this Act: amount, income, income year

Compare: 2004 No 35 s BD 3

BD 4 Allocation of deductions to particular income years

Application

(1) Every deduction must be allocated to an income year under this section.

General rule

(2) A deduction for an amount of expenditure or loss is allocated to the income year in which the expenditure or loss is incurred, unless a provision in any of Parts D to I provides for allocation on another basis.

Interpretation of incur

(3) When the time of incurrence of an amount of expenditure or loss is being deter- mined, regard must be had to case law, which—
(a) requires some people to recognise expenditure or loss on an accrual basis; and
(b) requires other people to recognise expenditure or loss on a cash basis;
and
(c) more generally, defines the concept of incurrence.

Role of Part E

(4) Part E (Timing and quantifying rules) contains a number of provisions that—
(a) specifically modify the allocation of deductions or have the effect of modifying the allocation of deductions; or
(b) allocate deductions as part of the process of quantifying them.

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Allocation

(5) If an expenditure or loss gives rise to more than 1 deduction, the deductions are allocated to income years to the extent that their total is no more than the amount of the expenditure or loss.

Defined in this Act: amount, deduction, income year, loss

Compare: 2004 No 35 s BD 4

Subpart BE—Withholding liabilities

Contents

Page
BE 1 Withholding liabilities 135

BE 1 Withholding liabilities

PAYE income payments

(1) A person who makes a PAYE income payment must withhold an amount from the payment under the PAYE rules.

Resident passive income

(2) A person who makes a payment of resident passive income must withhold an amount from the payment under the RWT rules.

Non-resident passive income

(3) A person who makes a payment of non-resident passive income must withhold an amount from the payment under the NRWT rules.

Fringe benefits

(4) A person who provides a fringe benefit to another person must pay fringe bene- fit tax under the FBT rules.

Employer’s superannuation cash contributions

(5) A person who makes an employer’s superannuation cash contribution must pay
ESCT under the ESCT rules.

Retirement scheme contributions

(5B) A person who makes a retirement scheme contribution to a retirement savings scheme must pay RSCT under the RSCT rules.

Residential land purchase amount

(6) A person described in section RL 3 (Associated persons: who must pay, and how?) must withhold an amount from a residential land purchase amount under the RLWT rules.

Defined in this Act: amount, dividend, employer’s superannuation cash contribution, ESCT, ESCT rules, FBT rules, fringe benefit, fringe benefit tax, non-resident passive income, NRWT rules, pay, PAYE income payment, PAYE rules, resident passive income, residential land purchase amount, re-

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tirement savings scheme, retirement scheme contribution, RLWT rules, RSCT, RSCT rules, RWT

rules, superannuation fund

Compare: 2004 No 35 s BE 1

Section BE 1(1) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section

5(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009

No 34).

Section BE 1(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 5(1) of the

Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section BE 1(5) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section

5(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009

No 34).

Section BE 1(5): substituted (with effect on 1 April 2008), on 6 October 2009, by section 5(2) of the

Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section BE 1(5B) heading: inserted, on 1 April 2008, by section 308(1) of the Taxation (Business

Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section BE 1(5B): inserted, on 1 April 2008, by section 308(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section BE 1(6) heading: replaced, on 1 July 2016, by section 38(1) of the Taxation (Residential

Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 (2016 No 21).

Section BE 1(6): replaced, on 1 July 2016, by section 38(1) of the Taxation (Residential Land With- holding Tax, GST on Online Services, and Student Loans) Act 2016 (2016 No 21).

Section BE 1 list of defined terms employer’s superannuation cash contribution: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 5(5)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section BE 1 list of defined terms employer’s superannuation contribution: repealed (with effect on 1 April 2008), on 6 October 2009, by section 5(5)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section BE 1 list of defined terms FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 5(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act

2009 (2009 No 34).

Section BE 1 list of defined terms FDP rules: repealed (with effect on 30 June 2009), on 6 October

2009, by section 5(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section BE 1 list of defined terms PAYE income payment: inserted (with effect on 1 April 2008), on

6 October 2009, by section 5(5)(b) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section BE 1 list of defined terms PAYE payment: repealed (with effect on 1 April 2008), on 6 Oc- tober 2009, by section 5(5)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section BE 1 list of defined terms residential land purchase amount: inserted, on 1 July 2016, by section 38(2) of the Taxation (Residential Land Withholding Tax, GST on Online Services, and Stu- dent Loans) Act 2016 (2016 No 21).

Section BE 1 list of defined terms retirement savings scheme: inserted, on 1 April 2008, by section

308(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section BE 1 list of defined terms retirement scheme contribution: inserted, on 1 April 2008, by section 308(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section BE 1 list of defined terms RLWT rules: inserted, on 1 July 2016, by section 38(2) of the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 (2016 No 21).

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Section BE 1 list of defined terms RSCT: inserted, on 1 April 2008, by section 308(2) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section BE 1 list of defined terms RSCT rules: inserted, on 1 April 2008, by section 308(2) of the

Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subpart BF—Other obligations

Contents

Page
BF 1 Other obligations 137

BF 1 Other obligations

A person must pay the following types of income or ancillary tax under the relevant Part:
(a) qualifying company election tax under Part H (Taxation of certain en- tities):
(b) income tax on taxable distributions from non-complying trusts under
Part H:
(c) further income tax under Part O (Memorandum accounts):
(d) RLWT under subpart RL (Residential land withholding tax), if the per- son is described in section RL 2 (Vendors: who must pay, and how?).
(e) [Repealed]

Defined in this Act: ancillary tax, further income tax, income tax, non-complying trust, pay, qualify- ing company election tax, RLWT, taxable distribution, withdrawal tax

Compare: 2004 No 35 s BF 1

Section BF 1(d): replaced, on 1 July 2016, by section 39(1) of the Taxation (Residential Land With- holding Tax, GST on Online Services, and Student Loans) Act 2016 (2016 No 21).

Section BF 1(e): repealed, on 2 June 2016, by section 4 of the Taxation (Transformation: First Phase

Simplification and Other Measures) Act 2016 (2016 No 27).

Section BF 1 list of defined terms further FDP: repealed (with effect on 30 June 2009), on 6 October

2009, by section 6(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section BF 1 list of defined terms RLWT: inserted, on 1 July 2016, by section 39(2) of the Taxation

(Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 (2016

No 21).

Subpart BG—Avoidance

Contents

Page
BG 1 Tax avoidance 138

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BG 1 Tax avoidance

Avoidance arrangement void

(1) A tax avoidance arrangement is void as against the Commissioner for income tax purposes.

