Income Tax Act 2004
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Version as at 29 March 2025
Income Tax Act 2004
Public Act |
2004 No 35 |
|
Date of assent |
7 May 2004 |
|
Income Tax Act 2004: repealed, on 1 April 2008, by section ZA 1(1) of the Income Tax Act 2007 (2007 No 97).
Note
Changes authorised by subpart 2 of Part 3 of the Legislation Act 2019 have been made in this consolidation. See the notes at the end of this consolidation for further details.
This Act is administered by the Inland Revenue Department.
Contents
A 1 Title
This Act is the Income Tax Act 2004.
Compare: 1994 No 164 s AA 1(1)
A 2 Commencement
1 April 2005
(1)
This Act comes into force on 1 April 2005.
Act effective for 2005-06 tax year and later
(2)
However, except when the context requires otherwise, this Act applies only—
(a)
with respect to the tax on income derived in the 2005-06 tax year and later tax years, in the case of a person whose income year is the same as the tax year; and
(b)
with respect to the tax on income derived in the corresponding income years, in the case of a person whose income year is not the same as the tax year.
Defined in this Act: corresponding income year, income, income year, tax, tax year
Compare: 1994 No 164 s AA 1(2), (3)
Part A Purpose and interpretation
Contents
AA 1 Purpose of Act
The main purposes of this Act are—
(a)
to define, and impose tax on, net income:
(b)
to impose obligations concerning tax:
(c)
to set out rules for calculating tax and for satisfying the obligations imposed.
Defined in this Act: net income, tax
Compare: 1994 No 164 s AA 1
Paragraphs (a) and (b) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
AA 2 Interpretation
Aids to interpretation
(1)
Diagrams, flowcharts, readers’ notes, and the lists of defined terms following sections are included in this Act only as interpretational aids. If there is conflict between an interpretational aid and a provision of this Act, the provision prevails.
Defined terms
(2)
If a defined term is used in a section and is not included in the list of defined terms following the section, the term is nevertheless used in the section as defined.
Compare: 1994 No 164 s AA 3(2)
AA 3 Definitions
References to this Act
(1)
Except in this Part and Parts B to E, a reference to this Act includes a reference to the Tax Administration Act 1994 unless the context requires that it not be included.
Significance of Part O
(2)
Definitions of terms that apply generally for the purposes of this Act, and general provisions on the interpretation and construction of this Act, appear in Part O (Definitions and related matters).
Compare: 1994 No 164 s AA 4
Part B Core Provisions
Contents
Subpart BA—Purpose
BA 1 Purpose
The purposes of this Part are—
(a)
to impose income tax, provisional tax, withholding tax, and other tax obligations concerning taxes:
(b)
to set out procedures to be followed for calculating tax and satisfying the obligations imposed under this Act
(c)
to provide a basis for applying the other Parts:
(d)
generally to set up the scheme of the Act and the main links between its Parts.
Defined in this Act: income tax, provisional tax, tax
Compare: 1994 No 164 s BA 1
Paragraphs (a) to (c) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
Subpart BB—Income tax and resulting obligations
Contents
BB 1 Imposition of income tax
Income tax is imposed on taxable income, at the rate or rates of tax fixed by an annual taxing Act, and is payable to the Crown under this Act and the Tax Administration Act 1994.
Defined in this Act: annual taxing Act, income tax, tax, taxable income
Compare: 1994 No 164 s BB 1
BB 2 Main obligations
Income tax liability
(1)
A person’s income tax liability for a tax year must be calculated, and satisfied by the person, under subpart BC (Calculating and satisfying income tax liabilities).
Non-filing taxpayer
(2)
Despite subsection (1), a non-filing taxpayer is not required to file a return of income.
Provisional tax
(3)
A provisional taxpayer must pay provisional tax for a tax year under the provisional tax rules.
Withholding liabilities
(4)
A person who has a withholding liability must satisfy it under subpart BE (Withholding liabilities).
Other obligations
(5)
A person who has an obligation under subpart BF (Other obligations) must satisfy it under that subpart.
Defined in this Act: income tax liability, non-filing taxpayer, provisional tax rules, provisional tax, provisional taxpayer, return of income, tax year
Compare: 1994 No 164 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)
Despite anything in this Act, except section BH 1(5) (Double tax agreements), or in any other enactment, under subpart BH (Double tax agreements) a double tax agreement has effect in relation to—
(a)
income tax; or
(b)
any other tax imposed by this Act; or
(c)
the exchange of information that relates to a tax, as defined in paragraphs (a)(i) to (v) of the definition of tax in section 3 of the Tax Administration Act 1994.
Defined in this Act: Commissioner, double tax agreement, income tax, tax, tax avoidance arrangement
Compare: 1994 No 164 s BB 3
Subpart BC—Calculating and satisfying income tax liabilities
Contents
BC 1 Non-filing and filing taxpayers
Non-filing taxpayer
(1)
The income tax liability of a non-filing taxpayer for a tax year is the total tax withheld from amounts of income included in the taxpayer’s annual gross income for the year.
Filing taxpayer
(2)
The income tax liability of a filing taxpayer for a tax year is calculated under sections BC 2 to BC 6.
Filing taxpayer with schedular income
(3)
If a filing taxpayer has schedular income, their income tax liability calculation is modified by section BC 7.
Defined in this Act: amount, annual gross income, filing taxpayer, income, income tax liability, non-filing taxpayer, schedular income, tax, tax year
Compare: 1994 No 164 ss BC 1(1), BC 2
BC 2 Annual gross income
A person’s annual gross income for a tax year is the total of their assessable income that is allocated to the corresponding income year.
Defined in this Act: annual gross income, assessable income, corresponding income year, tax year
Compare: 1994 No 164 s BC 4
BC 3 Annual total deduction
A person’s annual total deduction for a tax year is the total of their deductions that are allocated to the corresponding income year.
Defined in this Act: annual total deduction, corresponding income year, deduction, tax year
Compare: 1994 No 164 s BC 5
BC 4 Net income and net loss
Income more than deductions
(1)
If, for a tax year, a person’s annual gross income is more than their annual total deduction, the difference is their net income for the year.
Income equal to deductions
(2)
If, for a tax year, a person’s annual gross income equals their annual total deduction, their net income for the year is zero.
Deductions more than income
(3)
If, for a tax year, a person’s annual total deduction is more than their annual gross income, the difference is their net loss for the year, and their net income for the year is zero.
Treatment of net loss
(4)
A person with a net loss for a tax year may, under Part I (Treatment of net losses),—
(a)
subtract the net loss from their net income for a future tax year; or
(b)
make the net loss available to another person to subtract from that other person’s net income for that or a future tax year.
Defined in this Act: annual gross income, annual total deduction, net income, net loss, tax year
Compare: 1994 No 164 s BC 6
BC 5 Taxable income
A person’s taxable income for a tax year is determined by subtracting any available net losses that the person has from their net income under Part I (Treatment of net losses).
Defined in this Act: available net loss, net income, taxable income, tax year
Compare: 1994 No 164 s BC 7
BC 6 Income tax liability of filing taxpayer
Calculation rules
(1)
The income tax liability of a filing taxpayer for a tax year is the amount calculated under subsections (2) to (5).
Unadjusted income tax liability
(2)
The unadjusted income tax liability of the filing taxpayer for the tax year is calculated by multiplying their taxable income for the tax year by the applicable basic tax rate.
Adjusted income tax liability
(3)
The unadjusted income tax liability of the filing taxpayer becomes their adjusted income tax liability by subtracting their allowable rebates from their unadjusted income tax liability.
Result positive
(4)
If the adjusted income tax liability is more than zero, that amount is the filing taxpayer’s income tax liability for the tax year.
Result negative
(5)
If the adjusted income tax liability is zero or negative, the filing taxpayer’s income tax liability for the tax year is zero.
Defined in this Act: adjusted income tax liability, allowable rebates, amount, applicable basic tax rate, filing taxpayer, income tax liability, tax year, taxable income, unadjusted income tax liability
Compare: 1994 No 164 s BC 8(1)-(5)
BC 7 Income tax liability of person with schedular income
Modified income tax liability
(1)
The income tax liability for a tax year of a person who has schedular income for the year is the total of—
(a)
their schedular income tax liability for the year calculated under subsection (2) or (3); and
(b)
the amount that would be their income tax liability for the year if they had no schedular income.
Schedular income tax liability
(2)
If a person has 1 kind of schedular income for a tax year, their schedular income tax liability for the year is the amount that would be the income tax liability for the year if their only income for the year were that schedular income.
Multiple schedular income
(3)
If a person has more than 1 kind of schedular income for a tax year, their schedular income tax liability for the year is the total of the amounts calculated for each kind of schedular income.
Defined in this Act: amount, income, income tax liability, schedular income, schedular income tax liability, tax year
Compare: 1994 No 164 s BC 3
BC 8 Surplus rebates
Amount of surplus rebates
(1)
If a person’s adjusted income tax liability is negative for a tax year, their amount of surplus rebates is the lesser of—
(a)
the total of the refundable rebates to which they are entitled for the year; and
(b)
the difference between zero and their adjusted income tax liability.
Refunds from Commissioner
(2)
The Commissioner must refund the amount of surplus rebates under section KD 4 (Allowance of credit of tax in end of year assessment).
Defined in this Act: adjusted income tax liability, amount, Commissioner, refundable rebate, tax year
Compare: 1994 No 164 ss BC 8(6), BC 10(1)
BC 9 Satisfaction of income tax liability
Use of tax credits
(1)
Credits for tax paid or tax withheld, calculated under Part L (Credits), satisfy a person’s income tax liability for a tax year as far as the credits extend.
Terminal tax
(2)
If the person’s income tax liability is more than the total of their credits, the difference is the person’s terminal tax. The person must pay the terminal tax to complete the satisfaction of their income tax liability.
Defined in this Act: income tax liability, tax, tax year, terminal tax
Compare: 1994 No 164 ss BC 1(2), BC 9(1)
BC 10 Surplus credits
Composition of surplus credits
(1)
The composition of a person’s surplus credits is determined as if their credits for tax paid or tax withheld were set off against their income tax liability in the following order:
(a)
non-refundable credits:
(b)
credits for supplementary dividends allowed to them under subpart LE (Non-resident investors):
(c)
convertible credits:
(d)
refundable credits.
Application of surplus credits
(2)
If, for a tax year, the total of a person’s credits for tax paid or tax withheld is more than their income tax liability, then,—
(a)
(b)
Defined in this Act: Commissioner, convertible credit, income tax, income tax liability, non-refundable credit, refundable credit, supplementary dividend, surplus refundable credits, tax, tax year
Compare: 1994 No 164 ss BC 9(2), (3), BC 10(2)
Subpart BD—Income, deductions, and timing
Contents
BD 1 Income, exempt income, excluded income, non-residents’ foreign-sourced income, and assessable income
Amounts of income
(1)
An amount is income of a person if it is their income under a provision in Part C (Income).
Exempt income
(2)
An amount of income of a person is exempt income if it is their exempt income under a provision in subpart CW (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 (Terminating provisions); 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 HH 4(3) (Trustee income) 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 income, foreign-sourced amount, income, non-resident, non-residents’ foreign-sourced income
Compare: 1994 No 164 s BD 1
Subsection (5)(a) and (b) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
BD 2 Deductions
An amount is a deduction of a person if they are allowed a deduction for the amount under Part D (Deductions).
Defined in this Act: amount, deduction
Compare: 1994 No 164 s BD 2
BD 3 Allocation of income to particular income years
Application
(1)
Every amount of income must be allocated to an income year under this section.
General rule
(2)
Interpretation of derive
(3)
When the time of derivation of an amount of income is being determined, regard must be had to case law, which—
(a)
requires some people to recognise income on an accrual basis; and
(b)
requires other people to recognise income on a cash basis; and
(c)
more generally, defines the concept of derivation.
Income credited in account
(4)
Despite subsection (3), income that has not previously been derived by a person is treated as being derived when it is credited in their account or, in some other way, dealt with in their interest or on their behalf.
Role of Part E
(5)
Part E (Timing and quantifying rules) contains a number of provisions that—
(a)
specifically modify the allocation of income or have the effect of modifying the allocation of income; or
(b)
allocate income as part of the process of quantifying it.
Single allocation
(6)
An amount of income may be allocated only once.
Defined in this Act: amount, income, income year
Compare: 1994 No 164 ss BD 3(1)-(4), EB 1(1)
BD 4 Allocation of deductions to particular income years
Application
(1)
Every deduction must be allocated to an income year under this section.
General rule
(2)
A deduction for an amount of expenditure or loss is allocated to the income year in which the expenditure or loss is incurred, unless a provision in any of Parts D to I provides for allocation on another basis.
Interpretation of incur
(3)
When the time of incurrence of an amount of expenditure or loss is being determined, regard must be had to case law, which—
(a)
requires some people to recognise expenditure or loss on an accrual basis; and
(b)
requires other people to recognise expenditure or loss on a cash basis; and
(c)
more generally, defines the concept of incurrence.
Role of Part E
(4)
Part E (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.
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: 1994 No 164 ss BD 4, EF 1(1)(a)
Subpart BE—Withholding liabilities
Contents
BE 1 Withholding liabilities
Source deduction payments
(1)
A person who makes a source deduction payment must withhold an amount from the payment under the PAYE rules.
Resident withholding income
(2)
A person who makes a payment of resident withholding income must withhold an amount from the payment under the RWT rules.
Non-resident withholding income
(3)
A person who makes a payment of non-resident withholding income must withhold an amount from the payment under the NRWT rules.
Fringe benefits
(4)
A person who provides a fringe benefit to another person must pay fringe benefit tax under the FBT rules.
Specified superannuation contributions
(5)
A person who makes a specified superannuation contribution to a superannuation fund must pay specified superannuation contribution withholding tax under the SSCWT rules.
Retirement scheme contributions
(5B)
A person who makes a retirement scheme contribution to a retirement savings scheme must pay retirement scheme contribution withholding tax under the RSCWT rules.
Dividend withholding payments
(6)
A person who receives dividends must make dividend withholding payments under the dividend withholding payment rules.
Defined in this Act: amount, dividend, dividend withholding payment, dividend withholding payment rules, FBT rules, fringe benefit, fringe benefit tax, non-resident withholding income, NRWT rules, PAYE rules, payment, resident withholding income, retirement savings scheme, retirement scheme contribution, retirement scheme contribution withholding tax, RSCWT rules, RWT rules, source deduction payment, specified superannuation contribution, specified superannuation contribution withholding tax, SSCWT rules, superannuation fund
Compare: 1994 No 164 s BE 1
Section BE 1(5B) heading: inserted (with effect from 1 April 2007), on 19 December 2007, by section 4(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section BE 1(5B): inserted (with effect from 1 April 2007), on 19 December 2007, by section 4(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section BE 1 list of defined terms retirement savings scheme: inserted (with effect from 1 April 2007), on 19 December 2007, by section 4(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 (with effect from 1 April 2007), on 19 December 2007, by section 4(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section BE 1 list of defined terms retirement scheme contribution withholding tax: inserted (with effect from 1 April 2007), on 19 December 2007, by section 4(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section BE 1 list of defined terms RSCWT rules: inserted (with effect from 1 April 2007), on 19 December 2007, by section 4(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subpart BF—Other obligations
Contents
BF 1 Other obligations
A person must pay the following under the relevant Part:
(a)
qualifying company election tax under Part H (Treatment of net income of certain entities):
(b)
income tax on taxable distributions from non-qualifying trusts under Part H (Treatment of net income of certain entities):
(c)
withdrawal tax under Part I (Treatment of net losses):
(d)
further income tax under Part M (Tax payments):
(e)
further dividend withholding payments under Part M (Tax payments).
Defined in this Act: further dividend withholding payment, further income tax, income tax, non-qualifying trust, qualifying company election tax, taxable distribution, withdrawal tax
Compare: 1994 No 164 s BF 1
Paragraphs (a) to (d) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
Subpart BG—Avoidance
Contents
BG 1 Tax avoidance
Avoidance arrangement void
(1)
A tax avoidance arrangement is void as against the Commissioner for income tax purposes.
Reconstruction
(2)
Under Part G (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: 1994 No 164 s BG 1
Subpart BH—Double tax agreements
Contents
BH 1 Double tax agreements
Meaning
(1)
Double tax agreement means an agreement that—
(a)
has been negotiated for 1 or more of the purposes set out in subsection (2); and
(b)
has been agreed between—
(i)
the government of any territory outside New Zealand and the government of New Zealand; or
(ii)
the Taipei Economic and Cultural Office in New Zealand and the New Zealand Commerce and Industry Office; and
(c)
has entered into force as a result of a declaration by the Governor-General by Order in Council under subsection (3).