Reconstruction

(2) Under Part G (Avoidance and non-market transactions), the Commissioner may counteract a tax advantage that a person has obtained from or under a tax avoidance arrangement.

Defined in this Act: Commissioner, income tax, tax avoidance arrangement

Compare: 2004 No 35 s BG 1

Subpart BH—Double tax agreements

Contents

Page
BH 1 Double tax agreements 138

BH 1 Double tax agreements

Meaning

(1) Double tax agreement means an agreement that—
(a) has been negotiated for 1 or more of the purposes set out in subsection
(2); and
(b) has been agreed between—
(i) 1 or more governments of territories outside New Zealand and the government of New Zealand; or
(ii) the Taipei Economic and Cultural Office in New Zealand and the
New Zealand Commerce and Industry Office; and
(c) has entered into force as a result of a declaration by the Governor-Gener- al by Order in Council under subsection (3).

Purposes

(2) The following are the purposes for which a double tax agreement may be nego- tiated:
(a) to provide relief from double taxation: (b) to provide relief from tax:
(c) to tax the income derived by non-residents from any source in New Zea- land:
(d) to determine the income to be attributed to non-residents or their agen- cies, branches, or establishments in New Zealand:

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(e) to determine the income to be attributed to New Zealand residents who have special relationships with non-residents:
(f) to prevent fiscal evasion:
(g) to facilitate the exchange of information: (h) to assist in recovering unpaid tax.

Entry into force

(3) An agreement to which subsection (1)(a) and (b) apply comes into force as de- clared by the Governor-General by Order in Council and on the date deter- mined under the agreement.

Overriding effect

(4) Despite anything in this Act, except subsection (5) or (5B) or section BG 1 (Tax avoidance), or in any other Inland Revenue Act or the Official Informa- tion Act 1982 or the Privacy Act 1993, a double tax agreement has effect in relation to—
(a) income tax:
(b) any other tax imposed by this Act:
(c) the exchange of information that relates to a tax, as defined in para- graphs (a)(i) to (v) of the definition of tax in section 3 of the Tax Admin- istration Act 1994.

Agreement for recovery of tax

(5) An agreement that provides for the recovery of unpaid tax is subject to Part
10A of the Tax Administration Act 1994.

Foreign account information-sharing agreements

(5B) A foreign account information-sharing agreement is subject to Part 11B of the
Tax Administration Act 1994.

Reference to profits

(6) A reference in a double tax agreement to the profits of an activity or business is to be read, if possible, as a reference to the amount that would be a person’s net income if that activity or business were their only activity or business.

Reference to unrelated persons

(7) A reference in a double tax agreement to 2 persons being unrelated is to be read, if possible, as a reference to 2 persons being not associated.

Defined in this Act: associated, business, double tax agreement, income, income tax, Inland Revenue Acts, net income, New Zealand, New Zealand resident, non-resident, pay, source in New Zealand, tax

Compare: 2004 No 35 s BH 1

Section BH 1(1)(b)(i): amended (with effect on 21 October 2013), on 21 February 2017, by section 4 of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017

No 3).

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Section BH 1(3): replaced, on 30 March 2017, by section 6(1) of the Taxation (Annual Rates for

2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section BH 1(4): amended, on 30 March 2017, by section 6(2) of the Taxation (Annual Rates for

2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section BH 1(5B) heading: inserted, on 1 July 2014, by section 6(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section BH 1(5B): inserted, on 1 July 2014, by section 6(2) of the Taxation (Annual Rates, Employee

Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section BH 1(7) heading: added, on 8 December 2009, by section 5 of the Taxation (Consequential

Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section BH 1(7): added, on 8 December 2009, by section 5 of the Taxation (Consequential Rate

Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section BH 1 list of defined terms associated: inserted, on 8 December 2009, by section 126 of the

Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

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Part C Income

Subpart CA—General rules

Contents

Page
CA 1 Amounts that are income 141
CA 2 Amounts that are exempt income or excluded income 141

CA 1 Amounts that are income

Amounts specifically identified

(1) An amount is income of a person if it is their income under a provision in this
Part.

Ordinary meaning

(2) An amount is also income of a person if it is their income under ordinary con- cepts.

Defined in this Act: amount, income

Compare: 2004 No 35 s CA 1

CA 2 Amounts that are exempt income or excluded income

What this section does

(1) This section identifies the subparts in this Act that deal with exempt income and excluded income.

Exempt income

(2) An amount of income of a person is exempt income if it is their exempt in- come under a provision in subpart CW (Exempt income) or CZ (Terminating provisions).

Excluded income

(3) An amount of income of a person is excluded income if—
(a) it is their excluded income under a provision in subpart CX (Excluded income) or CZ; and
(b) it is not their non-residents’ foreign-sourced income.

Defined in this Act: amount, excluded income, exempt income, non-residents’ foreign-sourced in- come

Compare: 2004 No 35 s CA 2

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Subpart CB—Income from business or trade-like activities

Contents

Business generally

Page
CB 1 Amounts derived from business 144
CB 2 Amounts received on disposal of business assets that include trading stock
144

Schemes for profit

CB 3 Profit-making undertaking or scheme 145

Personal property

CB 4 Personal property acquired for purpose of disposal 145
CB 5 Business of dealing in personal property 145

Land

CB 6A Disposal within 2 years: bright-line test for residential land 145
CB 6 Disposal: land acquired for purpose or with intention of disposal 148
CB 7 Disposal: land acquired for purposes of business relating to land 148
CB 8 Disposal: land used for landfill, if notice of election 149
CB 9 Disposal within 10 years: land dealing business 149
CB 10 Disposal within 10 years: land development or subdivision business
150
CB 11 Disposal within 10 years of improvement: building business 151
CB 12 Disposal: schemes for development or division begun within 10 years
CB 13 Disposal: amount from major development or division and not already in income
CB 14 Disposal: amount from land affected by change and not already in income
151
152
153
CB 15 Transactions between associated persons 154
CB 15B When land acquired 155

Exclusions for bodies controlled by local authorities

CB 15C Council-controlled organisations and other companies 156

Exclusions for residential land

CB 16A Main home exclusion for disposal within 2 years 156
CB 16 Residential exclusion from sections CB 6 to CB 11 157
CB 17 Residential exclusion from sections CB 12 and CB 13 158
CB 18 Residential exclusion from section CB 14 158