Purposes
(2)
The following are the purposes for which a double tax agreement may be negotiated:
(a)
to provide relief from double taxation:
(b)
to provide relief from tax:
(c)
to tax the income derived by non-residents from any source in New Zealand:
(d)
to determine the income to be attributed to non-residents or their agencies, branches, or establishments in New Zealand:
(e)
to determine the income to be attributed to New Zealand residents who have special relationships with non-residents:
(f)
to prevent fiscal evasion:
(g)
to facilitate the exchange of information:
(h)
to assist in recovering unpaid tax.
Entry into force
(3)
An agreement to which subsection (1)(a) and (b) apply enters into force on the date specified by the Governor-General by Order in Council.
Overriding effect
(4)
Despite anything in this Act, except subsection (5), or in any other Inland Revenue Act or the Official Information Act 1982 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 paragraphs (a)(i) to (v) of the definition of tax in section 3 of the Tax Administration 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.
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.
Defined in this Act: business, double tax agreement, income, income tax, net income, New Zealand, New Zealand resident, non-resident, source in New Zealand, tax
Compare: 1994 No 164 s BH 1
Subsection (4) was amended, as from 3 April 2006, by section 4 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting the words “any other Inland Revenue Act or the Official Information Act 1982 or the Privacy Act 1993,”
for the words “any other enactment,”
.
Subsections (4)(a) and (b) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
Part C Income
Contents
Subpart CA—General rules
CA 1 Amounts that are income
Amounts specifically identified
(1)
An amount is income of a person if it is their income under a provision in this Part.
Ordinary meaning
(2)
An amount is also income of a person if it is their income under ordinary concepts.
Defined in this Act: amount, income
Compare: 1994 No 164 ss BD 1(1), CD 5
CA 2 Amounts that are exempt income or excluded income
What this section does
(1)
This section identifies the subparts in this Act that deal with exempt income and excluded income.
Exempt income
(2)
An amount of income of a person is exempt income if it is their exempt income 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 (Terminating provisions); and
(b)
it is not their non-residents’ foreign-sourced income.
Defined in this Act: amount, excluded income, exempt income, non-residents’ foreign-sourced income
Subpart CB—Income from business or trade-like activities
Contents
Business generally
CB 1 Amounts derived from business
Income
(1)
An amount that a person derives from a business is income of the person.
Exclusion
(2)
Subsection (1) does not apply to an amount that is of a capital nature.
Defined in this Act: amount, business, income
Compare: 1994 No 164 s CD 3
Schemes for profit
CB 2 Profit-making undertaking or scheme
An amount that a person derives from carrying on or carrying out an undertaking or scheme entered into or devised for the purpose of making a profit is income of the person.
Defined in this Act: amount, income
Compare: 1994 No 164 s CD 4
Personal property
CB 3 Personal property acquired for purpose of disposal
An amount that a person derives from disposing of personal property is income of the person if they acquired the property for the purpose of disposing of it.
Defined in this Act: amount, income, personal property
Compare: 1994 No 164 s CD 4
CB 4 Business of dealing in personal property
An amount that a person derives from disposing of personal property is income of the person if their business is to deal in property of that kind.
Defined in this Act: amount, business, income, personal property
Compare: 1994 No 164 s CD 4
CB 4B Disposal of certain shares by portfolio investment entity or New Zealand Superannuation Fund after declaration of dividend
When this section applies
(1)
This section applies to a portfolio investment entity or the New Zealand Superannuation Fund (the entity) if—
(a)
the entity disposes of a share in a company; and
(b)
section CX 44C (Proceeds from disposal of certain shares by portfolio investment entities or New Zealand Superannuation Fund) applies to the disposal; and
(c)
a dividend from the share is—
(i)
declared before the disposal; and
(ii)
paid to a holder of the share who after the disposal becomes entitled to the dividend.
Income
(2)
The entity derives an amount of income that is the greater of zero and the amount calculated using the formula (declaration shares - distribution shares) x distribution.
Definition of items in formula
(3)
The items in the formula are defined in subsections (4) to (6).
Declaration shares
(4)
Declaration shares is the number of shares in the company held by the entity when the dividend is declared.
Distribution shares
(5)
Distribution shares is the number of shares in the company for which the entity derives the dividend.
Distribution
(6)
Distribution is the amount for a share of—
(a)
the dividend that is not fully imputed as that term is defined in section NG 2(3) (Application of NRWT rules), if the share is issued by a company that has an imputation credit account; or
(b)
the dividend, if paragraph (a) does not apply.
Defined in this Act: amount, company, dividend, imputation credit account, income, portfolio investment entity, share
Section CB 4B: substituted (with effect from 1 October 2007), on 19 December 2007, by section 5 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CB 4B: inserted, on 1 October 2007, by section 4 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section CB 4B(1)(a): amended, on 1 October 2007, by section 4 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Land
CB 5A Land partially sold or sold with other land
Sections CB 5 to CB 21 apply to amounts derived from the disposal of land if the land—
(a)
is part of the land to which the relevant section applies:
(b)
is the whole of the land to which the relevant section applies:
(c)
is disposed of together with other land.
Defined in this Act: amount, dispose, land
Section CB 5A: inserted (with effect from 1 April 2005), on 19 December 2007, by section 6(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CB 5 Disposal: land acquired for purpose or with intention of disposal
Income
(1)
An amount that a person derives from disposing of land is income of the person if they acquired the land—
(a)
for 1 or more purposes that included the purpose of disposing of it:
(b)
with 1 or more intentions that included the intention of disposing of it.
Exclusions
(2)
Subsection (1) is overridden by the exclusions for residential land in section CB 14 and for business premises in section CB 17.
Defined in this Act: amount, business, dispose, income, land
Compare: 1994 No 164 s CD 1(2)(a)
Subsection (1)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
CB 6 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 person, carried on a business of dealing in land; and
(ii)
person A acquired the land for the purpose of the business; or
(b)
both the following apply:
(i)
at the time person A acquired the land they, or an associated person, carried on a business of developing land or dividing land into lots; and
(ii)
person A acquired the land for the purpose of the business; or
(c)
all the following apply:
(i)
at the time person A acquired the land they, or an associated person, carried on a business of erecting buildings; and
(ii)
person A acquired the land for the purpose of the business; and
(iii)
before or after acquiring the land person A, or the associated person, made improvements to it.
Exclusions
(2)
Subsection (1) is overridden by the exclusions for residential land in section CB 14 and for business premises in section CB 17.
Defined in this Act: amount, associated person, business, dispose, improvements, income, land
Compare: 1994 No 164 s CD 1(2)(b)(i), (c)(i), (d)(i)
CB 6B Disposal: Land used for landfill, if notice of election
An amount that a person derives from disposing of land is income of the person if—
(a)
the person uses the land as a landfill before disposing of the land; and
(b)
at the time of disposal, the land is not being used as a landfill; and
(c)
the person acquiring the land is not an associated person under section OD 7; and
(d)
the person gives written notice to the Commissioner of an election that the land be subject to this section by the day that is the later of the following:
(i)
the day that is 12 months after the day on which the person acquires the land:
(ii)
24 June 2006; and
(e)
the person makes an election under paragraph (d) for all land that the person acquires and uses as a landfill; and
(f)
any person associated with the person makes an election under paragraph (d) for all land that the associated person acquires and uses as a landfill.
Defined in this Act: associated person, Commissioner, dispose
Section CB 6B was inserted, as from 1 October 2005, by section 4 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
CB 7 Disposal within 10 years: land dealing business
Income
(1)
An amount that a person derives from disposing of land is income of the person if—
(a)
they dispose of the land within 10 years of acquiring it; and
(b)
at the time they acquired the land, they carried on a business of dealing in land, whether or not the land was acquired for the purpose of the business.
Income: associated person in business of dealing in land
(2)
An amount that a person (person A) 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)
Subsections (1) and (2) are overridden by the exclusions for residential land in section CB 14 and for business premises in section CB 17.
Defined in this Act: amount, associated person, business, dispose, income, land, year
Compare: 1994 No 164 s CD 1(2)(b)(ii)
CB 8 Disposal within 10 years: land development or subdivision business
Income
(1)
An amount that a person derives from disposing of land is income of the person if—
(a)
they dispose of the land within 10 years of acquiring it; and
(b)
at the time they acquired the land, they carried on a business of developing land or dividing land into lots, whether or not the land was acquired for the purpose of the business.
Income: associated person in business of developing or subdividing land
(2)
An amount that a person (person A) 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)
Subsections (1) and (2) are overridden by the exclusions for residential land in section CB 14 and for business premises in section CB 17.
Defined in this Act: amount, associated person, business, dispose, income, land, year
Compare: 1994 No 164 s CD 1(2)(c)(ii)
Subsection (2)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
CB 9 Disposal within 10 years of improvement: building business
Income
(1)
An amount that a person derives from disposing of land is income of the person if—
(a)
they dispose of the land within 10 years of completing improvements to it; and
(b)
at the time they began the improvements, they carried on a business of erecting buildings, whether or not the land was acquired for the purpose of the business.
Income: associated person in business of erecting buildings
(2)
An amount that a person (person A) derives from disposing of land within 10 years of completing improvements on it is income of person A if another person (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)
Subsections (1) and (2) are overridden by the exclusions for residential land in section CB 14 and for business premises in section CB 17.
Defined in this Act: amount, associated person, business, dispose, improvements, income, land, year
Compare: 1994 No 164 s CD 1(2)(d)(ii)
CB 10 Disposal: schemes for development or division begun within 10 years
Income
(1)
An amount that a person derives from disposing of land is income of the person if the amount is derived in the following circumstances:
(a)
an undertaking or scheme, which is not necessarily in the nature of a business, is carried on; and
(b)
the undertaking or scheme involves the development of the land or the division of the land into lots; and
(c)
the person, or another person for them, carries on development or division work on or relating to the land; and
(d)
the development or division work is not minor; and
(e)
the undertaking or scheme was begun within 10 years of the date on which the person acquired the land.
Exclusions
(2)
Subsection (1) is overridden by the exclusions for residential land in section CB 15, for business premises in section CB 18, for farm land in section CB 19, and for investment land in section CB 21.
Defined in this Act: amount, business, dispose, income, land, year
Compare: 1994 No 164 s CD 1(2)(f)
CB 11 Disposal: amount from major development or division and not already in income
Income
(1)
An amount that a person derives from disposing of land is income of the person if—
(a)
the amount is not income under any of sections CB 5 to CB 10 and CB 12; 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, levelling, roading, or any other amenity, service, or work customarily undertaken or provided in major projects involving the development of land for commercial, industrial, or residential purposes.
Exclusions
(2)
Subsection (1) is overridden by the exclusions for residential land in section CB 15, for business premises in section CB 18, for farm land in section CB 19, and for investment land in section CB 21.
Relationship with section DB 20
(3)
Section DB 20 (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: 1994 No 164 s CD 1(2)(g)
Section CB 11(2) heading: substituted (with effect from 1 April 2005), on 19 December 2007, by section 7(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CB 11(2): substituted (with effect from 1 April 2005), on 19 December 2007, by section 7(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CB 12 Disposal: amount from land affected by change and not already in income
Income
(1)
An amount that a person derives from disposing of land is income of the person if—
(a)
the amount is not income under any of sections CB 5 to CB 10; 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 Management Act 1991:
(h)
the likelihood of a decision being made:
(i)
the removal of a condition, covenant, designation, heritage order, obligation, prohibition, or restriction under the Resource Management Act 1991:
(j)
the likelihood of the removal of a condition, covenant, designation, heritage order, obligation, prohibition, or restriction:
(k)
an occurrence of a similar nature to any of the occurrences described in any of paragraphs (a) to (j):
(l)
the likelihood of an occurrence of a similar nature to any of the occurrences described in any of paragraphs (a) to (j).
Exclusions
(3)
Subsection (1) is overridden by the exclusions for residential property in section CB 16 and for farm land in section CB 20.
Defined in this Act: amount, dispose, income, land, year
Compare: 1994 No 164 s CD 1(2)(e)
Subsection (2)(a) to (k) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
CB 13 Transactions between associated persons
Income
(1)
An amount that a person (transferee) derives from disposing of land is income of the transferee under whichever is applicable of sections CB 5 to CB 12 if—
(a)
the land has been transferred to the transferee from another person (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 5 to CB 12 if the transferor had retained and disposed of the land.
Date on which some transferees acquire land
(2)
For the purposes of sections CB 6 to CB 10 and CB 12, 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: 1994 No 164 ss CD 1(11), GD 9(1)
Exclusions for residential land
CB 14 Residential exclusion from sections CB 5 to CB 9
Exclusion
(1)
Sections CB 5 to CB 9 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 applies to land related to the land that has the dwellinghouse on it if the total area of the related land is—
(a)
4,500 square metres or less; or
(b)
more than 4,500 square metres, if the larger area is required for the reasonable occupation and enjoyment of the dwellinghouse.
Who exclusion does not apply to
(3)
The exclusion does not apply to a person who has engaged in a regular pattern of acquiring and disposing, or erecting and disposing, of dwellinghouses.
Defined in this Act: dispose, land, trustee
Compare: 1994 No 164 s CD 1(3)(b)
CB 15 Residential exclusion from sections CB 10 and CB 11
Exclusion: developing or dividing land for residential use
(1)
Sections CB 10 and CB 11 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 purposes of, the residing on the land of the person or any member of their family living with them.
Exclusion: dividing residential land
(2)
Sections CB 10 and CB 11 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 divided; and
(ii)
was occupied by the person mainly as residential land for themselves and a member of their family living with them.
Defined in this Act: land
Compare: 1994 No 164 s CD 1(2)(f)(iv), (6)
Section CB 15(1): amended (with effect from 1 April 2005), on 19 December 2007, by section 8 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CB 16 Residential exclusion from section CB 12
Exclusion
(1)
Section CB 12 does not apply if—
(a)
the person acquired the land and used it or intended to use it for residential purposes; and
(b)
they disposed of the land to another person who acquired it for residential purposes.
Purpose of acquisition for purposes of subsection (1)(b)
(2)
For the purposes of subsection (1)(b), the purpose of the acquisition by the other person is ascertained from the circumstances of the disposal and other relevant matters.
Meaning of residential purposes
(3)
In this section, residential purposes —
(a)
means a purpose that the person has of using the land or intending to use the land mainly as a residence for themselves and members of their family living with them; and
(b)
includes the purpose of erecting a dwellinghouse on the land to be occupied as such a residence.
Defined in this Act: dispose, land, residential purposes
Compare: 1994 No 164 s CD 1(4)(a)(ii), (b)(ii)
Exclusions for business premises
CB 17 Business exclusion from sections CB 5 to CB 9
Exclusion
(1)
Sections CB 5 to CB 9 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 businesses.
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: 1994 No 164 s CD 1(3)(a)
CB 18 Business exclusion from sections CB 10 and CB 11
Sections CB 10 and CB 11 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 purposes of, the carrying on of a business by the person on the land; and
(c)
the business does not consist of the undertaking or scheme.
Defined in this Act: business, land
Compare: 1994 No 164 s CD 1(2)(f)(iii)
Section CB 18 heading: amended (with effect from 1 April 2005), on 19 December 2007, by section 9(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CB 18: amended (with effect from 1 April 2005), on 19 December 2007, by section 9(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Exclusions for farm land
CB 19 Farm land exclusion from sections CB 10 and CB 11
Exclusion
(1)
Sections CB 10 and CB 11 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 occupied or used by the person, their spouse, civil union partner or de facto partner, or both of them, mainly for the purposes of a farming or agricultural business carried on by either or both of them; and
(c)
the area and nature of the land disposed of mean that it is then capable of being worked as an economic unit as a farming or agricultural business; and
(d)
the land was disposed of mainly for the purpose of using it in a farming or agricultural business.
Circumstances for purposes of subsection (1)(d)
(2)
The circumstances of the disposal of the land are relevant to the decision on whether the land was disposed of mainly for the purpose of using it in a farming or agricultural business. The circumstances include—
(a)
the consideration for the disposal of the land:
(b)
current prices paid for land in that area:
(c)
the terms of the disposal:
(d)
a zoning or other classification relating to the land:
(e)
the proximity of the land to any other land being used or developed for uses other than farming or agricultural uses.
Defined in this Act: business, dispose, land
Compare: 1994 No 164 s CD 1(7)
Subsection (1)(b) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (1)(b) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (2)(a) to (d) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CB 20 Farm land exclusion from section CB 12
Exclusion
(1)
Section CB 12 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.
Purposes of acquisition for purposes of subsection (1)(b)
(2)
For the purposes of subsection (1)(b), person B’s purposes in acquiring the land are ascertained from circumstances of the disposal arising after person A acquired the land and other relevant matters, not including the factors described in section CB 12(1).
Defined in this Act: business, dispose, land
Compare: 1994 No 164 s CD 1(4)(a)(i), (b)(i), (c)
Subsection (1)(a) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
in both places it appears.
Subsection (1)(a) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
in both places it appears.
Exclusion for investment land
CB 21 Investment exclusion from sections CB 10 and CB 11
Sections CB 10 and CB 11 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 purposes of, the person’s deriving from the land income of the kind described in section CC 1 (Land).
Defined in this Act: income, land
Compare: 1994 No 164 s CD 1(2)(f)(v)
Section CB 21 heading: amended (with effect from 1 April 2005), on 19 December 2007, by section 10(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CB 21: amended (with effect from 1 April 2005), on 19 December 2007, by section 10(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Timber
CB 22 Disposal of timber or right to take timber
Income
(1)
An amount is income of a person if they derive it from—
(a)
disposing of timber; or
(b)
disposing of a right to take timber.
Whether or not person owns land
(2)
Subsection (1) applies whether or not the person owns the land on which the timber is situated.
Defined in this Act: amount, dispose, income, own, right to take timber
Compare: 1994 No 164 s CJ 1(1)
CB 23 Disposal of land with standing timber
When this section applies
(1)
This section applies when a person disposes of land with standing timber on it.
Exclusions
(2)
This section does not apply when the standing timber is of 1 of the following kinds:
(a)
trees that are ornamental or incidental, as evidenced by a certificate given under section 44C 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 Transfer Act 1952; or
(c)
trees subject to a right to take a benefit (in the form of a profit à prendre) granted before 1 January 1984.
Income
(3)
The amount that the person derives from disposing of the standing timber is income of the person.
Defined in this Act: amount, dispose, income, standing timber
Compare: 1994 No 164 s CJ 1(2)(a)-(d), (e)(i)
Farming, forestry, or fishing
CB 24 Income equalisation schemes
Income derived by a person, as timed and quantified under any of the following provisions, is income of the person:
(a)
sections EH 11, EH 14, EH 16, EH 18, EH 20 to EH 22, EH 24, and EH 26 (which relate to the main income equalisation scheme):
(b)
sections EH 47, EH 49, EH 51 to EH 53, EH 55, and EH 57 (which relate to the adverse event income equalisation scheme):
(c)
sections EH 74, EH 76, and EH 78 (which relate to the thinning operations income equalisation scheme).
Defined in this Act: adverse event income equalisation scheme, income, main income equalisation scheme, person, thinning operations income equalisation scheme
Paragraphs (a) and (b) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
Environmental restoration
This heading was inserted, as from 21 June 2005, by section 5 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79).
CB 24B Environmental restoration accounts
Income from refund
(1)
A person who receives a refund for a tax year under section EK 12 (Refund on request) derives for the person’s corresponding income year an amount of income calculated using the formula—
Income from transfer from environmental restoration account
(2)
If there is a transfer from a person’s environmental restoration account under section EK 15 (Transfer on request), EK 16 (Transfer on death, bankruptcy, or liquidation), or EK 19 (Environmental restoration account of amalgamating company), the person derives for the corresponding income year an amount of income calculated using the formula—
Definitions of items in formulas
(3)
The items in the formulas are defined in subsections (4) to (6).
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 stated in schedule 1; 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 transferred.
Income arising from renewal of resource consent
(7)
A person who incurs expenditure of a type listed in schedule 6B, part A, paragraphs 2 to 5 (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant) and not in schedule 6B, part C derives income under subsection (8) if—
(a)
the deduction under section DB 37 (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.
Amount of income
(8)
The person derives for the income year in which the period of the resource consent is extended, or the new resource consent is granted, an amount of income equal to the greater of zero and the difference between—
(a)
the total deduction under section DB 37 (Avoiding, remedying, or mitigating effects of discharge of contaminant) for the person for the period from the grant of the resource consent to the beginning of the income year:
(b)
the total deduction for the expenditure that the person would have had under section DB 37 for the period referred to in paragraph (a), if the period of the resource consent at the time of the grant had been 35 years.
Defined in this Act: corresponding income year, environmental restoration account, income, income tax, taxable income, tax year.
Section CB 24B was inserted, as from 1 October 2005, by section 5 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
Minerals
CB 25 Disposal of minerals
Income
(1)
An amount that a person derives from disposing of minerals taken from land is income of the person.
Whether or not person owns land
(2)
Subsection (1) applies whether or not the person owns the land from which the minerals are taken.
Defined in this Act: amount, dispose, income, mineral, own
Compare: 1994 No 164 s CJ 1(1)
Intellectual property
CB 26 Sale of patent applications or patent rights
If a person derives an amount from the sale of a patent application with a complete specification or from the sale of patent rights, the amount is income of the person.
Defined in this Act: amount, income, patent rights.
Section CB 26 was substituted, as from 1 October 2005, by section 6(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application to patent applications lodged for the first time after 21 June 2005.
Transfer of business
CB 27 Sale of business: transferred employment income obligations
When this section applies
(1)
This section applies when section DC 9 (Sale of business: transferred employment income obligations) applies and the reduction in the consideration is more than the amount the buyer actually pays for the transferred obligation.
Income
(2)
The excess is income of the buyer.
Timing of income
(3)
The income is allocated to the income year in which the reduction of the transferred provision is required to be recognised by the buyer under generally accepted accounting practice.
Defined in this Act: amount, generally accepted accounting practice, income, income year
Compare: 1994 No 164 s CD 3A
Stolen property
CB 28 Property obtained by theft
Income
(1)
If a person obtains possession or control of property without claim of right, an amount equal to the market value of the property is income of the person.
Timing of income
(2)
The income is allocated to the income year in which the person obtains possession or control of the property.
Whether or not constructive trust
(3)
Subsection (1) applies whether or not the person holds the property as a trustee under a constructive trust.
Defined in this Act: amount, claim of right, income, income year, possession, property, trustee
Compare: 1994 No 164 ss CD 6(1), (2), EN 5(1), (2)
Emissions trading scheme
Heading: added, on 26 September 2008, by section 58 of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).
CB 29 Disposal of ETS units
When this section applies
(1)
This section applies when a person disposes of an ETS unit.
Income
(2)
The amount that a person derives on disposal by the person of an ETS unit is income.
Surrender of unit: generally zero income
(3)
If the person disposes of the unit by surrender under the Climate Change Response Act 2002, the person is treated as deriving no income, unless subsection (4) applies.
Surrender of unit: pre-1990 forest land deforestation
(4)
Despite subsection (3), subsection (5) applies if—
(a)
the person surrenders the ETS unit in relation to the deforestation of pre-1990 forest land; and
(b)
at the time of the surrender, the person would not derive income, other than exempt income or excluded income, from a disposal of the pre-1990 forest land without timber; and
(c)
the ETS unit is not a post-1989 forest land unit.
Surrendered unit treated as sold for cost
(5)
If subsection (4) applies, the surrendered unit is treated as having been sold by the person, at the time of its surrender, to an unrelated person for an amount equal to its cost.
Converted unit treated as sold
(6)
If a person converts a New Zealand unit into a Kyoto unit under the Climate Change Response Act 2002, the person is treated as having sold the converted unit for an amount equal to its cost, if any.
Exempt income: pre-1990 forest land unit
(7)
Section CW 3B (Pre-1990 forest land units: emissions trading scheme) applies to the disposal to another person of a pre-1990 forest land unit.
Disposal at below market value
(8)
Section GD 16 (Disposals of ETS units at below market value) may apply to treat a disposal (other than a surrender) as being for market value.
Defined in this Act: amount, convert, ETS unit, excluded income, exempt income, forest land unit, income, Kyoto unit, New Zealand unit, pre-1990 forest land unit, post-1989 forest land unit, pre-1990 forest land, surrender
Section CB 29: added, on 26 September 2008, by section 58 of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).
Subpart CC—Income from holding property (excluding equity)
Contents
Land use
CC 1 Land
Income
(1)
An amount described in subsection (2) is income of the owner of land if they derive the amount from—
(a)
a lease, licence, or easement affecting the land; or
(b)
the grant of a right to take the profits of the land.
Amounts
(2)
The amounts are—
(a)
rent:
(b)
a fine:
(c)
a premium:
(d)
a payment for the goodwill of a business:
(e)
a payment for the benefit of a statutory licence:
(f)
a payment for the benefit of a statutory privilege; or
(g)
other revenues.
Relationship with section GD 10
(3)
The treatment of leases of property to related parties for less than an adequate rent is dealt with in section GD 10 (Leases for inadequate rent).
Defined in this Act: amount, business, income, lease, own
Compare: 1994 No 164 s CE 1(1)(e)
Subsection (2)(a) to (e) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
CC 2 Non-compliance with covenant for repair
When this section applies
(1)
This section applies when a person who is a lessor of land derives an amount for non-compliance by the lessee with an obligation under a lease of the land—
(a)
to maintain the land; or
(b)
to make repairs to improvements on the land.
Income
(2)
The amount is income of the lessor.
Timing of income
(3)
The income is allocated to the income year in which the lessor receives the amount.
Relationship with sections EI 4 and EI 5
(4)
Subsection (3) is overridden by sections EI 4 (Amount paid to lessor for non-compliance with covenant for repair) and EI 5 (Amount paid for non-compliance: when lessor ceases to own land).
Defined in this Act: amount, income, income year, lease, repairs
Compare: 1994 No 164 s EN 1(1), (2)
Financial instruments
CC 3 Financial arrangements
Income: party to financial arrangement
(1)
If a person who is a party to a financial arrangement is treated as deriving an amount of income under the financial arrangement under subpart EW (Financial arrangements rules), the amount is income of the person.
Income: trustee
(2)
Income derived by a trustee in the circumstances described in section EW 51 (Income when debt forgiven to trustee) is income of the trustee.
Defined in this Act: amount, financial arrangement, income, trustee
Compare: 1994 No 164 s CE 1(1)(c)
CC 4 Payments of interest
Income
(1)
Interest derived by a person is income of the person.
Apportionment
(2)
Interest due but unpaid on the date on which a person disposes of a security is apportioned between the person disposing of the security and the person acquiring it.
Defined in this Act: income, interest, pay
Compare: 1994 No 164 s CE 1(1)(a)
CC 5 Annuities
Income
(1)
An annuity derived by a person is income of the person.
Apportionment
(2)
Income under an annuity due but unpaid on the date on which a person disposes of the annuity is apportioned between the person disposing of the annuity and the person acquiring it.
Relationship with sections CW 4 and CW 24
(3)
This section is overridden by sections CW 4 (Annuities under life insurance policies) and CW 24 (Annuities from Crown Bank Accounts).
Defined in this Act: income
Compare: 1994 No 164 s CE 1(1)(a)
CC 6 Prizes received under Building Societies Act 1965
Income
(1)
A prize received by a person under section 31A of the Building Societies Act 1965 is income of the person, whether they take it as cash or as an advance.
Timing of income
(2)
The income is allocated as follows:
(a)
a cash prize is allocated to the day on which the bonus ballot giving rise to the prize is held; and
(b)
an advance is allocated to the day on which the advance is made or, if the advance is made in a series of advances, to the first day on which an advance is made.
Defined in this Act: income
Compare: 1994 No 164 s CE 1(2)(d)
CC 7 Consideration other than in money
When this section applies
(1)
This section applies when—
(a)
a lender provides money to a borrower for use in a business that the borrower carries on in New Zealand; and
(b)
the borrower provides to the lender, as some or all of the consideration, a tangible or intangible benefit that—
(i)
is not interest; and
(ii)
may or may not be relief from an obligation; and
(iii)
may or may not be convertible into money; and
(c)
the borrowing is a commercial transaction under which the borrower would have been liable to pay interest at the current commercial rate, given the nature and term of the loan, if the borrower had not provided the benefit (whether or not the contract between the borrower and the lender provides for the payment of interest if the benefit is not provided).
Income
(2)
The amount described in subsection (3) is income of the lender.
Amount of income
(3)
The amount is the interest that the borrower would have been liable to pay if the lender had lent the money to the borrower in consideration of the payment of interest at the current commercial rate, given the nature and term of the loan, reduced by the amount of any interest that the borrower pays.
Defined in this Act: amount, business, income, interest, New Zealand, pay, payment
Compare: 1994 No 164 s CE 1(1)(b), (2)(a)-(c)
CC 8 Use of money interest payable by Commissioner
Income
(1)
Interest payable by the Commissioner to a person under Part 7 of the Tax Administration Act 1994 is income of the person.
Timing of income
(2)
Interest to which this section applies is allocated under section EF 4 (Use of money interest payable by Commissioner).
Relationship with financial arrangements rules
(3)
Interest to which this section applies is disregarded for the purposes of the financial arrangements rules.
Defined in this Act: Commissioner, financial arrangements rules, income, interest, pay
Compare: 1994 No 164 s ED 5
CC 8B Certain commercial bills: non-resident holders
When this section applies
(1)
This section applies in relation to a commercial bill held by a non-resident when—
(a)
neither the financial arrangements rules nor the old financial arrangements rules apply to the calculation and allocation of income and expenditure in relation to the commercial bill because of the application of section EW 9(2) to (4) or EZ 45(e) (which relate to the application of the rules); and
(b)
the non-resident holder—
(i)
disposes of the commercial bill other than by redemption; or
(ii)
redeems a commercial bill whose issuer is an associated person of the non-resident.
Income: disposal
(2)
The value of the commercial bill on the day the non-resident holder disposes of it is income of the person.
Income: redemption
(3)
The amount that the non-resident holder receives on redemption is income of the person.
Defined in this Act: amount , associated person , commercial bill, , financial arrangements rules , income , non-resident , old financial arrangements rules
Section CC 8B: inserted (with effect on 1 April 2005), on 6 October 2009, by section 735(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Royalties
CC 9 Royalties
Income
(1)
A royalty derived by a person is income of the person.
Meaning of royalty
(2)
Royalty includes a payment of any kind derived as consideration for—
(a)
the use of, or right to use, a copyright, patent, plant variety rights, trademark, design or model, plan, secret formula or process, or other similar property or right:
(b)
the use of, or right to use, a mine or quarry:
(c)
the extraction, removal, or other exploitation of standing timber or a natural resource:
(d)
the right to extract, remove, or otherwise exploit standing timber or a natural resource:
(e)
the use of, or right to use, a film, a videotape, or a tape in connection with radio broadcasting:
(f)
the supply of scientific, technical, industrial, or commercial knowledge or information:
(g)
the total or partial forbearance of the use of, or the grant of a right to use, property or a right referred to in any of paragraphs (a) to (e):
(h)
the supply of assistance that enables the application or use of anything in any of paragraphs (a) to (f):
(i)
the total or partial forbearance of the supply of knowledge or information or assistance referred to in paragraph (f) or (h).
Relevance of description of payment
(3)
For the purposes of subsection (2), none of the following is relevant:
(a)
how the payment is described or computed:
(b)
whether the payment is periodical or otherwise:
(c)
whether the payment is an instalment of the purchase price of real property:
(d)
whether the payment is an instalment of the purchase price of personal property.
Defined in this Act: income, royalty, standing timber
Compare: 1994 No 164 ss CD 2, OB 1royalty
Subsection (2)(a) was amended, as from 1 October 2005, by section 7 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “patent, plant variety rights,”
for the expression “patent,”
with application as from the 2005–06 income year.
Subsections (2)(a) to (h) and (3)(a) to (c) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
CC 10 Films
When this section applies
(1)
This section applies when a person has a right or interest of any of the kinds described in subsection (2) in or to—
(a)
a film; or
(b)
a print of the film; or
(c)
publicity material for the film; or
(d)
any other tangible asset relating to the film.
Right or interest
(2)
The right or interest is a right or interest, including a future or contingent right or interest, of any of the following kinds:
(a)
copyright in the film:
(b)
a licence relating to the copyright:
(c)
an equitable right in the copyright:
(d)
an equitable right in a licence relating to the copyright:
(e)
any other right existing in or attaching to the film:
(f)
a right to income, or a share of income, from the rental, sale, use, or other exploitation of the film.
Income
(3)
The following amounts are income of the person:
(a)
an amount received or receivable by the person for—
(i)
the use of, or the right to use, the film or a right or interest in a right in the film:
(ii)
the granting of a licence for a future right in the film:
(iii)
the disposal of some or all of a right or interest in a right in the film:
(iv)
the assignment of a right or an interest in a right:
(v)
the assignment of a right to derive income from the use of a right or interest; and
(b)
an amount derived by the person from the rental, sale, use, or other exploitation of the film.
Relationship with section FC 21
(4)
This section is overridden by section FC 21 (Amounts derived by non-residents from renting films).
Defined in this Act: amount, film, income
Compare: 1994 No 164 s CJ 2
Subsection (2)(a) to (e) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
Subsection (3)(a)(i) to (iv) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
Subpart CD—Income from equity
Contents
Income
CD 1 Dividend
A dividend derived by a person is income of the person.
Defined in this Act: dividend, income
Compare: 1994 No 164 ss CE 1(1)(a), CF 1
The heading to section CD 1 was substituted, as from 1 October 2006, by section 5 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
CD 1B Distribution excluded from being dividend
A distribution, derived by a member of a co-operative company, that is excluded by section CD 24B from being a dividend is income of the member.
Defined in this Act: co-operative company, dividend, income
Section CD 1B was inserted, as from 3 April 2006, by section 6(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
What is a dividend?