Exclusions for business premises

CB 19 Business exclusion from sections CB 6 to CB 11 159
CB 20 Business exclusion from sections CB 12 and CB 13 159

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Exclusions for farm land

CB 21 Farm land exclusion from sections CB 12 and CB 13 160
CB 22 Farm land exclusion from section CB 14 160

Exclusion for investment land

CB 23 Investment exclusion from sections CB 12 and CB 13 161
CB 23B Land partially disposed of or disposed of with other land 161

Timber

CB 24 Disposal of timber or right to take timber 162
CB 25 Disposal of land with standing timber 162

Investments

CB 26 Disposal of certain shares by portfolio investment entities 163

Farming, forestry, or fishing

CB 27 Income equalisation schemes 164
CB 27B Entering partners’ livestock income [Repealed] 164

Environmental restoration

CB 28 Environmental restoration accounts 164

Minerals

CB 29 Disposal of minerals 166

Intellectual property

CB 30 Disposal of patent applications or patent rights 166

Transfer of business

CB 31 Disposal of business: transferred employment income obligations 166

Stolen property

CB 32 Property obtained by theft 167

Look-through companies

CB 32B Owners of look-through companies 167
CB 32C Dividend income for first year of look-through company 167

Mutual associations

CB 33 Amounts derived by mutual associations 170
CB 34 Amounts derived by members from mutual associations 171

Partners and partnerships

CB 35 Amounts of income for partners 172

Emissions units under Climate Change Response Act 2002

CB 36 Disposal of emissions units 172

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Business generally

CB 1 Amounts derived from business

Income

(1) An amount that a person derives from a business is income of the person.

Exclusion

(2) Subsection (1) does not apply to an amount that is of a capital nature.

Defined in this Act: amount, business, income

Compare: 2004 No 35 s CB 1

CB 2 Amounts received on disposal of business assets that include trading stock

When this section applies

(1) This section applies in an income year when—
(a) a person (person A) who owns or carries on a business disposes of some or all of the assets of the business to another person (person B); and
(b) the disposal is made outside the ordinary course of the business, or to put an end to the business or a part of it; and
(c) the assets consist of or include trading stock of the business, or a share or interest in trading stock.

Assessable income of person A

(2) An amount that person A receives from the disposal of the trading stock is taken into account in determining their income for the income year. The amount is derived at the time of disposal referred to in subsection (1).

Price of acquisition by person B

(3) In the calculation of the taxable income of person B for the income year or a later income year, person B is treated as acquiring the trading stock for the amount of the disposal referred to in subsection (2).

Disposal

(4) In this section, a disposal—
(a) includes the passing of property by an exchange, gift, distribution under a will or on intestacy; and
(b) does not include a disposal under any of sections FC 3 to FC 8 (which relate to distributions after death) that is not at market value.

Relationship with section CB 1

(5) This section overrides section CB 1.

Defined in this Act: amount, assessable income, business, dispose, distribution, income year, market value, property, taxable income, trading stock

Compare: 2004 No 35 s FB 3

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Schemes for profit

CB 3 Profit-making undertaking or scheme

An amount that a person derives from carrying on or carrying out an undertak- ing or scheme entered into or devised for the purpose of making a profit is in- come of the person.

Defined in this Act: amount, income

Compare: 2004 No 35 s CB 2

Personal property

CB 4 Personal property acquired for purpose of disposal

An amount that a person derives from disposing of personal property is income of the person if they acquired the property for the purpose of disposing of it.

Defined in this Act: amount, income, personal property

Compare: 2004 No 35 s CB 3

CB 5 Business of dealing in personal property

An amount that a person derives from disposing of personal property is income of the person if their business is to deal in property of that kind.

Defined in this Act: amount, business, income, personal property

Compare: 2004 No 35 s CB 4

Land

CB 6A Disposal within 2 years: bright-line test for residential land

Disposal within 2 years

(1) An amount that a person derives from disposing of residential land is income of the person, if the bright-line date for the residential land is within 2 years of—
(a) the date on which the instrument to transfer the land to the person was registered—
(i) under the Land Transfer Act 1952; or
(ii) under foreign laws of a similar nature to the Land Transfer Act
1952, if the land is outside New Zealand; or
(b) their date of acquisition of the land, if an instrument to transfer the land to the person is not registered on or before the bright-line date.

Subdivision

(2) Despite subsection (1), an amount that a person derives from disposing of resi- dential land that results from the person subdividing other land (the undivided land) is income of the person if the bright-line date for the residential land is within 2 years of—

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(a) the date on which the instrument to transfer the undivided land to the person was registered—
(i) under the Land Transfer Act 1952; or
(ii) under foreign laws of a similar nature to the Land Transfer Act
1952, if the land is outside New Zealand; or
(b) their date of acquisition of the undivided land, if the land is not regis- tered as described in paragraph (a) at the bright-line date.

Leases with perpetual right of renewal

(3) Despite subsection (1), an amount that a person derives from disposing of a freehold estate in residential land, acquired as the owner of a leasehold estate with a perpetual right of renewal, is income if the bright-line date for the free- hold estate is within 2 years of the grant of the leasehold estate.

Contingent interest

(4) Despite subsection (1), an amount that a person derives from disposing of a freehold estate in residential land, acquired as the result of the completion of a land development or subdivision, is income if the bright-line date for the free- hold estate is within 2 years of the person acquiring an interest, in relation to the land, that is contingent upon the completion of the land development or subdivision.

Start of 2-year period for transfers by registration if trustees change

(4B) If the person referred to in subsection (1)(a) or (2)(a) is a trustee of a trust who has been transferred the land or undivided land from a trustee of the trust, the date on which the instrument was registered is treated as occurring on—
(a) for subsection (1)(a)—
(i) the earliest date (first date) on which an instrument to transfer the land to a trustee of the trust was registered under the relevant law referred to in the subsection, if there has been no intervening transfer to a person who is not a trustee; or
(ii) the first date following the intervening transfer, if there has been an intervening transfer to a person who is not a trustee:
(b) for subsection (2)(a)—
(i) the earliest date (the undivided date) on which an instrument to transfer the undivided land to a trustee of the trust was registered under the relevant law referred to in the subsection, if there has been no intervening transfer to a person who is not a trustee; or
(ii) the undivided date following the intervening transfer, if there has been an intervening transfer to a person who is not a trustee.

Exception: disposal of land by executor, administrator, or beneficiary

(5) This section does not apply to an amount that an executor or administrator de- scribed in section FC 1(1)(a) (Disposals to which this subpart applies), or a

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beneficiary described in section FC 1(1)(b), derives from disposing of residen- tial land that was transferred to them on the death of a person.