CD 2 Meaning of dividend
Sections CD 3 to CD 13 define what is a dividend.
Defined in this Act: dividend
CD 3 Transfers of value generally
Transfers of value from company
(1)
A transfer of value from a company to a person is a dividend if—
(a)
the cause of the transfer is a shareholding in the company, as described in section CD 5; and
(b)
none of the exclusions in sections CD 14 to CD 26 applies to the transfer.
Calculation rules
(2)
Sections CD 27 to CD 31 apply for the purposes of calculating the amount of the dividend.
Defined in this Act: company, dividend, transfer of value
Compare: 1994 No 164 s CF 2(1)(a)-(e), (g)-(l), (1A), (3), (7), (10)
CD 4 What is a transfer of value?
General test
(1)
A transfer of value from a company to a person occurs when—
(a)
the company provides money or money’s worth to the person; and
(b)
if the person provides any money or money’s worth to the company under the same arrangement, the market value of what the company provides is more than the market value of what the person provides.
Release of debt
(2)
A company (the creditor) provides money’s worth to a person (the debtor) if the debtor is released from an obligation to pay money to the creditor, either by agreement or by operation of law, except to the extent to which—
(a)
the obligation the debtor is released from is an amount of debt to which section EW 46B(3) (Consideration when debt forgiven within economic group) applies; and
(b)
at the time the debtor is released, the debtor is a company that is a member of the same wholly-owned group as the creditor, and the debtor is described in section EW 46B(1)(a) or (b).
When shares are cancelled
(2B)
The market value of any transfer from the shareholder to the company on the cancellation of a share of the shareholder’s rights as a shareholder is zero.
Provision of services for less than market value
(3)
Despite subsection (1), a transfer of value does not occur to the extent to which the money’s worth provided by the company is only the provision of services.
Limit to subsection (3)
(4)
Subsection (3) does not apply to the provision of services by a company that is a close company, if the provision is the benefit of expenditure of the company.
Defined in this Act: arrangement, close company, company, market value, pay, services, share, shareholder, transfer of value, wholly-owned group of companies
Compare: 1994 No 164 s CF 2(1)(a)-(e), (g)-(l), (1A), (3), (10)
Section CD 4(2): replaced (with effect on 1 April 2006), on 30 March 2017, by section 385(1) (and see section 385(3)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CD 4(2B) heading: inserted (with effect on 1 April 2005), on 6 October 2009, by section 736(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 4(2B): inserted (with effect on 1 April 2005), on 6 October 2009, by section 736(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 4 list of defined terms market value: inserted (with effect on 1 April 2005), on 6 October 2009, by section 736(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 4 list of defined terms share: inserted (with effect on 1 April 2005), on 6 October 2009, by section 736(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 4 list of defined terms shareholder: inserted (with effect on 1 April 2005), on 6 October 2009, by section 736(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 4 list of defined terms wholly-owned group of companies: inserted (with effect on 1 April 2006), on 30 March 2017, by section 385(2) (and see section 385(3)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
CD 5 When is a transfer caused by a shareholding relationship?
General test
(1)
A transfer of value from a company to a person (recipient) is caused by a shareholding in the company if—
(a)
the recipient at any relevant time—
(i)
holds shares in the company; or
(ii)
is associated with a shareholder; or
(iii)
is the trustee of a trust, and a beneficiary of the trust is either a shareholder or the spouse, civil union partner or de facto partner of a shareholder; and
(b)
the company makes the transfer because of that shareholding of the relevant shareholder.
Indication that test met
(2)
One indication that a transfer is caused by a shareholding is if the terms of the arrangement that results in the transfer are different from the terms on which the company would enter into a similar arrangement if no shareholding were involved.
Deductible distributions of producer boards
(3)
Despite subsection (1), a transfer of value by a statutory producer board to a member is not caused by a shareholding if—
(a)
the transfer is a cash distribution; and
(b)
the distribution is a deduction under section HF 1 (Profits of mutual associations in respect of transactions with members) or any other provision of this Act; and
(c)
the board does not choose to treat the distribution as a dividend under section ME 30 (Statutory producer board may determine to attach imputation credit to certain distributions).
Deductible distributions of co-operative companies
(4)
Despite subsection (1), a transfer of value by a co-operative company to a shareholder is not caused by a shareholding if—
(a)
the transfer is a cash distribution; and
(b)
the distribution is a deduction under section HF 1 (Profits of mutual associations in respect of transactions with members) or any other provision of this Act; and
(c)
the company does not choose to treat the distribution as a dividend under section ME 35 (Co-operative company may make annual determination to attach imputation credit to certain distributions).
Defined in this Act: arrangement, associated person, company, co-operative company deduction, share, shareholder, statutory producer board, transfer of value, trustee
Compare: 1994 No 164 s CF 2(1)(g), (k), (l), (2), (7)
Subsection (1)(a)(iii) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (1)(a)(iii) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
CD 6 Bonus issues in lieu of dividend
Bonus issues in lieu
(1)
A bonus issue in lieu is a dividend.
Amount of dividend
(2)
The amount of the dividend is the money or money’s worth offered as an alternative, minus any resident withholding tax payable in relation to the dividend.
Defined in this Act: amount, bonus issue in lieu, dividend, pay, resident withholding tax
Compare: 1994 No 164 s CF 2(1)(f), (6)(a)
CD 7 Elections to make bonus issue into dividend
Treating bonus issues as dividends
(1)
A bonus issue that is not a bonus issue in lieu is a dividend if—
(a)
the bonus issue—
(i)
is issued fully paid from reserves of the company:
(ii)
if a dividend, would not be exempt income under section CW 10 (Dividend within New Zealand wholly-owned group) or CW 11 (Dividend of conduit tax relief holding company); and
(b)
the company chooses under this section to treat the bonus issue as a dividend.
Form of election
(2)
A company chooses to treat a bonus issue as a dividend by—
(a)
resolving, when it makes the bonus issue, that it is a dividend; and
(b)
resolving, when it makes the bonus issue, the amount to be treated as a dividend, which must be more than zero; and
(c)
giving notice to the Commissioner under section 63 of the Tax Administration Act 1994 of the election and the amount.
Amount of dividend
(3)
The amount of the dividend is the amount chosen by the company.
Defined in this Act: amount, bonus issue, bonus issue in lieu, Commissioner, company, dividend, notice
Compare: 1994 No 164 ss CF 2(1)(f), (6)(b), CF 8
Subsection (1) (excluding the heading) was substituted, as from 1 October 2005, by section 8(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application for an issue of shares made on or after 16 November 2004.
CD 7B Interests in money or property of foreign unit trust
Interest absolutely vested in unit holder
(1)
If a beneficial interest in money or property of a unit trust that is a foreign company vests absolutely in a unit holder, the money or property is a dividend for the unit holder.
Amount of dividend
(2)
The amount of the dividend is the value of the money or property.
Defined in this Act: dividend, foreign company, unit holder, unit trust
Section CD 7B was inserted, as from 1 October 2005, by section 168 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
CD 7C Bonus issue by foreign unit trust instead of money or property
Interest absolutely vested in unit holder
(1)
A bonus issue made to a unit holder by a unit trust that is a foreign company is a dividend for the unit holder if the issue is made under an arrangement or decision that the unit trust will make the bonus issue instead of causing a beneficial interest in money or property of the unit trust to vest absolutely in the unit holder.
Amount of dividend
(2)
The amount of the dividend is the value of the money or property in which a beneficial interest would have vested in the unit holder if the bonus issue had not been made.
Defined in this Act: bonus issue, dividend, foreign company, unit holder, unit trust
Section CD 7C was inserted, as from 1 October 2005, by section 168 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
CD 8 Notional distributions of producer boards and co-operative companies
Notional distributions of producer boards
(1)
A notional distribution of a statutory producer board is a dividend if the board determines to attach an imputation credit to the notional distribution under section ME 30 (Statutory producer board may determine to attach imputation credit to certain distributions).
Calculation: section ME 33
(2)
The amount of the dividend is calculated under section ME 33 (Notional distribution deemed to be dividend).
Notional distributions of co-operative companies
(3)
A notional distribution of a co-operative company is a dividend if the company determines to attach an imputation credit to the notional distribution under section ME 35 (Co-operative company may make annual determination to attach imputation credit to certain distributions).
Calculation: section ME 38
(4)
The amount of the dividend is calculated under section ME 38 (Notional distribution deemed to be dividend or taxable Maori authority distribution).
Corresponding payments not dividends
(5)
Section CD 24 means that a payment that corresponds to a notional distribution may not be a dividend.
Defined in this Act: amount, co-operative company, dividend, imputation credit, statutory producer board
Compare: 1994 No 164 s CF 2(1)(l)
CD 9 Tax credits linked to dividends
Imputation and dividend withholding payment credits
(1)
The amount of a dividend is increased by—
(a)
an imputation credit attached to the dividend:
(b)
a dividend withholding payment credit attached to the dividend.
Relationship with section CD 10
(2)
Subsection (1) is overridden by sections CD 10 and CD 10B.
When subsection (1) does not apply
(3)
Subsection (1) does not apply in—
(a)
Part L (Credits), except for subpart LE (Non-resident investors); or
(b)
Part M (Tax payments); or
(c)
Part N (Withholding taxes and taxes on income of others).
Defined in this Act: amount, dividend, dividend withholding payment credit, imputation credit, tax
Compare: 1994 No 164 s CF 6(1)
Subsection (1)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
Subsection (2) was amended, as from 1 July 2006, by section 7 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “sections CD 10 and CD 10B”
for “section CD 10”
.
CD 10 Certain dividends not increased by tax credits
When this section applies
(1)
This section applies when a unit trust manager, in the ordinary course of their management activities for a unit trust,—
(a)
acquires units from unit holders under the terms on which the units were offered to potential unit holders; and
(b)
derives a dividend from the redemption or other cancellation of units in the unit trust.
Credit not included
(2)
Relationship with section FC 3
(3)
To the extent to which subsection (2) applies, section FC 3 (Share dealing) does not apply.
Some definitions
(4)
In this section,—
imputation credit includes a dividend withholding payment credit
unit trust manager includes—
(a)
a person nominated by the unit trust manager; or
(b)
a trustee or a manager of a group investment fund that derives category A income; or
(c)
a person nominated by the trustee or the manager of the group investment fund.
Defined in this Act: amount, cancellation, dividend, dividend withholding payment credit, imputation credit, pay, tax, unit trust, unit trust manager
Compare: 1994 No 164 s CF 7A
CD 10B Credit transfer notice
When this section applies
(1)
This section applies if a share user under a share-lending arrangement—
(a)
derives a dividend for the original share, with an imputation credit attached; and
(b)
issues a credit transfer notice for the dividend.
Credit not included
(2)
The dividend derived by the share user does not include the amount of the imputation credit.
Income
(3)
The amount of the imputation credit is income derived by the share supplier when the credit transfer notice is issued.
Definition
(4)
In this section, imputation credit includes a dividend with-holding payment credit.
Defined in this Act: amount, credit transfer notice, dividend, dividend withholding payment credit, imputation credit, original share, share-lending arrangement, share supplier, share user
Section CD 10B was inserted, as from 1 July 2006, by section 8(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
CD 10C Dividend reduced if foreign tax paid on company’s income
When this section applies
(1)
This section applies if a person—
(a)
derives a dividend from a company that is a foreign company; and
(b)
has a liability under the laws of a country or territory outside New Zealand for income tax on income of the company corresponding to the liability that the person would have under the laws of New Zealand for income tax on income of the company if the company were a partnership in which the person were a partner; and
(c)
pays the income tax; and
(d)
provides to the Commissioner upon request, within the time allowed by the Commissioner, sufficient information to satisfy the Commissioner as to the amount of income tax paid.
Amount of dividend reduced
(2)
The amount of the dividend is reduced by the greater of zero and the amount calculated using the formula—
total tax paid – earlier reductions.
Definition of items in formula
(3)
In the formula,—
(a)
total tax paid is the total amount of income tax on income of the company that the person has paid in the country by the time that the person derives the dividend:
(b)
earlier reductions is the total amount of reductions under this section that, by the time that the person derives the dividend, have affected other dividends derived by the person from the company.
Defined in this Act: branch equivalent method, Commissioner, company, controlled foreign company, dividend, FIF income or loss, foreign company, foreign investment fund, income, income tax
Section CD 10C was inserted, as from 1 April 2006, by section 8(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
CD 11 Foreign tax credits and refunds linked to dividends
Foreign tax credits
(1)
If a double tax agreement gives a person a tax credit in a foreign country when they derive a dividend from that country, the amount of the dividend is increased by the tax credit.
Foreign tax refunds
(2)
When a person who has derived a dividend from outside New Zealand also derives a refund of income tax of a foreign country, the refund is treated as a dividend if—
(a)
the company paying the dividend was entitled to deduct the tax from the dividend; and
(b)
the person was not personally liable to pay the tax.
Defined in this Act: amount, company, dividend, double tax agreement, income tax, New Zealand, pay, tax
Compare: 1994 No 164 ss CF 6(2), CF 7
CD 12 Benefits of shareholder-employees or directors
Unclassified fringe benefits
(1)
A non-cash benefit provided by a company to an employee is a dividend if—
(a)
the benefit is an unclassified benefit; and
(b)
the employee is a shareholder in the company; and
(c)
the company chooses, under section CX 16(2) (Benefits provided to employees who are shareholders or investors), to treat the benefit as a dividend.
Non-executive directors’ non-cash benefits
(2)
A non-cash benefit provided by a company to a non-executive director of the company is a dividend if the director is a shareholder in the company, even if the benefit is provided solely because the director is a non-executive director.
Other shareholder-employee benefits
(3)
In any other case of a non-cash benefit provided by a company to a person who is both an employee and a shareholder, the benefit is not a dividend if—
(a)
the application of section CX 16(2) (Benefits provided to employees who are shareholders or investors) means it is a fringe benefit; and
(b)
section CD 23 accordingly excludes it from being a dividend.
Meaning of non-executive director
(4)
In this section, non-executive director means a person whose only services to the company as an employee are the formal statutory obligations.
Defined in this Act: company, director, dividend, employee, fringe benefit, non-executive director, shareholder, unclassified benefit
Compare: 1994 No 164 ss CF 2(1A), CI 2A(1), (2), OB 1non-executive director shareholder
CD 13 Attributed repatriations from controlled foreign companies
Attributed repatriations
(1)
An amount of attributed repatriation of a person who has an income interest in a CFC is a dividend.
Calculation: sections CD 34 to CD 41
(2)
The amount of the dividend is calculated under sections CD 34 to CD 41.
Timing of income
(3)
The dividend is treated as having been paid by the CFC to the person, and as having been derived by the person,—
(a)
6 months after the end of the accounting period of the CFC for which the attributed repatriation is calculated, if the person is a company for which the dividend is exempt income under section CW 9 (Dividend derived by company from overseas); and
(b)
at the end of the accounting period, in any other case.
New Zealand residents
(4)
The dividend of a person who has ceased to be a New Zealand resident is treated as being derived while the person is a New Zealand resident.
Defined in this Act: accounting period, amount, attributed repatriation, CFC, company, dividend, exempt income, income, interest, New Zealand resident, pay
Compare: 1994 No 164 ss CF 2(16), CG 8(13)
What is not a dividend?
CD 14 Returns of capital: off-market share cancellations
Application of this section
(1)
This section applies if a company pays an amount to a shareholder because of the off-market cancellation of a share in the company, other than on liquidation of the company.
Ordering rule
(2)
The amount is not a dividend to the extent to which it is less than or equal to the available subscribed capital per share calculated under the ordering rule, if—
(a)
1 of the bright line tests in subsection (3) is met; and
(b)
the company is not an unlisted trust that has chosen the slice rule for the share under subsection (4); and
(c)
the anti-avoidance rule in subsection (6) does not apply.
Bright line tests
(3)
The bright line tests referred to in subsection (2)(a) are as follows:
(a)
the cancellation is part of a pro rata cancellation that results in a fifteen percent capital reduction for the company:
(b)
the cancellation is part of a pro rata cancellation that results in a ten percent capital reduction for the company and the Commissioner has given a notice under subsection (8):
(c)
the cancellation is not part of a pro rata cancellation and results in the shareholder suffering a fifteen percent interest reduction:
(d)
the company is an unlisted trust and the cancellation is not part of a pro rata cancellation:
(e)
the share is a non-participating redeemable share.
Unlisted trusts choosing slice rule
(4)
If the company is an unlisted trust, it may issue a share on terms that the ordering rule does not apply and that instead the slice rule applies to the cancellation. If this happens, the amount paid is not a dividend to the extent to which it is less than or equal to the available subscribed capital per share calculated under the slice rule (but still subject to the antiavoidance rule in subsection (6)).
Calculation concessions for foreign unlisted widelyheld trusts
(5)
If a company is an unlisted widely-held trust not resident in New Zealand and a shareholder cannot obtain sufficient information to calculate the available subscribed capital per share under the ordering rule,—
(a)
the share is treated as if it were issued under subsection (4) on terms that the slice rule applies; and
(b)
the available subscribed capital under the slice rule is—
(i)
the amount paid for the issue of the share, if subparagraph (ii) does not apply; or
(ii)
the value of the money or property in which a beneficial interest would have vested in the share-holder had the share not been issued, if the share is a taxable bonus issue under paragraph (d) of the definition of the term.
Overriding anti-avoidance rule
(6)
Neither subsection (2) nor (4) excludes an amount paid by a company on cancellation of a share from being a dividend if any part of the payment is in lieu of the payment of a dividend.
Factors relevant in applying anti-avoidance rule
(7)
For the purposes of applying subsection (6), the following factors must be considered:
(a)
the nature and amount of dividends paid by the company before or after the cancellation; and
(b)
the issue of shares in the company after the cancellation; and
(c)
the expressed purpose or purposes of the cancellation; and
(d)
any other relevant factor.
Commissioner notifying view
(8)
If no part of a payment on cancellation of a share is in lieu of the payment of a dividend, the Commissioner may give notice to the company that subsection (6) does not apply to the cancellation.
Some definitions
(9)
In this section,—
counted associate means—
(a)
a person associated with the shareholder other than merely by virtue of being a relative; or
(b)
a spouse, civil union partner, de facto partner or minor child of the shareholder, or a trustee of a trust under which a spouse, civil union partner, de facto partner or minor child of the shareholder is a beneficiary
counted associate: paragraph (b) of this definition was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner”
for “spouse”
in both places it occurs.
counted associate: paragraph (b) of this definition was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, de facto partner”
for “spouse, civil union partner”
in both places it occurs.
fifteen percent capital reduction means the circumstance in which the total amount paid by the company on account of the cancellation (or on account of any other pro rata cancellation of participating shares in the company occurring at the same time) is at least 15% of the market value of all participating shares in the company at the time the company first gave notice to shareholders of the cancellation
fifteen percent interest reduction means the circumstance in which, immediately after and as a result of the cancellation (together with any other cancellation of participating shares in the company occurring at the same time),—
(a)
the total direct voting interests in the company of the shareholder and any counted associates is 85% or less of their total direct voting interests in the company immediately before the cancellation; and
(b)
if at the time of the cancellation a market value circumstance exists, the total direct market value interests in the company of the shareholder and any counted associates is 85% or less of their total direct market value interests immediately before the cancellation
non-participating redeemable share means a share that meets the following conditions
(a)
the share is issued, under the company’s constitution or establishing legislation, on terms that involve the share being required or allowed to be redeemed or repaid before the company is liquidated; and
(b)
the share is—
(i)
a redeemable share under section 68 of the Companies Act 1993 or an equivalent provision of foreign law; or
(ii)
issued under 1 of New Zealand’s Acts relating to co-operative companies; or
(iii)
subject to section FC 1 (Floating rate of interest on debentures) or FC 2 (Interest on debentures issued in substitution for shares) or section FC 2B(2) (Stapled debt securities); or
(iv)
a unit in a unit trust that is not a widely-held trust; and
(c)
the share is either a fixed rate share or a share for which the amount payable on cancellation is no more than the available subscribed capital per share calculated under the slice rule; and
(d)
the shareholder does not have shareholder decisionmaking rights in relation to the share except—
(i)
a protective right; or
(ii)
if the company is subject to 1 of New Zealand’sActs relating to co-operative companies
participating share means a share that is not a non-participating redeemable share
protective right means a shareholder decision-making right that—
(a)
arises only if the shareholder’s position may be altered to the shareholder’s detriment or if the company defaults on its obligations under the terms of the share; and
(b)
is granted to the shareholder only to assist the shareholder to prevent the alteration or to remedy the default; and
(c)
when the share is issued is not expected to arise
ten percent capital reduction means the circumstance in which the total amount paid by the company on account of the cancellation (or paid on account of any other pro rata cancellation of participating shares in the company occurring at the same time) is at least 10% of the market value of all participating shares in the company at the time the company first gave notice to shareholders of the cancellation
unlisted trust means a unit trust or group investment fund, the units or interests in which are not quoted on the official list of a recognised exchange.
Defined in this Act: amount , associated person , available subscribed capital , cancellation , Commissioner , company , co-operative company , counted associate , direct market value interest , direct voting interest , dividend f, ifteen percent capital reduction , fifteen percent interest reduction , fixed rate share , group investment fund , liquidation , market value circumstance , New Zealand , non-participating redeemable share , notice , off-market cancellation , ordering rule , participating share , pay , pro rata cancellation , protective right , recognised exchange , relative , resident in New Zealand , share , shareholder , shareholder decision-making rights , slice rule , ten percent capital reduction , trustee , unit trust , unlisted trust , unlisted widely-held trust , widely-held trust
Compare: 1994 No 164 s CF 3(1)(b), (2)(c), (14)
Subsection (3)(a) to (d) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for “; or”
.
Subsection (5) (excluding the heading) was substituted, as from 1 October 2005, by section 9 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
Section CD 14(9) non-participating redeemable share paragraph (b)(iii): amended (with effect on 25 February 2008), on 6 October 2009, by section 737 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
CD 15 Ordering rule and slice rule
Ordering rule
(1)
Under the ordering rule, the available subscribed capital per share is calculated for a share using the formula—
Definition of items in formula
(2)
In the formula,—
(a)
available subscribed capital of class is the available subscribed capital, of all shares of the same class as the share, at the relevant time for the calculation:
(b)
shares being cancelled of class is the number of shares of the same class as the share (including the share) being cancelled at the time.
Slice rule
(3)
Under the slice rule, the available subscribed capital per share is calculated for a share using the formula—
Definition of items in formula
(4)
In the formula,—
(a)
available subscribed capital of class is the available subscribed capital, of all shares of the same class as the share, at the relevant time for the calculation:
(b)
shares of class is the number of shares of the same class as the share (including the share) on issue at the time.
Amount when foreign company information inadequate
(5)
Despite subsections (2) to (4), the available subscribed capital per share calculated under the ordering rule is zero if—
(a)
the company is not resident in New Zealand; and
(b)
the relevant shareholder cannot obtain sufficient information to calculate the actual available subscribed capital per share using the relevant rule.
Defined in this Act: available subscribed capital, cancellation, foreign company, ordering rule, resident in New Zealand, share, shareholder, shares of the same class, slice rule
Compare: 1994 No 164 ss CF 3(2)(b), OB 1 available subscribed capital per share, available subscribed capital per share cancelled
CD 16 Returns of capital: on-market share cancellations
Companies acquiring own shares
(1)
An amount paid by a company in acquiring any of its shares in an on-market cancellation is not a dividend.
When excess amount relevant
(2)
Despite subsection (1), any excess of the amount paid over the available subscribed capital per share calculated under the ordering rule—
(a)
is treated as a dividend and not a return of capital when applying—
(i)
(ii)
(iii)
section GB 1(3) (Agreements purporting to alter incidence of tax to be void); and
(b)
gives rise to an imputation credit account debit under section ME 5(1)(c) and (2)(c) (Debits arising to imputation credit account).
Defined in this Act: amount, available subscribed capital, company, dividend, imputation credit account, on-market cancellation, ordering rule, pay, share
Compare: 1994 No 164 ss CF 3(1)(e), (f), OB 1available subscribed capital
Subsection (2)(a)(i) and (ii) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for “; and”
.
CD 17 Treasury stock acquisitions
Treasury stock generally
(1)
An amount paid by a company in acquiring any of its shares is not a dividend if—
(a)
the acquisition is treated as not resulting in the cancellation of the share, under section 67A(1) of the Companies Act 1993 or section 24 of the Co-operative Companies Act 1996 (each of which relates to treasury stock); and
(b)
the acquisition is not part of a pro rata cancellation or something that is in substance a pro rata cancellation.
Reversion to on-market cancellation treatment
(2)
Subsections (4) to (6) apply in the case of an acquisition of a share to which subsection (1) or section CF 3(1)(d) or (da) of the Income Tax Act 1994 applies if,—
(a)
before the first anniversary of the acquisition, the company cancels the share; or
(b)
at the first anniversary, the company has failed to transfer a share of the same class in an arm’s length transfer, except if the company is established under New Zealand co-operative company legislation; or
(c)
after the first anniversary, the company, which is established under New Zealand co-operative company legislation, cancels the share.
Requirement for arm’s length transfers
(3)
When subsection (2)(b) is applied,—
(a)
a transfer is arm’s length only if it is—
(i)
to a person not associated with the company; or
(ii)
in a transaction that occurs on a recognised exchange, through a broker or some other agent independent of the company, and that is not preceded by any arrangement between the transferee and the company for the transfer; and
(b)
each arm’s length transfer of a share is taken into account only in relation to a single share acquisition to which subsection (1) has applied.
Reduction of available subscribed capital
(4)
If subsection (2) applies, then, with effect from the cancellation or the first anniversary, depending on which first causes subsection (2) to apply, the available subscribed capital of the class of the share is reduced by the lesser of—
(a)
the amount paid to the shareholder on the acquisition; and
(b)
the available subscribed capital per share calculated under the ordering rule, and calculated in the case of the first anniversary as if the share and any other shares to which this subsection applies on that date were cancelled on that date.
Imputation credit account debit
(5)
If subsection (2) applies, then, with effect from the date of the acquisition by the company, section ME 5(1)(c) and (2)(c) (Debits arising to imputation credit account) apply as if the original acquisition were an on-market cancellation but item “a”
of the formula in section ME 5(1)(c) were equal to only the excess of the amount received by the shareholder over the reduction described in subsection (4).
Relief from imputation penalty tax
(6)
No imputation penalty tax is imposed under section 140B of the Tax Administration Act 1994 (nor any late payment penalty imposed under that Act in relation to the imputation penalty tax) if it would not have arisen had subsection (5) applied only with effect from the date of cancellation or first anniversary (depending on which first causes subsection (2) to apply).
Defined in this Act: agent, amount, arrangement, associated person, available subscribed capital, cancellation, company, co-operative company, dividend, imputation credit account, imputation penalty tax, New Zealand, on-market cancellation, ordering rule, pay, pro rata cancellation, recognised exchange, share, shareholder
Compare: 1994 No 164 s CF 3(1)(d), (da), (3), (3A)
Section CD 17(4): substituted (with effect on 1 April 2005), on 6 October 2009, by section 738(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
CD 18 Capital distributions on liquidation or emigration
Application of this section
(1)
This section applies if a shareholder—
(a)
is paid an amount in relation to a share on the liquidation of the company:
(b)
is treated under section FCB 2 (Emigrating company treated as paying distribution to shareholders) as being paid an amount in relation to a share in the company.
Return of subscribed capital or capital gains
(2)
The amount paid is a dividend only to the extent to which it is more than—
(a)
the available subscribed capital per share calculated under the ordering rule; and
(b)
the available capital distribution amount calculated under section CD 33.
Statutory producer board capital levies
(3)
If the company is a statutory producer board, the amount is not a dividend to the extent to which it is a return of a levy charged specifically for capital development.
Non-deductible capital
(4)
An amount that is not a dividend as a result of subsection (3) is nevertheless treated as a return of capital for the purposes of the capital limitation.
Defined in this Act: amount, available capital distribution amount, available subscribed capital, capital limitation, company, dividend, emigrating company, levy, liquidation, ordering rule, pay, share, shareholder, statutory producer board
Compare: 1994 No 164 s CF 3(1)(c), (i), (4)
The heading to section CD 18 was amended, as from 3 April 2006, by section 9(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “or emigration”
after “liquidation”
with application as from the income year corresponding to the 2005–06 tax year.
Subsection (1) (excluding the heading) was substituted, as from 3 April 2006, by section 9(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
The list of defined terms was amended, as from 3 April 2006, by section 9(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “emigrating company”
with application as from the income year corresponding to the 2005–06 tax year.
CD 19 Property made available intra-group
Application of this section
(1)
This section applies if—
(a)
a transfer of value is made by a company (first company) to another company (associated company); and
(b)
if this section did not exist, the transfer would be a dividend under section CD 5(1)(a)(ii) (because the associated company is associated with a shareholder in the first company) or under section CD 5(1)(a)(iii) (because the associated company is the trustee of a trust of which a shareholder in the first company, or a shareholder’s spouse, civil union partner or de facto partner, is a beneficiary).
Intra-group property arrangements worth $10,000 or less
(2)
The transfer of value is not a dividend if—
(a)
the transfer consists of making property available for less than market value; and
(b)
the transfer is not a loan; and
(c)
in the tax year of the first company in which the transfer occurs, the total amount of transfers of value by the first company to the associated company that would be dividends for the year if this section did not exist is $10,000 or less.
Downward transfers of value
(3)
The transfer of value is also not a dividend if—
(a)
either—
(i)
the first company has a voting interest in the associated company; or
(ii)
the first company is associated with a company (parent company) that has a voting interest in the associated company and that could have received the transfer of value without it being assessable income, non-resident withholding income, or a gain subject to dividend withholding payment for the parent company; and
(b)
the associated company does not have a voting interest in the first company; and
(c)
no person, other than the parent company, has both—
(i)
a voting interest or (if there is a market value circumstance in respect of either the first company or the associated company) a market value interest in the first company; and
(ii)
a voting interest, or (if there is a market value circumstance in respect of either the first company or the associated company) a market value interest in the associated company, of more than 10%.
Relationship with section FC 3
(4)
Subsection (3) does not apply to a transfer of value that is subject to section FC 3 (Share dealing).
Rules for identifying voting interests
(5)
For the purposes of subsection (3)(a) and (b),—
(a)
for the purposes of determining if a company has a voting interest in another company, the look-through rule in section OD 3(3)(d) (Voting interests) does not apply to treat the initial company’s voting interest as held by its shareholders or anyone else; and
(b)
a zero voting interest is not a voting interest.
Rules for identifying voting and market value interests
(6)
For the purposes of subsection (3)(c),—
(a)
for the purposes of determining the extent to which a person, other than the parent company, has a voting interest or market value interest in the first company or the associated company, the look-through rules in sections OD 3(3)(d) (Voting interests) and OD 4(3)(d) (Market value interests) do not apply to treat the person’s voting interest or market value interest as held by the person’s shareholders or anyone else unless the person treated as holder is the parent company; and
(b)
for the purposes of determining the extent to which a person, other than the parent company, has a voting interest or market value interest of more than 10% in the associated company, the look-through rules in sections OD 3(3)(d) (Voting interests) and OD 4(3)(d) (Market value interests) do not apply to treat a voting interest or market value interest of the first company or the parent company in the associated company as held by their respective shareholders or anyone else; and
(c)
a zero voting interest is not a voting interest and a zero market value interest is not a market value interest.
Defined in this Act: amount, assessable income, associated person, company, dividend, dividend withholding payment, loan, market value circumstance, market value interest, non-resident withholding income, shareholder, tax year, transfer of value, trustee, voting interest
Compare: 1994 No 164 s CF 2(13)-(14)
Subsection (1)(b) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (1)(b) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
CD 20 Transfers of certain excepted financial arrangements within wholly-owned groups
When section ED 2 (Transfers of certain excepted financial arrangements within wholly-owned groups) applies to a transfer of an excepted financial arrangement within a whollyowned group of companies, the transfer does not give rise to a dividend.
Defined in this Act: dividend, excepted financial arrangement, wholly-owned group of companies
Compare: 1994 No 164 s EE 14(4)
CD 21 Non-taxable bonus issues
A non-taxable bonus issue is not a dividend.
Defined in this Act: dividend, non-taxable bonus issue
Compare: 1994 No 164 s CF 3(1)(a)
CD 21BA Issues to shareholders of rights to subscribe for or sell back shares
Issue of rights to subscribe for shares
(1)
The issue by a company to a shareholder of a right to subscribe for a share, or to sell a share in the company to the company, is not a dividend.
Issue of shares under rights to subscribe for shares
(2)
The issue by a company of a share to a person for consideration less than the market value, immediately before the issue, of a share in the same class of shares, is not a dividend if—
(a)
the person subscribes for the share under a right (a subscription right) issued by the company to a shareholder holding shares before the issue of the right; and
(b)
the company does not, as part of the issue of the subscription right, give the person a right to dispose of the share to the company.
Premiums from issue of rights to subscribe for shares
(3)
A distribution by a company to a shareholder is not a dividend if—
(a)
the company issues to the shareholder a right (the shareholder right) to subscribe for, or dispose of to the company, a share in the company at a given price (the shareholder price); and
(b)
the shareholder fails or is ineligible to exercise the shareholder right; and
(c)
another person pays to the company an amount—
(i)
for the shareholder right:
(ii)
greater than the shareholder price, for the issue of a share under the shareholder right; and
(d)
the distribution is from the amount of the payment that does not increase the company’s available subscribed capital.