Relationship with subject matter

(6) This section applies if none of sections CB 6 to CB 12 apply.

Some definitions

(7) In this section and section CB 16A,—

bright-line date means, for a disposal of residential land,— (a) the earliest of—

(i) the date that the person enters into an agreement for the disposal: (ii) the date on which the person makes a gift of the residential land: (iii) the date on which the person’s residential land is compulsorily ac-
quired under any Act by the Crown, a local authority, or a public
authority:
(iv) if there is a mortgage secured on the residential land, the date on which the land is disposed of by or for the mortgagee as a result of the mortgagor’s defaulting; or
(b) if none of paragraph (a)(i) to (iv) apply, the date on which the estate or interest in the residential land is disposed of

date of acquisition means the latest date on which the person acquires the es- tate or interest in the residential land.

Defined in this Act: amount, bright-line date, date of acquisition, dispose, estate, income, interest, land, mortgage, person, residential land, trustee, year

Section CB 6A: inserted (with effect on 1 October 2015 and applying to a person’s disposal of resi- dential land if the date that the person first acquires an estate or interest in the residential land is on or after that date), on 16 November 2015, by section 4(1) of the Taxation (Bright-line Test for Residen- tial Land) Act 2015 (2015 No 111).

Section CB 6A(3): amended (with effect on 1 October 2015), on 13 May 2016, by section 40(1) of the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act

2016 (2016 No 21).

Section CB 6A(4): amended (with effect on 1 October 2015), on 13 May 2016, by section 40(2) of the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act

2016 (2016 No 21).

Section CB 6A(4B) heading: inserted (with effect on 1 October 2015), on 21 February 2017, by sec- tion 62(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).

Section CB 6A(4B): inserted (with effect on 1 October 2015), on 21 February 2017, by section 62(1)

of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017

No 3).

Section CB 6A(5): amended (with effect on 1 April 2008), on 30 March 2017, by section 7 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CB 6A list of defined terms trustee: inserted (with effect on 1 October 2015), on 21 February

2017, by section 62(2) of the Taxation (Business Tax, Exchange of Information, and Remedial Mat- ters) Act 2017 (2017 No 3).

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CB 6 Disposal: land acquired for purpose or with intention of disposal

Income

(1) An amount that a person derives from disposing of land is income of the person if they acquired the land—
(a) for 1 or more purposes that included the purpose of disposing of it:
(b) with 1 or more intentions that included the intention of disposing of it.

Exclusions

(2) Subsection (1) is overridden by the exclusions for residential land in section
CB 16 and for business premises in section CB 19.

Land partially disposed of or disposed of with other land

[Repealed]

(3) [Repealed]

Defined in this Act: amount, business, dispose, income, land

Compare: 2004 No 35 ss CB 5, OB 1 “land” paragraph (a)(i)

Section CB 6(3) heading: repealed (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 30 March 2017, pursuant to section 8(1) of the Taxation (Annual Rates for

2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CB 6(3): repealed (with effect on 1 April 2008 and applying for the 2008–09 and later in- come years), on 30 March 2017, by section 8(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

CB 7 Disposal: land acquired for purposes of business relating to land

Income

(1) An amount that a person (person A) derives from disposing of land is income of person A if—
(a) both the following apply:
(i) at the time person A acquired the land they, or an associated per- son, carried on a business of dealing in land; and
(ii) person A acquired the land for the purpose of the business; or
(b) both the following apply:
(i) at the time person A acquired the land they, or an associated per- son, carried on a business of developing land or dividing land into lots; and
(ii) person A acquired the land for the purpose of the business; or
(c) all the following apply:
(i) at the time person A acquired the land they, or an associated per- son, carried on a business of erecting buildings; and
(ii) person A acquired the land for the purpose of the business; and

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(iii) before or after acquiring the land person A, or the associated per- son, made improvements to it.

Exclusions

(2) Subsection (1) is overridden by the exclusions for residential land in section
CB 16 and for business premises in section CB 19.

Defined in this Act: amount, associated person, business, dispose, improvements, income, land

Compare: 2004 No 35 s CB 6

CB 8 Disposal: land used for landfill, if notice of election

An amount that a person derives from disposing of land is income of the person if—
(a) the person uses the land as a landfill before disposing of the land; and
(b) at the time of disposal, the land is not being used as a landfill; and
(c) the person acquiring the land is not an associated person; and
(d) the person notifies the Commissioner of an election that the land be sub- ject to this section by the day that is the later of the following:
(i) the day that is 12 months after the day on which the person ac- quires the land:
(ii) 24 June 2006; and
(e) the person makes an election under paragraph (d) for all land that the person acquires and uses as a landfill; and
(f) any person associated with the person makes an election under para- graph (d) for all land that the associated person acquires and uses as a landfill.

Defined in this Act: associated person, Commissioner, dispose, notice, notify

Compare: 2004 No 35 s CB 6B

Section CB 8(c): substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 7(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CB 8(d): amended, on 2 June 2016, by section 5(1) of the Taxation (Transformation: First

Phase Simplification and Other Measures) Act 2016 (2016 No 27).

Section CB 8 list of defined terms notice: inserted, on 2 June 2016, by section 5(2) of the Taxation

(Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).

Section CB 8 list of defined terms notify: inserted, on 2 June 2016, by section 5(2) of the Taxation

(Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).

CB 9 Disposal within 10 years: land dealing business

Income

(1) An amount that a person derives from disposing of land is income of the person if—
(a) they dispose of the land within 10 years of acquiring it; and

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(b) at the time they acquired the land, they carried on a business of dealing in land, whether or not the land was acquired for the purpose of the busi- ness.

Income: associated person in business of dealing in land

(2) An amount that a person (person A) derives from disposing of land within 10 years of acquiring it is income of person A if a person (person B) associated with them at the time the land was acquired carried on a business of dealing in land, whether or not—
(a) person A carried on a business of dealing in land; or
(b) the land was acquired for the purpose of person B’s business.

Exclusions

(3) Subsection (2) is overridden by the exclusion for bodies controlled by a local authority in section CB 15C and subsections (1) and (2) are overridden by the exclusions for residential land in section CB 16 and for business premises in section CB 19.