Defined in this Act: available subscribed capital, bonus issue in lieu, company, consideration, dividend, share, shareholder
Section CD 21BA: inserted (with effect on 1 April 2005, applying for the 2005–06 and later tax years), on 17 July 2013, by section 152(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
CD 21B Transfer by unit trust of legal interest after beneficial interest vests
Transfer of legal interest in money or property that is dividend
If money or property of a unit trust is a dividend under section CD 7B for a unit holder, a transfer to the unit holder of the legal interest in the money or property is not a dividend.
Defined in this Act: dividend, unit holder, unit trust
Section CD 21B was inserted, as from 1 October 2005, by section 169 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
CD 22 Flat-owning companies
Occupation rights
(1)
If a flat-owning company makes residential property available to a person, that is not a dividend.
Meaning of flat-owning company
(2)
In this section, flat-owning company means a company—
(a)
whose constitution provides that every registered shareholder is entitled to the use of a specific residential property in New Zealand owned by the company; and
(b)
whose only significant assets are residential properties available for use by specific shareholders and funds reserved for meeting the company’s costs.
Defined in this Act: company, dividend, flat-owning company, New Zealand, shareholder
Compare: 1994 No 164 s CF 2(1)(e), (21)
CD 23 Employee benefits
FBT rules
(1)
A fringe benefit subject to fringe benefit tax is not a dividend.
Board
(2)
An amount that is employment income under section CE 1(c) (Amounts derived in connection with employment) is not a dividend.
Defined in this Act: amount, dividend, employment income, FBT rules, fringe benefit, fringe benefit tax
Compare: 1994 No 164 s CF 3(1)(g), (h)
CD 24 Payments corresponding to notional distributions of producer boards and co-operative companies
Statutory producer board payments
(1)
An amount paid by a statutory producer board to a person in relation to a tax year is not a dividend if—
(a)
the person was a member of the board at some time during the tax year; and
(b)
unless the Commissioner allows otherwise, the amount is calculated on the basis of the member’s share of—
(i)
the total produce transactions of members with the board during the tax year; or
(ii)
the total levies payable by members to the board for the tax year; and
(c)
the amount corresponds to a notional distribution amount treated as a dividend under section CD 8(1).
Co-operative company payments
(2)
An amount paid by a co-operative company to a person in relation to a tax year is not a dividend if—
(a)
the person was a shareholder of the company at some time during the tax year; and
(b)
the amount is calculated on the basis of the shareholder’s share of the total produce transactions of shareholders with the company during the tax year; and
(c)
the amount corresponds to a notional distribution amount treated as a dividend under section CD 8(3).
Non-deductible capital
(3)
An amount that is not a dividend as a result of this section is nevertheless treated as a return of capital for the purposes of the capital limitation.
Defined in this Act: amount, capital limitation, Commissioner, co-operative company, dividend, levy, member, pay, produce transactions, producer board, shareholder, statutory producer board, tax year
Compare: 1994 No 164 s CF 3(1)(ia), (j), (4)
CD 24B Distribution to member of co-operative company based on member’s transactions
Election by co-operative company that distribution not be dividend
(1)
A co-operative company may choose that an amount of a distribution (trading distribution) to a member of the co-operative company is not a dividend if—
(a)
the trading distribution is made by the co-operative company, or by a company (subsidiary company) in which the co-operative company owns voting interests equal to 100%; and
(b)
the requirements of subsection (2) are met.
Further requirements for election
(2)
A co-operative company may make an election under subsection (1) if—
(a)
the co-operative company is resident in New Zealand for the period to which the trading distribution relates; and
(b)
the company making the distribution is resident in New Zealand for the period to which the trading distribution relates; and
(c)
the co-operative company believes on reasonable grounds that the member at the time of the distribution—
(i)
is resident in New Zealand:
(ii)
has a fixed establishment in New Zealand; and
(d)
the value of the trading distribution is determined by the value for the period of transactions between the member and the co-operative company or subsidiary company that satisfy subsection (3); and
(e)
the number of shares in the co-operative company held by the member determines the value of the transactions with the co-operative company or subsidiary company that the member has a right to enter.
Transactions must involve trading stock
(3)
A transaction must—
(a)
be the sale and purchase of trading stock of the vendor that is not intangible property; and
(b)
not be subject to section FB 3 (Disposal of trading stock) or FB 4(1) (Income derived from disposal of trading stock together with other assets of business).
Amount excluded from being dividend
(4)
The amount of a trading distribution that is excluded under subsection (1) from being a dividend for a member is the lesser of the following:
(a)
the amount of the trading distribution:
(b)
the amount of the trading distribution relating to shares in the co-operative company that the member acquires for the purpose of obtaining the right to enter transactions with the co-operative company or subsidiary company.
Form of election
(5)
The co-operative company makes an election under subsection (1) for an income year containing the period to which a trading distribution relates by giving the Commissioner notice of the election when providing the company’s return of income for the tax year to which the income year corresponds.
Period of election
(6)
The election applies for distributions in the income year referred to in subsection (5) and for distributions in later income years.
Defined in this Act: company, co-operative company, resident in New Zealand, shareholder
Section CD 24B was inserted, as from 3 April 2006, by section 10(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for distributions made as from 3 April 2006.
Section CD 24B list of defined terms foreign-sourced amount: repealed (with effect on 1 April 2005), on 7 December 2009, by section 163 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
CD 25 Qualifying amalgamations
An amount derived by an amalgamated company on a qualifying amalgamation from an amalgamating company that ceases to exist on the amalgamation is not a dividend if it arises from—
(a)
the amalgamated company acquiring property of the amalgamating company; or
(b)
the amalgamated company being relieved of an obligation owed to the amalgamating company.
Defined in this Act: amalgamated company, amalgamating company, amalgamation, amount, dividend, qualifying amalgamation
Compare: 1994 No 164 s CF 5(a)
CD 26 Foreign investment fund income
Amount not dividend
(1)
An amount paid by a company to a person is not a dividend if,—
(a)
at the time the person derives the amount, the person’s interest in the company is an attributing interest or would have been an attributing interest if the company had not been liquidated; and
(b)
the person calculates their FIF income or loss in relation to the interest and the period in which the amount is paid under—
(i)
the comparative value method:
(ii)
the deemed rate of return method:
(iii)
the cost method:
(iv)
the fair dividend rate method.
Exclusion for interests in grey list companies
(2)
Subsection (1)(b)(iv) does not apply if—
(a)
the FIF is a grey list company; and
(b)
the person holds a direct income interest of 10% or more in the FIF at the beginning of the income year in which the period falls.
Application of rule for certain managed funds
(3)
Subsection (2) does not apply if—
(a)
the person is a portfolio investment entity, an entity eligible to be a portfolio investment entity, or a life insurance company; and
(b)
the FIF is a foreign investment vehicle.
Defined in this Act: amount , attributing interest , company , comparative value method , cost method , deemed rate of return method, direct income interest , dividend , fair dividend rate method, FIF income, foreign investment fund f, oreign investment vehicle , life insurance , liquidation , loss , pay , portfolio investment entity
Compare: 1994 No 164 s CF 3(1)(k)
Section CD 26(1) heading: substituted (with effect on 19 December 2007), on 7 September 2010, by section 197 of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section CD 26(1) heading: inserted (with effect on 1 April 2007), on 6 October 2009, by section 739(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 26(1): substituted (with effect on 19 December 2007), on 7 September 2010, by section 197 of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section CD 26(b): substituted, on 19 December 2007, by section 11 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Paragraph (b) was amended, as from 1 April 2007, by section 5(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “comparative value method, the deemed rate of return method, the cost method, or the fair dividend rate method”
for “comparative value method or the deemed rate of return method”
. See section 5(3) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
Section CD 26(1)(b)(iv): amended (with effect on 1 April 2007), on 6 October 2009, by section 739(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 26(1)(c): repealed (with effect on 1 April 2007), on 6 October 2009, by section 739(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 26(2) heading: added (with effect on 1 April 2007), on 6 October 2009, by section 739(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 26(2): added (with effect on 1 April 2007), on 6 October 2009, by section 739(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 26(3) heading: added (with effect on 1 April 2007), on 6 October 2009, by section 739(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 26(3): added (with effect on 1 April 2007), on 6 October 2009, by section 739(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 26 list of defined terms direct income interest: inserted (with effect on 1 April 2007), on 6 October 2009, by section 739(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 26 list of defined terms foreign investment vehicle: inserted (with effect on 1 April 2007), on 6 October 2009, by section 739(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 26 list of defined terms life insurance: inserted (with effect on 1 April 2007), on 6 October 2009, by section 739(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 26 list of defined terms portfolio investment entity: added (with effect on 1 April 2007), on 6 October 2009, by section 739(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
The list of defined terms was amended, as from 1 April 2007, by section 5(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “cost method”
and “fair dividend rate method”
. See section 5(3) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
Calculation rules
CD 27 General calculation rule for transfers of value
Difference in value
(1)
The amount of a dividend that is a transfer of value from a company to a person is calculated using the formula—
value from company – value from person.
Definition of items in formula
(2)
In the formula,—
(a) value from company is the market value of the money or money’s worth that the company provides to the person
(b) value from person —
(i)
is the market value of the money or money’s worth (if any) that the person provides to the company as consideration for the transfer; and
(ii)
excludes any amount that is attributable merely to the holding or giving up of rights as a shareholder in the company.
Relationship with sections CD 28 to CD 31
(3)
This section is overridden by sections CD 28 to CD 31.
Defined in this Act: amount, company, dividend, shareholder, transfer of value
Compare: 1994 No 164 s CF 2(1)(c)-(e)
CD 28 Calculation of amount of dividend when property made available
How this section applies
(1)
This section applies to determine the amount of a dividend that arises under section CD 3 because a company makes property available to a person.
Amounts calculated quarterly
(2)
The amount of the dividend is calculated for each quarter during which the property is made available.
Date when amounts treated as paid
(3)
The amount of the dividend calculated for a quarter is treated as being paid by the company to the person and as being derived by the person 6 months after the end of the company’s income year. However, if the company gives notice to the shareholder on an earlier date of the amount of the dividend for that quarter, the amount is treated as being paid and derived on that earlier date instead.
Using FBT rules
(4)
Unless the property made available is a loan, the amount of the dividend for each quarter is the value of the fringe benefit for that quarter calculated under the FBT rules as if—
(a)
making the property available were the provision of a fringe benefit by the company to an employee in relation to employment, despite anything in sections CX 6 to CX 32 (which relate to fringe benefits); and
(b)
the company were not to choose to pay fringe benefit tax on an income year basis under section ND 14 (Payment of fringe benefit tax on income year basis for shareholder-employees).
Using difference from benchmark rate
(5)
If the property made available is a loan, the amount of the dividend for each quarter is the excess (if any) of interest, calculated for the quarter on the basis of the daily balance of the loan and the benchmark rate specified in subsections (6) to (8), over the actual amount of interest accruing on the loan in the quarter. However, the company may choose instead to calculate the dividend as the excess of the benchmark interest rate amount over the amount of income accruing to the company in the quarter calculated under the yield to maturity method.
Benchmark rate: fringe benefit tax rate for certain loans
(6)
For the purposes of subsection (5), the benchmark rate of interest is the prescribed rate of interest if—
(a)
all amounts payable to the company for the loan are expressed in New Zealand dollars; and
(b)
either the borrower is not a company or, if the borrower is another company, the company making the loan notifies the Commissioner that this subsection is to apply to the loan and the quarter.
Setting benchmark rate
(7)
For the purposes of subsection (5), the benchmark rate is the rate set by the Commissioner if—
(a)
all amounts payable to the company in relation to the loan are payable in a single currency other than New Zealand dollars; and
(b)
the Commissioner has set a benchmark rate for that currency and the quarter; and
(c)
either the borrower is not a company or, if the borrower is another company, the company making the loan notifies the Commissioner that this subsection is to apply to the loan and the quarter.
Default benchmark rate
(8)
For the purposes of subsection (5), if neither subsection (6) nor (7) applies, the benchmark rate of interest is a market rate determined at the end of the quarter for a loan made on the same terms between persons at arm’s length.
Daily loan balance: certain repayments backdated
(9)
For the purposes of subsection (5), in determining the daily balance of a loan during a tax year, an amount repaid during the tax year is treated as having been applied in repayment of the loan at the start of the company’s tax year or, if later, the day the loan was made, if—
(a)
the amount is repaid by applying any salary, wages, extra pay, dividends, or interest payable by the company to the borrower; and
(b)
the amount payable by the company is income of the borrower in the tax year or a previous tax year; and
(c)
the amount payable by the company is payable without any tax deduction under the PAYE rules, the RWT rules, or the NRWT rules.
Daily loan balance: company nominating amount
(10)
Subject to subsection (9), for the purposes of subsection (5), the daily balance of the loan for a tax year is treated as being equal to the notional balance chosen under subsection (11) by the company making the loan if—
(a)
the borrower is a company; and
(b)
the loan is a variable principal debt instrument; and
(c)
the company making the loan notifies the Commissioner that this subsection applies for the loan and the tax year; and
(d)
the amount of the dividend calculated as a result for the loan, the borrower, and the tax year is no more than 30% greater or less than the amount that would be calculated if this section did not apply.
Notional balance options
(11)
The notional balance referred to in subsection (10) is whichever of the following is chosen by the company making the loan and notified to the Commissioner:
(a)
the average of the outstanding balances of the loan at the end of each month in the company’s tax year:
(b)
the average of—
(i)
the outstanding balance of the loan at the start of the tax year or the first time during the tax year at which the loan exists, whichever is later; and
(ii)
the outstanding balance of the loan at the end of the tax year or the last time during the tax year at which the loan exists, whichever is earlier.
Notice generally by tax returns
(12)
Reference in this section to a company notifying the Commissioner is a reference to—
(a)
a notice given to the Commissioner with the company’s return of income for the relevant tax year; or
(b)
if no return is required, a notice given by the date on which a return would be required to be filed for the tax year if a return had been required.
Attributed repatriation dividends
(13)
No amount of dividend arises under section CD 3 as a result of any difference between the interest (if any) payable by a person to a CFC in an accounting period of the CFC under a loan and the benchmark rate of interest specified in any of subsections (6) to (8) if—
(a)
the outstanding balance of the loan at the end of the accounting period is taken into account under sections CD 35 to CD 41 in calculating the New Zealand repatriation amount of the CFC for the accounting period; and
(b)
as a result, the person derives a dividend under section CD 13.
When loan disregarded
(14)
Subsection (13) does not apply to the extent to which the loan is a loan to which—
(a)
section CD 39(11) applies, meaning that the loan is disregarded for the accounting period; or
(b)
section CZ 10(4) (Transitional relief for calculation of attributed repatriation dividends: 2 July 1992) applies, meaning that the loan is effectively disregarded for the accounting period.
Defined in this Act: accounting period, amount, attributed repatriation, CFC, Commissioner, company, dividend, employee, extra pay, FBT rules, fringe benefit, fringe benefit tax, income, income year, interest, loan, New Zealand, New Zealand repatriation amount, notice, notify, NRWT rules, pay, PAYE rules, prescribed rate of interest, quarter, return of income, RWT rules, shareholder, tax deduction, tax year, variable principal debt instrument
Compare: 1994 No 164 s CF 2(11), (12), (19)
Subsection (11)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for “; or”
.
CD 29 Adjustment if dividend recovered by company
When dividends recovered
(1)
If a company recovers a dividend from a shareholder under section 56 of the Companies Act 1993 or an equivalent provision of foreign law, this section applies to the extent necessary to ensure that—
(a)
the recovered dividend and any attached imputation credit or dividend withholding payment credit are disregarded for the purposes of this Act; and
(b)
the resulting refunds are made.
Amendment of assessments
(2)
Section 113B of the Tax Administration Act 1994 requires the Commissioner, if given notice of the recovery of the dividend from a shareholder, to amend an assessment of the company or the shareholder in relation to income tax or under the imputation rules, the NRWT rules, the RWT rules, the dividend withholding payment rules, or under section LE 2 (Credits in respect of dividends to non-resident investors), as applicable.
Refunds
(3)
If the Commissioner has been notified of the recovery and has amended an assessment as described in subsection (2), the Commissioner must refund any relevant—
(a)
income tax, dividend withholding payment, or dividend withholding payment penalty tax of the shareholder; and
(b)
non-resident withholding tax or resident withholding tax of the company.
Relationship with sections MD 1 and NH 4
(4)
The refund is made despite sections MD 1 (Refund of excess tax) and NH 4 (Refund for overpayment and to company in loss), but subject to the other provisions of this Act.
Adjustments to accounts
(5)
If the Commissioner has been notified of the recovery and has amended an assessment as described in subsection (2), a credit or debit (as applicable) arises as at the date of recovery, and must be recorded in—
(a)
the imputation credit account of the company; or
(b)
if the shareholder is an imputation credit account company or dividend withholding payment account company, the imputation credit account or dividend withholding payment account of the shareholder.
Defined in this Act: assessment, Commissioner, company, dividend, dividend withholding payment, dividend withholding payment account, dividend withholding payment account company, dividend withholding payment rules, dividend withholding payment credit, dividend withholding payment penalty tax, imputation credit, imputation credit account, imputation credit account company, imputation rules, income tax, non-resident withholding tax, notice, NRWT rules, resident withholding tax, RWT rules, shareholder
Compare: 1994 No 164 s CF 2(8)
Section CD 29(2): replaced (with effect on 1 April 2005 and applying for the 2005–06 and later income years), on 30 June 2014, by section 197(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section CD 29(3): amended (with effect on 1 April 2005 and applying for the 2005–06 and later income years), on 30 June 2014, by section 197(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section CD 29(5): amended (with effect on 1 April 2005 and applying for the 2005–06 and later income years), on 30 June 2014, by section 197(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section CD 29 list of defined terms dividend withholding payment rules: inserted (with effect on 1 April 2005 and applying for the 2005–06 and later income years), on 30 June 2014, by section 197(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section CD 29 list of defined terms imputation rules: inserted (with effect on 1 April 2005 and applying for the 2005–06 and later income years), on 30 June 2014, by section 197(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section CD 29 list of defined terms NRWT rules: inserted (with effect on 1 April 2005 and applying for the 2005–06 and later income years), on 30 June 2014, by section 197(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section CD 29 list of defined terms RWT rules: inserted (with effect on 1 April 2005 and applying for the 2005–06 and later income years), on 30 June 2014, by section 197(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
CD 30 Adjustment if amount repaid later
When released debt repaid
(1)
If the release by a company of a shareholder’s obligation to pay money to the company has been treated as a dividend and the released amount is later repaid to the company, this section applies to the extent necessary to ensure that—
(a)
the dividend is disregarded for the purposes of this Act; and
(b)
the resulting refunds are made.
When close company expenditure repaid
(2)
If any expenditure of a close company that shareholders in the company believed on reasonable grounds was only for the benefit of the company is nevertheless a dividend and the expenditure is later repaid to the company, this section applies to the extent necessary to ensure that—
(a)
the dividend is disregarded for the purposes of this Act; and
(b)
the resulting refunds are made.
Amendment of assessments
(3)
Section 113B of the Tax Administration Act 1994 requires the Commissioner to amend assessments if given notice of the repayment.
Refunds
(4)
If the Commissioner is given notice of the repayment, the Commissioner must refund any relevant tax of the shareholder.
Relationship with section MD 1
(5)
The refund is made despite section MD 1 (Refund of excess tax), but subject to the other provisions of this Act.
Repayment of pre-1992 loans
(6)
Subsection (1) also applies to the repayment of an amount treated as a dividend under section 4(1)(b) of the Income Tax Act 1976 (as it applied before 1 April 1992 to give the Commissioner a discretion to treat loans as dividends), as if the amount repaid were a released amount that is repaid.
Defined in this Act: amount, assessment, close company, Commissioner, company, dividend, notice, pay, shareholder, tax
Compare: 1994 No 164 s CF 2(9), (10)
Subsection (3) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “113B”
for “113A”
.
CD 31 Adjustment if additional consideration paid
Differences from market value
(1)
If a dividend from a company arises because of a difference between the market value of property provided by or to the company and the consideration paid for it, the dividend is disregarded for the purposes of this Act if the conditions in subsections (2) to (4) are met.
Market value
(2)
The consideration paid must have been an amount that the company considered was the market value, having taken reasonable steps at the time of the transaction to ascertain a market value.
Difference paid
(3)
The recipient of the dividend must have later paid to the company—
(a)
sufficient additional consideration to reflect the actual market value of the property at the time of the transaction; or
(b)
a refund of any excess consideration paid by the company.
Accounts adjusted
(4)
Any necessary adjustments must have been made to the accounts of the company and the recipient for the additional consideration or refund.
Defined in this Act: amount, company, dividend, pay
Compare: 1994 No 164 s CF 2(9A)
CD 32 Available subscribed capital amount
Formula for calculating amount of available subscribed capital
(1)
For a share (share) in a company at any relevant time (calculation time), the amount of available subscribed capital is calculated using the formula—
1 July 1994 balance + subscriptions – returns.
Definition of items in formula
(2)
In the formula,—
(a)
1 July 1994 balance is,—
(i)
if the company existed before 1 July 1994, the amount calculated under subsection (3); and
(ii)
in any other case, zero:
(b)
subscriptions, subject to subsections (6) to (20), is the total amount of consideration that the company received, after 30 June 1994 and before the calculation time, for the issue of shares of the same class (the class) as the share:
(c)
returns, subject to subsections (21) to (24), is the total amount of consideration that the company paid, after 30 June 1994 and before the calculation time, on the cancellation of shares in the relevant class and that was not a dividend because of section CD 14 or CD 16 or a corresponding provision of an earlier Act.
1 July 1994 balance
(3)
The 1 July 1994 balance is calculated using the formula
Definition of items in formula
(4)
In the formula,—
(a)
paid-up capital, subject to subsection (5) relating to bonus issues, is the total amount of capital paid up before 1 July 1994 for shares in the class:
(b)
premiums is the total amount of qualifying share premium paid to the company before 1 July 1994 for shares in the class, but not including amounts applied before 1 July 1994 in paying up capital:
(c)
all shares issued is the number of shares in the class ever issued at the end of 30 June 1994:
(d)
30 June 1994 shares is the number of shares in the class on issue at the end of 30 June 1994.
1 July 1994 balance: bonus issues after 30 September 1988
(5)
The capital amount included in calculating the 1 July 1994 amount does not include an amount paid up by way of a bonus issue made after 30 September 1988, unless—
(a)
the bonus issue was a taxable bonus issue; or
(b)
the amount was paid up by application of an amount of qualifying share premium.
Subscriptions amount: taxable bonus issues and debt capitalisations
(6)
The subscriptions amount includes,—
(a)
in the case of a bonus issue in lieu, the amount offered as an alternative to the bonus issue; and
(b)
in the case of a taxable bonus issue that is not a bonus issue in lieu, the amount of the dividend arising from the taxable bonus issue; and
(c)
in the case of shares issued on conversion of, or as consideration for the release of, a debt claim against the company, the amount of debt converted or released.
Subscriptions amount: non-taxable and exempt bonus issues
(7)
The subscriptions amount does not include—
(a)
an amount for a bonus issue if neither subsection (6)(a) nor (b) applies; or
(b)
an amount for a taxable bonus issue made to a shareholder to whom the bonus issue was exempt income under section CW 9 (Dividend derived by company from overseas) or CW 10 (Dividend within New Zealand wholly-owned group) (or under a corresponding repealed provision) except to the extent to which the taxable bonus issue is fully credited.
Subscriptions amount: reinvested exempt dividends
(8)
The subscriptions amount does not include—
(a)
an amount received by the company that is mainly attributable, directly or indirectly, to the company paying a dividend to a shareholder,—
(i)
if the dividend was exempt income of the shareholder under section CW 9 (Dividend derived by company from overseas) or CW 10 (Dividend within New Zealand wholly-owned group) (or a corresponding provision of an earlier Act); and
(ii)
if the shareholder was not required to deduct an amount of dividend withholding payment from the dividend by section NH 1 (Liability to make deduction in respect of foreign withholding payment dividend); and
(iii)
to the extent to which the dividend is not fully credited; or
(b)
an amount received by the company that is mainly attributable, directly or indirectly, to the company paying a dividend at a time when the company is a controlled foreign company to another controlled foreign company (regardless of whether either company is resident in a grey list country).
Subscriptions amount: share-for-share exchanges
(9)
Subsection (10) applies if—
(a)
the company receives an amount, directly or indirectly, for the issue of shares in the class that is in the form of shares in another company; and
(b)
immediately after the issue there are 1 or more persons whose common voting interests (or common market value interests), as defined in section IG 1(5) (Companies included in group of companies), in the company and the other company total 10% or greater; and
(c)
the receipt is not on an amalgamation.
Subscriptions amount: no uplift for share-for-share exchanges
(10)
If subsection (9) applies, the subscriptions amount does not include the amount received to the extent to which it is more than the total available subscribed capital per share, calculated under the slice rule and calculated after deducting any ineligible capital amount described in subsections (13) and (14) of the shares in the other company at the date on which the amount is received.
Subscriptions amount: company share capital reorganisation
When subsection (10D) applies
(10B)
Subsection (10D) applies for a company (the calculation company) for which the calculation in subsection (1) is being performed if—
(a)
section EW 46B(1)(a) or (b) (Consideration when debt forgiven within economic group) applies to a creditor and debtor that are in the same wholly-owned group of companies as the calculation company; and
(b)
the creditor is a non-resident company; and
(c)
section EW 46B(3) does not apply; and
(d)
the calculation company is the debtor, or the calculation company holds, before section OD 3 or OD 4 (which relate to voting interests and market value interests) is applied to the calculation company, voting interests or, if a market value exists for a company that is part of the wholly-owned group of companies, market value interests, in the debtor.
When subsection (10D) applies
(10C)
Subsection (10D) also applies if section EW 46B(1)(c) applies to a creditor or single creditor group under that section, and the company for which the calculation in subsection (1) is being performed (the calculation company)—
(a)
is the creditor’s debtor, to whom section EW 46B(1)(c) applies:
(b)
has, before the application of section OD 3 or OD 4, either voting interests in the creditor’s debtor, to whom section EW 46B(1)(c) applies or market value interests in the creditor’s debtor, to whom section EW 46B(1)(c) applies, if a market value circumstance exists for the debtor.
Subscriptions amount: debt forgiven within economic group
(10D)
For the calculation company, the subscriptions amount is treated as including the amount of debt to which section EW 46B(5) applies for the creditor, for the class of shares that the creditor has the most voting interests for, or, if the creditor is the single creditor group under section EW 46B(1)(c), for the class of shares that a member of the group has the most voting interests for. The maximum subscriptions amount included for an amount of debt for a calculation company is,—
(a)
if the calculation company is the debtor, the amount of debt:
(b)
if the calculation company is not the debtor, the amount of debt multiplied by 1 of the following interests, determined before the application of section OD 3 or OD 4:
(i)
the calculation company’s voting interests in the creditor’s debtor; or
(ii)
the calculation company’s market value interest in the creditor’s debtor, if there is a market value circumstance.
(11)
Subsection (12) applies if a company receives an amount for the issue of shares in the class in the form of—
(a)
a shareholder giving up rights of membership in the company; or
(b)
a shareholder giving up rights of membership in a company associated with the company or that is in substance the same company.
Subscriptions amount: no uplift for share capital reorganisation
(12)
If subsection (11) applies, the subscriptions amount does not include the amount received to the extent to which it is more than the total available subscribed capital per share of the rights given up at the date they are given up, calculated—
(a)
under the slice rule; and
(b)
after deducting any ineligible capital amount described in subsections (13) and (14); and
(c)
as if the rights given up were shares, if they are not shares.
Subscriptions amount: when ineligible capital arises
(13)
For the purposes of subsections (10) and (12), an ineligible capital amount arises if—
(a)
a company (acquiring company) issues shares in consideration for acquiring, directly or indirectly, shares in another company (acquired company); and
(b)
the acquired company has issued shares in anticipation of the shares being acquired by the acquiring company; and
(c)
those shares issued in anticipation are not a fully credited taxable bonus issue; and
(d)
the acquiring company pays an amount in consideration for acquiring the shares in the acquired company in addition to issuing shares in the acquiring company.
Subscriptions amount: amount of ineligible capital
(14)
The ineligible capital amount is the lesser of—
(a)
the total of the available subscribed capital per share calculated under the slice rule of the shares in the acquired company that is attributable to the shares issued in anticipation (except to the extent to which the shares issued in anticipation are a fully credited taxable bonus issue); and
(b)
the total additional amount paid by the acquiring company referred to in subsection (13)(d).
Subscriptions amount: amalgamated company
(15)
The subscriptions amount for a company that is an amalgamated company resulting from an amalgamation—
(a)
includes an amount, as if it were consideration received at the time of the amalgamation for the issue of the amalgamated company’s shares, equal to the available subscribed capital, at the time of the amalgamation, of all shares in the amalgamating companies that are—
(i)
of an equivalent class to the class; and
(ii)
not held directly or indirectly by an amalgamating company; and
(iii)
not shares in the amalgamated company:
(b)
does not include any other amount for the agreement of shareholders of an amalgamating company to the amalgamation and the resulting property acquisitions by the amalgamated company.
Subscriptions amount: emigrating company
(15B)
If a company has been treated under section FCB 2 (Emigrating company treated as paying distribution to shareholders) as paying a distribution to shareholders, the subscriptions amount includes the amount of the distribution that is a dividend.
Subscriptions amount: Maori authority
(16)
If the company is a Maori authority, the subscriptions amount includes the taxable income derived by the Maori authority in the 2003-04 tax year or an earlier tax year.
Subscriptions amount: no double counting
(17)
The subscriptions amount does not include amounts included in calculating the 1 July 1994 balance.
Subscriptions amount: treasury stock sales excluded
(18)
The subscriptions amount does not include the amount of consideration received by a company for disposing of a share if the disposal is taken into account under section CD 17 to determine that the amount paid by the company on a previous share acquisition is not subject to section CD 17(4) to (6).
Subscriptions amount: superannuation fund’s interest in GIF
(19)
The subscriptions amount of a company that is a group investment fund includes the value of the interest of a superannuation fund in the group investment fund at the end of 31 March 1999.
1 July 1994 and subscriptions amount: foreign currency conversions
(20)
If an amount of consideration that a company receives for the issue of shares is payable in a foreign currency, the amount paid is treated, for the purposes of this section, as if it were converted into New Zealand currency at the calculation time.
Returns amount: on-market cancellations by associate
(21)
If the acquisition of a share by an associate of the company is treated under section ME 5(5) (Debits arising to imputation credit account) as if it were an on-market cancellation by the company, it is treated in the same way for the purposes of calculating the returns amount.
Returns amount: recovered amounts
(22)
The returns amount does not include any amount recovered by the company before the calculation time under section 56 of the Companies Act 1993 or an equivalent provision of foreign law.
Returns amount: shares cancelled on amalgamation
(23)
If shares in an amalgamated company held by an amalgamating company are cancelled on the amalgamation, the returns amount included in calculating the available subscribed capital amount of a share in the amalgamated company that is of the same class as the cancelled shares is increased by the amount calculated using the formula—
cancelled shares x asc per share.
Definition of items in formula
(24)
In the formula,—
(a)
cancelled shares is the number of cancelled shares:
(b)
asc per share is the available subscribed capital per share calculated under the slice rule of each cancelled share immediately before the amalgamation.
Meaning of fully credited
(25)
In this section, the part of a dividend that is fully credited is the part that is calculated using the formula—
Definition of items in formula
(26)
In the formula,—
(a)
dividend excluding credits is the dividend excluding any attached imputation credit or dividend withholding payment credit:
(b)
actual ratio is the total of the imputation ratio and dividend withholding payment ratio of the dividend (section MZ 18 (Fully credited: modifying the actual ratio) modifies this paragraph):
Link cannot be done — section MZ 18 not yet inserted.
(c)
maximum ratio is the maximum imputation ratio specified in section ME 8(1) (Allocation rules for imputation credits).
Meaning of qualifying share premium
(27)
In this section, qualifying share premium means an amount of premium paid to a company for the issue of a share by the company if—
(a)
the amount was credited to a share premium account in the company’s books; and
(b)
the issue of shares was not in consideration for the acquisition, directly or indirectly, of shares in another company.