Defined in this Act: amount, associated person, business, dispose, income, land, year

Compare: 2004 No 35 s CB 7

Section CB 9(3): amended (with effect on 1 September 2015), on 30 March 2017, by section 9 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

CB 10 Disposal within 10 years: land development or subdivision business

Income

(1) An amount that a person derives from disposing of land is income of the person if—
(a) they dispose of the land within 10 years of acquiring it; and
(b) at the time they acquired the land, they carried on a business of develop- ing land or dividing land into lots, whether or not the land was acquired for the purpose of the business.

Income: associated person in business of developing or subdividing land

(2) An amount that a person (person A) derives from disposing of land within 10 years of acquiring it is income of person A if a person (person B) associated with them at the time the land was acquired carried on a business of developing land or dividing land into lots, whether or not—
(a) person A carried on a business of developing land or dividing land into lots:
(b) the land was acquired for the purpose of person B’s business.

Exclusions

(3) Subsection (2) is overridden by the exclusion for bodies controlled by a local authority in section CB 15C and subsections (1) and (2) are overridden by the

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exclusions for residential land in section CB 16 and for business premises in section CB 19.

Defined in this Act: amount, associated person, business, dispose, income, land, year

Compare: 2004 No 35 s CB 8

Section CB 10(3): amended (with effect on 1 September 2015), on 30 March 2017, by section 10 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

CB 11 Disposal within 10 years of improvement: building business

Income

(1) An amount that a person derives from disposing of land is income of the person if—
(a) they dispose of the land within 10 years of completing improvements to it; and
(b) at the time they began the improvements, they carried on a business of erecting buildings, whether or not the land was acquired for the purpose of the business.

Income: associated person in business of erecting buildings

(2) An amount that a person (person A) derives from disposing of land within 10 years of completing improvements on it is income of person A if another per- son (person B) associated with person A at the time the improvements were begun carried on a business of erecting buildings, whether or not—
(a) person A carried on a business of erecting buildings; or
(b) the land was acquired for the purpose of person B’s business.

Exclusions

(3) Subsection (2) is overridden by the exclusion for bodies controlled by a local authority in section CB 15C and subsections (1) and (2) are overridden by the exclusions for residential land in section CB 16 and for business premises in section CB 19.

Defined in this Act: amount, associated person, business, dispose, improvements, income, land, year

Compare: 2004 No 35 s CB 9

Section CB 11(3): amended (with effect on 1 September 2015), on 30 March 2017, by section 11 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

CB 12 Disposal: schemes for development or division begun within 10 years

Income

(1) An amount that a person derives from disposing of land is income of the person if the amount is derived in the following circumstances:
(a) an undertaking or scheme, which is not necessarily in the nature of a business, is carried on; and

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(b) the undertaking or scheme involves the development of the land or the division of the land into lots; and
(c) the person, or another person for them, carries on development or div- ision work on or relating to the land; and
(d) the development or division work is not minor; and
(e) the undertaking or scheme was begun within 10 years of the date on which the person acquired the land.

Exclusions

(2) Subsection (1) is overridden by the exclusions for residential land in section CB 17, for business premises in section CB 20, for farm land in section CB 21, and for investment land in section CB 23.

Defined in this Act: amount, business, dispose, income, land, year

Compare: 2004 No 35 s CB 10

CB 13 Disposal: amount from major development or division and not already in income

Income

(1) An amount that a person derives from disposing of land is income of the person if—
(a) the amount is not income under any of sections CB 6A to CB 12 and CB
14; and
(b) the amount is derived in the following circumstances:
(i) an undertaking or scheme, which is not necessarily in the nature of a business, is carried on; and
(ii) the undertaking or scheme involves the development of the land or the division of the land into lots; and
(iii) the person, or another person for them, carries on development or division work on or relating to the land; and
(iv) the development or division work involves significant expenditure on channelling, contouring, drainage, earthworks, kerbing, level- ling, roading, or any other amenity, service, or work customarily undertaken or provided in major projects involving the develop- ment of land for commercial, industrial, or residential purposes.

Exclusions

(2) Subsection (1) is overridden by the exclusions for residential land in section CB 17, for business premises in section CB 20, for farm land in section CB 21, and for investment land in section CB 23.

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Relationship with section DB 27

(3) Section DB 27 (Amount from major development or division and not already in income) deals with a deduction for the value of the land.

Defined in this Act: amount, business, deduction, dispose, income, land

Compare: 2004 No 35 s CB 11

Section CB 13(1)(a): amended (with effect on 1 October 2015 and applying to a person’s disposal of residential land if the date that the person first acquires an estate or interest in the residential land is on or after that date), on 16 November 2015, by section 5(1) of the Taxation (Bright-line Test for Residential Land) Act 2015 (2015 No 111).

Section CB 13(2) heading: substituted, on 1 April 2008, by section 309 of the Taxation (Business

Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section CB 13(2): substituted, on 1 April 2008, by section 309 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

CB 14 Disposal: amount from land affected by change and not already in income

Income

(1) An amount that a person derives from disposing of land is income of the person if—
(a) the amount is not income under any of sections CB 6A to CB 12; and
(b) the person disposed of the land within 10 years of acquiring it; and
(c) the total amount that they derive from its disposal is more than the cost of the land; and
(d) at least 20% of the excess arises from a factor, or more than 1 factor, that—
(i) relates to the land; and
(ii) is described in subsection (2); and
(iii) occurs after the person acquired the land, for the factors described in subsection (2)(c), (e), (g), and (i).

Factors for purposes of subsection (1)(d)

(2) The factors referred to in subsection (1)(d) are—
(a) the rules of an operative district plan under the Resource Management
Act 1991:
(b) the likelihood of the imposition of rules: (c) a change to the rules:
(d) the likelihood of a change to the rules:
(e) a consent granted under the Resource Management Act 1991: (f) the likelihood of a consent being granted:
(g) a decision of the Environment Court made under the Resource Manage- ment Act 1991:

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(h) the likelihood of a decision being made:
(i) the removal of a condition, covenant, designation, heritage order, obliga- tion, prohibition, or restriction under the Resource Management Act
1991:
(j) the likelihood of the removal of a condition, covenant, designation, heritage order, obligation, prohibition, or restriction:
(k) an occurrence of a similar nature to any of the occurrences described in any of paragraphs (a) to (j):
(l) the likelihood of an occurrence of a similar nature to any of the occur- rences described in any of paragraphs (a) to (j).

Exclusions

(3) Subsection (1) is overridden by the exclusions for residential property in sec- tion CB 18 and for farm land in section CB 22.

Defined in this Act: amount, dispose, income, land, year

Compare: 2004 No 35 s CB 12

Section CB 14(1)(a): amended (with effect on 1 October 2015 and applying to a person’s disposal of residential land if the date that the person first acquires an estate or interest in the residential land is on or after that date), on 16 November 2015, by section 6(1) of the Taxation (Bright-line Test for Residential Land) Act 2015 (2015 No 111).

CB 15 Transactions between associated persons

Income

(1) An amount that a person (the transferee) derives from disposing of land is in- come of the transferee under whichever is applicable of sections CB 6 to CB 14 if—
(a) the land has been transferred to the transferee from another person (the

transferor); and

(b) the transferor and the transferee are associated persons at the time of the transfer; and
(c) the amount derived is more than the cost of the land to the transferee;
and
(d) the amount derived would have been income of the transferor under any of sections CB 6 to CB 14 if the transferor had retained and disposed of the land.

Date on which some transferees acquire land

(2) For the purposes of sections CB 7 to CB 12 and CB 14, if the transferor and transferee are associated persons at the time of the transfer, the transferee is treated as having acquired the land on the date on which the transferor acquired it.

Defined in this Act: amount, associated person, dispose, income, land

Compare: 2004 No 35 s CB 13

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CB 15B When land acquired

General rule

(1) For the purposes of this subpart except section CB 6A, a person acquires an es- tate, interest, or option that is land (the land) on the date that begins a period in which the person has an estate or interest in, or an option to acquire, the land, alone or jointly or in common with another person.

First exception: acquisition of land by company to be formed

(2) If a person, on behalf of a company to be formed, enters an agreement under which the company will have land, the company is treated, for the purposes of this subpart in relation to the land, as existing from when the person enters the agreement.

Second exception: land from exercise of option

(3) A person that exercises an option to acquire land and acquires the land, is treated as acquiring the land at the time when they exercise the option.

Relationship with subparts FB and FC

(4) Subsections (1) to (3) are overridden, for a transaction, by a provision in sub- part FB or FC (which relate to transfers of property) providing for the timing of the transaction.

Defined in this Act: company, estate, interest, land

Section CB 15B: inserted (with effect on 22 November 2013 and applying for disposals of land oc- curring on or after that date), on 30 June 2014, by section 7(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section CB 15B(1): amended (with effect on 1 October 2015 and applying to a person’s disposal of residential land if the date that the person first acquires an estate or interest in the residential land is on or after that date), on 16 November 2015, by section 7(1) of the Taxation (Bright-line Test for Residential Land) Act 2015 (2015 No 111).

Section CB 15B(3) heading: replaced (with effect on 22 November 2013), on 21 February 2017, by section 63 of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).

Section CB 15B(3): replaced (with effect on 22 November 2013), on 21 February 2017, by section 63 of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017

No 3).

Section CB 15B(3) heading: replaced (with effect on 14 May 2016), on 21 February 2017, by section

64 of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017

No 3).

Section CB 15B(3): replaced (with effect on 14 May 2016), on 21 February 2017, by section 64 of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).

Exclusions for bodies controlled by local authorities

Heading: inserted (with effect on 1 September 2015), on 30 March 2017, by section 12 of the Taxa- tion (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017

No 14).

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CB 15C Council-controlled organisations and other companies

Exclusion from application of some land provisions: kinds of associated persons

(1) Sections CB 9(2), CB 10(2), and CB 11(2) do not apply to a person (person A)
despite the activities of an associated person (person B) if— (a) person A is a local authority or—
(i) a council-controlled organisation that is linked by ownership or control to the local authority:
(ii) an entity referred to in section 6(4)(a) to (ca) of the Local Govern- ment Act 2002, that is linked by ownership or control to the local authority:
(iii) an entity that is associated with the local authority other than under section YB 14 (Tripartite relationship); and
(b) person B is—
(i) the local authority or an organisation or entity of a kind referred to in paragraph (a)(i) to (iii):
(ii) a person that is not associated with person A other than under sec- tion YB 14.

Exclusion from application of some land provisions: members of consolidated group

(2) If person A and person B are members of a consolidated group, and subsection (1) applies to prevent an amount from being income of person A, the amount is not income of person A under section CV 2 (Consolidated groups: income of company in group).

Defined in this Act: associated person, consolidated group, council-controlled organisation, local au- thority

Section CB 15C: inserted (with effect on 1 September 2015), on 30 March 2017, by section 12 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Exclusions for residential land

CB 16A Main home exclusion for disposal within 2 years

Main home exclusion

(1) Section CB 6A does not apply to a person who disposes of residential land, if the land has been used predominantly, for most of the time the person owns the land, for a dwelling that was the main home for—
(a) the person; or
(b) a beneficiary of a trust, if the person is a trustee of the trust and— (i) a principal settlor of the trust does not have a main home; or

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(ii) if a principal settlor of the trust does have a main home, it is that main home which the person is disposing of.

When this section does not apply

(2) The exclusion in subsection (1) does not apply to a person who disposes of residential land if—
(a) the exclusion has been used by the person 2 or more times within the 2 years immediately preceding the bright-line date for the residential land:
(b) the person has engaged in a regular pattern of acquiring and disposing of residential land.

A definition

(3) In this section, principal settlor means, for a trust, a settlor whose settlements for the trust are the greatest or greatest equal, by market value.

Defined in this Act: beneficiary, bright-line date, dispose, dwelling, land, main home, person, princi- pal settlor, residential land, settlement, settlor, trustee, year

Section CB 16A: inserted (with effect on 1 October 2015 and applying to a person’s disposal of resi- dential land if the date that the person first acquires an estate or interest in the residential land is on or after that date), on 16 November 2015, by section 8(1) of the Taxation (Bright-line Test for Residen- tial Land) Act 2015 (2015 No 111).

CB 16 Residential exclusion from sections CB 6 to CB 11

Exclusion

(1) Sections CB 6 to CB 11 do not apply if— (a) the person—
(i) acquired the land with a dwellinghouse on it; or
(ii) acquired the land and erected a dwellinghouse on it; and
(b) the dwellinghouse was occupied mainly as a residence by—
(i) the person and any member of their family living with them; or
(ii) if the person is a trustee, 1 or more beneficiaries of the trust.

What exclusion applies to

(2) The exclusion applies to the land that has the dwellinghouse on it. It also ap- plies to land related to the land that has the dwellinghouse on it if the total area of the related land is—
(a) 4,500 square metres or less; or
(b) more than 4,500 square metres, if the larger area is required for the reasonable occupation and enjoyment of the dwellinghouse.

Who exclusion does not apply to

(3) The exclusion does not apply to a person who has engaged in a regular pattern of acquiring and disposing, or erecting and disposing, of dwellinghouses.

Defined in this Act: dispose, land, trustee

Compare: 2004 No 35 s CB 14

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CB 17 Residential exclusion from sections CB 12 and CB 13

Exclusion: developing or dividing land for residential use

(1) Sections CB 12 and CB 13 do not apply if—
(a) the work involved in the undertaking or scheme is to create or effect a development, division, or improvement; and
(b) the development, division, or improvement is for use in, and for the pur- poses of, the residing on the land of the person or any member of their family living with them.

Exclusion: dividing residential land

(2) Sections CB 12 and CB 13 do not apply if—
(a) the land is a lot that came out of a larger area of land that the person divided into 2 or more lots; and
(b) the larger area of land—
(i) was 4,500 square metres or less immediately before it was divi- ded; and
(ii) was occupied by the person mainly as residential land for them- selves and a member of their family living with them.

Defined in this Act: land

Compare: 2004 No 35 s CB 15

Section CB 17(1): amended, on 1 April 2008, by section 310 of the Taxation (Business Taxation and

Remedial Matters) Act 2007 (2007 No 109).

CB 18 Residential exclusion from section CB 14

Exclusion

(1) Section CB 14 does not apply if—
(a) the person acquired the land and used it or intended to use it for residen- tial purposes; and
(b) they disposed of the land to another person who acquired it for residen- tial purposes.

Purpose of acquisition for purposes of subsection (1)(b)

(2) For the purposes of subsection (1)(b), the purpose of the acquisition by the other person is ascertained from the circumstances of the disposal and other relevant matters.

Meaning of residential purposes

(3) In this section, residential purposes—
(a) means a purpose that the person has of using the land or intending to use the land mainly as a residence for themselves and members of their fam- ily living with them; and

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(b) includes the purpose of erecting a dwellinghouse on the land to be occu- pied as such a residence.

Defined in this Act: dispose, land, residential purposes

Compare: 2004 No 35 s CB 16

Exclusions for business premises

CB 19 Business exclusion from sections CB 6 to CB 11

Exclusion

(1) Sections CB 6 to CB 11 do not apply to a disposal of land if— (a) the land is the premises of a business; and
(b) the person acquired and occupied, or erected and occupied, the premises mainly to carry on a substantial business from them.

Who exclusion does not apply to

(2) The exclusion does not apply to a person who has engaged in a regular pattern of acquiring and disposing, or erecting and disposing, of premises for business- es.

Meaning of land

(3) In this section, land includes land that—
(a) is reserved, with the premises, for the use of the business; and
(b) is of an area no greater than that required for the reasonable occupation of the premises and the carrying on of the business.

Defined in this Act: business, dispose, land

Compare: 2004 No 35 s CB 17

CB 20 Business exclusion from sections CB 12 and CB 13

Sections CB 12 and CB 13 do not apply if—
(a) the work involved in the undertaking or scheme is to create or effect a development, division, or improvement; and
(b) the development, division, or improvement is for use in, and for the pur- poses of, the carrying on of a business by the person on the land; and
(c) the business does not consist of the undertaking or scheme.

Defined in this Act: business, land

Compare: 2004 No 35 s CB 18

Section CB 20: amended, on 1 April 2008, by section 311(2) of the Taxation (Business Taxation and

Remedial Matters) Act 2007 (2007 No 109).

Section CB 20 heading: amended, on 1 April 2008, by section 311(1) of the Taxation (Business Taxa- tion and Remedial Matters) Act 2007 (2007 No 109).

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Part C s CB 21 Income Tax Act 2007

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1 October 2017

Exclusions for farm land

CB 21 Farm land exclusion from sections CB 12 and CB 13

Exclusion

(1) Sections CB 12 and CB 13 do not apply if—
(a) the land is a lot resulting from the division of a larger area of land into 2 or more lots; and
(b) immediately before the land was divided, the larger area of land was oc- cupied or used by the person, their spouse, civil union partner or de facto partner, or both of them, mainly for the purposes of a farming or agricul- tural business carried on by either or both of them; and
(c) the area and nature of the land disposed of mean that it is then capable of being worked as an economic unit as a farming or agricultural business; and
(d) the land was disposed of mainly for the purpose of using it in a farming or agricultural business.

Circumstances for purposes of subsection (1)(d)

(2) The circumstances of the disposal of the land are relevant to the decision on whether the land was disposed of mainly for the purpose of using it in a farm- ing or agricultural business. The circumstances include—
(a) the consideration for the disposal of the land: (b) current prices paid for land in that area:
(c) the terms of the disposal:
(d) a zoning or other classification relating to the land:
(e) the proximity of the land to any other land being used or developed for uses other than farming or agricultural uses.

Defined in this Act: business, dispose, land, pay

Compare: 2004 No 35 s CB 19

CB 22 Farm land exclusion from section CB 14

Exclusion

(1) Section CB 14 does not apply if—
(a) the person (person A) acquired the land, and they, their spouse, civil union partner or de facto partner, or both of them used or intended to use the land mainly for the purposes of a farming or agricultural business carried on by them, their spouse, civil union partner, or de facto partner, or both of them; and
(b) they disposed of the land to another person (person B) mainly for the purposes of the continuing use of the land in a farming or agricultural business.

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Purposes of acquisition for purposes of subsection (1)(b)

(2) For the purposes of subsection (1)(b), person B’s purposes in acquiring the land are ascertained from circumstances of the disposal arising after person A ac- quired the land and other relevant matters, not including the factors described in section CB 14(1).

Defined in this Act: business, dispose, land

Compare: 2004 No 35 s CB 20

Exclusion for investment land

CB 23 Investment exclusion from sections CB 12 and CB 13

Sections CB 12 and CB 13 do not apply if—
(a) the work involved in the undertaking or scheme is to create or effect a development, division, or improvement; and
(b) the development, division, or improvement is for use in, and for the pur- poses of, the person’s deriving from the land income of the kind de- scribed in section CC 1 (Land).

Defined in this Act: income, land

Compare: 2004 No 35 s CB 21

Section CB 23: amended, on 1 April 2008, by section 312(2) of the Taxation (Business Taxation and

Remedial Matters) Act 2007 (2007 No 109).

Section CB 23 heading: amended, on 1 April 2008, by section 312(1) of the Taxation (Business Taxa- tion and Remedial Matters) Act 2007 (2007 No 109).

CB 23B Land partially disposed of or disposed of with other land

Sections CB 6A to CB 23 apply to an amount derived from the disposal of land if the land is—
(a) part of the land to which the relevant section applies:
(b) the whole of the land to which the relevant section applies: (c) disposed of together with other land.

Defined in this Act: amount, dispose, land

Compare: 2004 No 35 s CB 5A

Section CB 23B: inserted, on 1 April 2008, by section 313 of the Taxation (Business Taxation and

Remedial Matters) Act 2007 (2007 No 109).

Section CB 23B heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–

16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section CB 23B: amended (with effect on 1 October 2015 and applying to a person’s disposal of resi- dential land if the date that the person first acquires an estate or interest in the residential land is on or after that date), on 16 November 2015, by section 9(1) of the Taxation (Bright-line Test for Residen- tial Land) Act 2015 (2015 No 111).

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Part C s CB 24 Income Tax Act 2007

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1 October 2017

Timber

CB 24 Disposal of timber or right to take timber

Income

(1) An amount is income of a person if they derive it from— (a) disposing of timber; or
(b) disposing of a right to take timber.

Whether or not person owns land

(2) Subsection (1) applies whether or not the person owns the land on which the timber is situated.

Disposal for below market value

(3) Section GC 2 (Disposals of timber rights or standing timber) may apply to treat a person as deriving an amount on the grant of a right to take timber or disposal of standing timber.

Defined in this Act: amount, dispose, income, own, right to take timber, standing timber

Compare: 2004 No 35 s CB 22

CB 25 Disposal of land with standing timber

When this section applies

(1) This section applies when a person disposes of land with standing timber on it.

Exclusions

(2) This section does not apply when the standing timber is of 1 of the following kinds:
(a) trees that are ornamental or incidental, as evidenced by a certificate given under section 44C of the Tax Administration Act 1994; or
(b) trees in a crop subject to a forestry right, as defined in section 2 of the Forestry Rights Registration Act 1983, registered under the Land Trans- fer Act 1952; or
(c) trees subject to a right to take a benefit (in the form of a profit a prendre)
granted before 1 January 1984.

Income

(3) The amount that the person derives from disposing of the standing timber is in- come of the person.

Defined in this Act: amount, dispose, income, standing timber

Compare: 2004 No 35 s CB 23

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Investments

CB 26 Disposal of certain shares by portfolio investment entities

When this section applies

(1) This section applies when—
(a) the income from the disposal by a person (the entity) of the share is ex- cluded income under section CX 55 (Proceeds from disposal of invest- ment shares); and
(ab) the share is not in a listed PIE; and
(b) a dividend from the share is—
(i) declared before the disposal; and
(ii) paid to a holder of the share who, after the disposal, becomes en- titled to the dividend; and
(c) the entity attributes the proceeds from the disposal to investors who are not entitled to the benefit of the dividend.

Income

(2) The entity is treated as deriving an amount of income calculated using the for- mula—
(shares at declaration − shares on distribution) × dividend.

Definition of items in formula

(3) In the formula,—
(a) shares at declaration is the number of shares held by the entity when the dividend is declared:
(b) shares on distribution is the number of shares for which the entity de- rives a dividend:
(c) dividend is the amount of the dividend per share or, for a share issued by an ICA company, the amount of the dividend per share that is not fully imputed.

Positive result

(4) The result of the formula must be a positive amount.

Defined in this Act: amount, company, dividend, excluded income, fully imputed, ICA company, income, listed PIE, pay, portfolio investment entity, share

Compare: 2007 No 97 s CB 26

Section CB 26: substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 8(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CB 26(1)(ab): inserted, on 30 June 2014, by section 8(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section CB 26(1)(b)(ii): amended (with effect on 1 April 2012), on 17 July 2013, by section 4 of the

Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).

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Part C s CB 27 Income Tax Act 2007

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1 October 2017

Section CB 26(1)(c): inserted (with effect on 1 April 2012), on 17 July 2013, by section 4 of the

Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).

Section CB 26 list of defined terms listed PIE: inserted, on 30 June 2014, by section 8(2) of the

Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Farming, forestry, or fishing

CB 27 Income equalisation schemes

Income derived by a person, as timed and quantified under any of the following provisions, is income of the person:
(a) sections EH 11, EH 14, EH 16, EH 18, EH 20 to EH 22, EH 24, and EH
26 (which relate to the main income equalisation scheme):
(b) sections EH 46, EH 48, EH 50 to EH 52, EH 54, and EH 56 (which re- late to the adverse event income equalisation scheme):
(c) sections EH 72, EH 74, and EH 76 (which relate to the thinning oper- ations income equalisation scheme).

Defined in this Act: adverse event income equalisation scheme, income, main income equalisation scheme, person, thinning operations income equalisation scheme

Compare: 2004 No 35 s CB 24

CB 27B Entering partners’ livestock income

[Repealed]

Section CB 27B: repealed (with effect on 1 April 2009), on 6 October 2009, by section 9(1) of the

Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Environmental restoration

CB 28 Environmental restoration accounts

Income from refund

(1) A person who receives a refund for a tax year under section EK 12 (Refund if application or excess balance) derives for the person’s corresponding income year an amount of income calculated using the formula—
refund ÷ tax rate.

Income from transfer from environmental restoration account

(2) If there is a transfer from a person’s environmental restoration account under section EK 15, EK 16, or EK 19 (which relate to environmental restoration ac- counts), the person derives for the corresponding income year an amount of in- come calculated using the formula—
transfer ÷ tax rate.

Definitions of items in formulas

(3) The items in the formulas are defined in subsections (4) to (6).

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Refund

(4) Refund is the amount of the refund.

Tax rate

(5) Tax rate is the highest rate of income tax on taxable income that—
(a) is set out in schedule 1 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits); and
(b) would apply to the person for the tax year if the person had sufficient taxable income.

Transfer

(6) Transfer is the amount in the environmental restoration account that is trans- ferred.

Income arising from renewal of resource consent

(7) A person who incurs expenditure of a type listed in schedule 19, part A, clauses
2 to 5 (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant) and not in schedule 19, part C derives income under subsection (8) if—
(a) the deduction under section DB 46 (Avoiding, remedying, or mitigating effects of discharge of contaminant) for the expenditure is determined by the period for which a resource consent is granted; and
(b) the period of the grant of the resource consent is extended by more than
50% in a later income year or a new resource consent is granted for a period that is more than 50% of the total period of the resource consent.