Defined in this Act: amalgamated company, amalgamating company, amalgamation, amount, associated person, available subscribed capital, bonus issue, bonus issue in lieu, cancellation, common market value interest, common voting interest, company, consideration, controlled foreign company, dividend, dividend withholding payment, dividend withholding payment credit, dividend withholding payment ratio, exempt income, fully credited, grey list, group investment fund, imputation credit, imputation ratio, Maori authority, market value circumstance, market value interest, New Zealand, non-resident company, on-market cancellation, pay, qualifying share premium, share, shareholder, shares of the same class, slice rule, superannuation fund, tax year, taxable bonus issue, taxable income, voting interest
Compare: 1994 No 164 ss CF 3(2)(a), (14), CF 4, OB 1 available subscribed capital, fully credited, ineligible capital amount, qualifying share premium, transitional capital amount
Section CD 32(10B): inserted (with effect on 1 April 2006), on 30 March 2017, by section 386(1) (and see section 386(3)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CD 32(10C): inserted (with effect on 1 April 2006), on 30 March 2017, by section 386(1) (and see section 386(3)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CD 32(10D): inserted (with effect on 1 April 2006), on 30 March 2017, by section 386(1) (and see section 386(3)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Subsection (15) (excluding the heading) was substituted, as from 1 April 2005, by section 11(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
Subsection (15B) was inserted, as from 3 April 2006, by section 11(2)Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
Section CD 32(26)(b): amended (with effect from 1 October 2007), on 19 December 2007, by section 12 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CD 32 list of defined terms consideration: inserted (with effect on 25 February 2008), on 6 October 2009, by section 740 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 32 list of defined terms market value circumstance: inserted, on 30 March 2017, by section 386(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CD 32 list of defined terms market value interest: inserted, on 30 March 2017, by section 386(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CD 32 list of defined terms non-resident company: inserted, on 30 March 2017, by section 386(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CD 32 list of defined terms voting interest: inserted, on 30 March 2017, by section 386(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
CD 33 Available capital distribution amount
Formula for calculating amount of available capital distribution
(1)
For a share (the share) on the liquidation of the company, the available capital distribution amount is calculated using the formula—
Definition of items in formula
(2)
In the formula,—
(a)
receipt is the amount received by the shareholder on the liquidation for the share:
(b)
asc per share is the available subscribed capital per share calculated under the ordering rule for the share at the time of the liquidation:
(c)
capital gains is the total of the capital gain amounts available for distribution to shareholders in the company on the liquidation, but excluding any gain occurring when the company distributes property to a shareholder on the liquidation:
(d)
capital property distributed is the total market value of capital property of the company distributed to shareholders on the liquidation:
(e)
cost is the total cost to the company of the capital property included in the capital property distributed item:
(f)
capital losses is the total of capital loss amounts of the company arising in the 1992-93 or a later tax year, but excluding any loss occurring when the company distributes property to shareholders on the liquidation:
(g)
total receipts is the total of all amounts received by shareholders on the liquidation:
(h)
total asc is the total of the available subscribed capital of all shares in the company at the time of the liquidation.
Positive amounts
(3)
Despite subsection (1), the available capital distribution amount per share is zero if either multiplier in the formula is negative.
When foreign company information inadequate
(4)
Despite subsection (1), the available capital distribution amount is zero if—
(a)
the company is not resident in New Zealand; and
(b)
the shareholder cannot obtain sufficient information to calculate the actual available capital distribution amount.
Capital gain amount: bonus issued capital gains
(5)
A capital gain amount is treated as still being available for distribution to the extent to which—
(a)
it has been applied to pay up a bonus issue made after 30 September 1988; and
(b)
the bonus issue is a non-taxable bonus issue; and
(c)
the bonus issued share is still on issue at the time of the company’s liquidation.
This subsection is overridden by subsection (6).
Capital gain amount: capital gains after 31 March 1988 and before 1992-93
(6)
A capital gain amount, derived after 31 March 1988 and before the 1992-93 tax year, is not available for distribution to the extent to which a capital loss amount has arisen for the company in the tax year in which the capital gain amount was derived or in a later tax year before the 1992-93 tax year. Capital loss amounts are offset against capital gain amounts in the chronological order in which each arose and, to the extent offset, are then disregarded for the purposes of this subsection.
Capital gain amount: when capital gain amounts arise
(7)
For the purposes of this section, a company derives a capital gain amount if,—
(a)
after 31 March 1988, it disposes of capital property for an amount of consideration that is more than the cost of the property to the company, including a disposal that the company is treated as making under section DB 19 (Amount from profit-making undertaking or scheme and not already in income) or DB 20 (Amount from major development or division and not already in income); the capital gain amount is the excess; or
(b)
after 31 March 1988, it receives a capital gain, including a gift, and no part is assessable income of the company; the capital gain amount is the amount of the capital gain; or
(c)
an amount is derived by the company from another company on liquidation of the other company that is excluded from being a dividend as a result of section CD 18(2)(b) and this section; or
(d)
an amount is derived by the company that is attributable to a revaluation of livestock in the 1992-93 or a later tax year under section 86D of the Income Tax Act 1976 or section EC 16 (Valuation under herd scheme) or EC 20 (Herd livestock disposed of before values determined); or
(e)
the amount is described in section CZ 9(1) (Available capital distribution amount: 1965 and 1985 to 1992).
Capital gain amount: amalgamated company inheriting gain
(8)
An amalgamated company is treated as deriving a capital gain amount at the time of the amalgamation equal to a capital gain amount of an amalgamating company to the extent to which—
(a)
the amalgamating company ceases to exist on the amalgamation; and
(b)
the amalgamating company’s capital gain amount was available for distribution at the time and was not distributed to anyone other than the amalgamated company.
Capital gain amount: consideration when debt forgiven within economic group
(8B)
The amount of a debt that section EW 46B (Consideration when debt forgiven within economic group) applies to does not give rise to a capital gain amount if section CD 32(10D) does not apply to it.
Capital losses amount: when capital losses arise
(9)
For the purposes of this section, a company incurs a capital loss if it disposes of capital property for an amount of consideration that is less than—
(a)
the adjusted tax value of the property at the date of disposal, if the property is an item of depreciable property; or
(b)
the cost of the property to the company at the date of disposal, if the property is not an item of depreciable property.
Capital loss amount
(9B)
The capital loss amount for a disposal referred to in subsection (9) is equal to the deficit referred to in that subsection for the disposal.
Capital losses amount: company existing before 1 April 1988
(10)
In the case of a company that existed before 1 April 1988, the capital losses amount cannot be more than the total of—
(a)
the amount of the capital gains item in the formula in subsection (1) to the extent derived after 31 March 1988; and
(b)
the amount of the capital property distributed item, minus the amount of the cost item, in the formula.
Related person transactions
(11)
No capital gain amount is derived or capital loss amount is incurred by a company after 31 March 1988 on disposing of property under an arrangement with a related person. This subsection is overridden by subsections (7)(c) and (12).
Close companies liquidations
(12)
Subsection (11) does not apply if—
(a)
the company is a close company; and
(b)
the related person is not a company; and
(c)
the disposal is on the liquidation of the company.
Reinvested exempt dividends
(13)
When a capital gain amount, a capital loss amount, or the cost of capital property is determined, the cost of any shares subscribed for by the company in another company does not include any consideration for the subscribed shares that is excluded from the available subscribed capital of the other company under section CD 32(7)(b) or (8).
Amounts written up
(14)
When a capital gain amount, a capital loss amount, or the cost of capital property is determined, the cost of the relevant capital property is increased to the extent to which—
(a)
the value of the property is written up in the company’s books; and
(b)
because it was attributed to the write-up,—
(i)
an amount paid before 11 June 1965 is treated as described in section CZ 9(2)(a) (Available capital distribution amount: 1965 and 1985 to 1992); or
(ii)
an issue of a share before 1 April 1988 is treated as described in section CZ 9(2)(b) (Available capital distribution amount: 1965 and 1985 to 1992).
Meaning of related person
(15)
In subsections (11) and (12), related person means a person related to a company (first company) because 1 of the following applies to the person and the company:
(a)
the person owns, can control (directly or indirectly), or has the right to acquire 20% or more of the first company’s ordinary shares; or
(b)
the person owns, can control (directly or indirectly), or has the right to acquire 20% or more of the voting rights of shareholders in the first company; or
(c)
the person is a company and the first company owns, can control (directly or indirectly), or has the right to acquire 20% or more of the ordinary shares in the person; or
(d)
the person is a company and the first company owns, can control (directly or indirectly), or has the right to acquire 20% or more of the voting rights of shareholders in the company; or
(e)
the person is a company and 20% or more of the shares or voting rights in the person are owned or controlled by persons that also own, control, or have the right to acquire 20% or more of the shares or voting rights in the first company; or
(f)
the person is a partner or co-venturer of the first company; or
(g)
the person is the trustee of a trust and the first company, or a person who is a related person of the first company under this subsection, benefits or can benefit under the trust (directly or indirectly); or
(h)
the person is a partnership and 1 or more persons, that are related persons of the first company under this subsection, are entitled to 50% or more of the partnership’s assets or profits or are able to control the partnership.
Look-through relatives and nominees
(16)
For the purposes of subsection (15), a person is treated as holding anything held by—
(a)
their spouse, civil union partner or de facto partner; or
(b)
their child; or
(c)
a child of their spouse, civil union partner or de facto partner; or
(d)
a spouse, civil union partner or de facto partner of their child or of a child of their spouse, civil union partner or de facto partner.
Look-through interposed companies
(17)
For the purposes of subsection (15)(e), if shares or voting rights in a company are owned or controlled by another company, a look-through approach must be applied. The lookthrough approach requires that—
(a)
the shares or voting rights are treated as if owned or controlled by the shareholders in the other company; and
(b)
if a shareholder in the other company is a company, that shareholder’s portion of the shares or voting rights are treated as if owned or controlled by the shareholders in the shareholder company; and
(c)
the approach is applied in the same way to any chain of companies, whatever the length of the chain.
Meaning of capital property
(18)
In this section, capital property means property of the company that is not revenue account property.
Defined in this Act: amalgamated company, amalgamating company, amalgamation, amount, available capital distribution amount, available subscribed capital, bonus issue, capital property, close company, company, deduction, depreciation loss, dividend, income, liquidation, nominee, non-taxable bonus issue, ordering rule, pay, related person, relative, resident in New Zealand, revenue account property, share, shareholder, tax year, trustee
Compare: 1994 No 164 ss CF 3(2)(b), (6)-(12), (14) excess return amount, CF 5(b), OB 1 capital gain amount
Subsection (2)(c) was amended, as from 1 April 2005, by section 12(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “capital gain amounts available”
for “capital gain available”
with application as from the income year corresponding to the 2005–06 tax year.
Subsection (7)(b) was substituted, as from 1 April 2005, by section 12(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
Section CD 33(8B): inserted (with effect on 1 April 2005), on 30 March 2017, by section 387(1) (and see section 387(4)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CD 33(9): replaced (with effect on 1 April 2005), on 30 March 2017 (applying for the 2005–06 and later income years), by section 387(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CD 33(9B): inserted (with effect on 1 April 2005), on 30 March 2017 (applying for the 2005–06 and later income years), by section 387(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CD 33(11): amended (with effect on 1 April 2005), on 7 December 2009, by section 149 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Subsection (16)(a) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (16)(a) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (16)(c) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (16)(c) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (16)(d) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (16)(d) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “a child of their spouse or civil union partner”
for “their spouse’s child”
.
Subsection (16)(d) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (16)(d) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “a child of their spouse, civil union partner or de facto partner”
for “a child of their spouse or civil union partner”
.
Section CD 33 list of defined terms deduction: inserted (with effect on 1 April 2005), on 30 March 2017, by section 387(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CD 33 list of defined terms depreciation loss: inserted (with effect on 1 April 2005), on 30 March 2017, by section 387(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
CFC attributed repatriation calculation rules
CD 34 When does a person have attributed repatriation from a CFC?
General rule
(1)
A person has an amount of attributed repatriation from a CFC if—
(a)
the person has an income interest under sections EX 8 to EX 13 (which relate to the calculation of a person’s income interest) in the CFC in 1 of the CFC’s accounting periods; and
(b)
the person’s income interest is 10% or more for the accounting period, under sections EX 14 to EX 17 (which relate to the 10% threshold); and
(bb)
at any time in the accounting period, the person is a New Zealand resident who is not a transitional resident; and
(c)
the CFC has a New Zealand repatriation amount for the accounting period, under sections CD 35 to CD 41.
Formula
(2)
The amount of the person’s attributed repatriation for the accounting period is calculated using the formula—
Definition of items in formula
(3)
In the formula,—
(a)
income interest is the income interest of the person for the period in the accounting period during which the person is a New Zealand resident who is not a transitional resident:
(b)
repatriation is the New Zealand repatriation amount for the CFC and the accounting period:
(c)
days is the number of days in the accounting period during which the person is a New Zealand resident who is not a transitional resident:
(d)
days in accounting period is the number of days in the accounting period.
Defined in this Act: accounting period, amount, attributed repatriation, CFC, income, interest, New Zealand repatriation amount, New Zealand resident, transitional resident
Compare: 1994 No 164 s CG 8(1)
Section CD 34(1)(b): amended (with effect from 1 April 2005), on 19 December 2007, by section 13(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (1)(bb) was inserted, as from 1 October 2005, by section 13(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 13(5) and (6) of that Act as to the application of this amendment.
Subsection (2) formula was substituted, as from 1 October 2005, by section 13(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 13(5) and (6) of that Act as to the application of this amendment.
Subsection (3) was inserted, as from 1 October 2005, by section 13(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 13(5) and (6) of that Act as to the application of this amendment.
The list of defined terms was amended, as from 1 October 2005, by section 13(4)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “New Zealand resident”
with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 13(5) and (6) of that Act as to the application of this amendment.
The list of defined terms was amended, as from 1 October 2005, by section 13(4)(b)Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “transitional resident”
with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 13(5) and (6) of that Act as to the application of this amendment.
CD 35 New Zealand repatriation amount
Formula
(1)
The New Zealand repatriation amount of a CFC for an accounting period is calculated using the formula—
closing New Zealand property – opening New Zealand property.
Definition of items in formula
(2)
In the formula,—
(a)
closing New Zealand property is the amount of New Zealand property of the CFC at the end of the accounting period calculated under the rules in sections CD 36 to CD 40:
(b)
opening New Zealand property is the amount of New Zealand property of the CFC at the start of the accounting period, calculated under the rules in sections CD 36 to CD 40.
Positive amounts
(3)
The New Zealand repatriation amount can never be negative.
CFC’s unrepatriated income balance
(4)
The New Zealand repatriation amount can never be more than the unrepatriated income balance of the CFC for the accounting period, calculated under section CD 41.
Defined in this Act: accounting period, amount, CFC, New Zealand, New Zealand repatriation amount
Compare: 1994 No 164 s CG 8(2)
CD 36 New Zealand property amount
Formula
(1)
The amount of New Zealand property of a CFC at any time is calculated using the formula—
tangible property + associated party equity + associated party debt.
Definition of items in formula
(2)
In the formula,—
(a)
tangible property is the total amount of tangible property (including real property), measured at cost, held by the CFC and situated in New Zealand:
(b)
associated party equity is the total amount of shares or options over shares, measured at cost, held by the CFC in companies that are at the time both—
(i)
resident in New Zealand; and
(ii)
associated with the CFC:
(c)
associated party debt is the total amount of balances outstanding, measured under section CD 39, but never totalling less than zero, of all financial arrangements, to which both—
(i)
the CFC is a party; and
(ii)
a New Zealand resident associated with the CFC at the time is a party.
Acquisitions from associates below market value
(3)
If the CFC acquires any property from a person who is associated (at the time of acquisition) with the CFC for a cost that is less than the market value of the property at the time, the cost to the CFC of acquiring the property is treated as being equal to the market value at the time.
Specific calculation rules in sections CD 37 to CD 40
(4)
There are specific calculation rules in sections CD 37 to CD 40, which apply, despite anything in this section, when the amount of New Zealand property is being calculated.
Defined in this Act: amount, associated person, CFC, company, financial arrangement, New Zealand, New Zealand resident, resident in New Zealand, share
Compare: 1994 No 164 s CG 8(3), (5), (14)tangible property
CD 37 Cost of tangible property
Capital expenditure
(1)
The cost of any item of tangible property (except trading stock) includes each of the following expenditures if no deduction would have been allowed under this Act for it (except for an amount of depreciation loss) had the CFC been a New Zealand resident:
(a)
the original purchase price of the property:
(b)
other expenditure incurred on purchasing the property:
(c)
expenditure incurred before the relevant time in improving the property:
(d)
expenditure incurred before the relevant time in establishing or improving the CFC’s legal right to the property.
Outstanding third party funding
(2)
The cost of any item of tangible property is reduced (but not to less than zero) by the balance outstanding at the time of a loan to the extent to which—
(a)
the loan is secured over the property; and
(b)
the lender is not associated at the time with the CFC; and
(c)
the balance is attributable to expenditure on the property included in the cost under subsection (1) (including any refinancing of an amount that is attributable to such expenditure).
Temporary New Zealand property
(3)
Subject to section CD 40(3) and (4), the amount of the tangible property item in the formula in section CD 36(1) excludes the cost of any property that is—
(a)
situated in New Zealand for less than 365 days in total; or
(b)
disposed of by the CFC—
(i)
by the later of 364 days after its acquisition and 9 months after the end of the CFC’s accounting period in which it was acquired; and
(ii)
to a person that is either a New Zealand resident or is not associated with the CFC at the time of the disposal.
CFC’s business operations assets excluded
(4)
The amount of the tangible property item in the formula in section CD 36(1) excludes the cost of any property that is acquired or used by the CFC in the course of carrying on a substantial business, unless subsection (5) applies.
What exclusion does not apply to
(5)
Subsection (4) does not apply if the business—
(a)
is carried on solely or mainly for the purpose of defeating the application of section CD 13; or
(b)
is of the same nature as a business also carried on in New Zealand at the time of the acquisition by a person that is—
(i)
a New Zealand resident; and
(ii)
associated at the time with the CFC; and
(iii)
not a company in which the CFC holds at the time shares that are excluded from the New Zealand repatriation amount measurement by section CD 38(1).
Defined in this Act: accounting period, associated person, business, CFC, company, deduction, depreciation loss, New Zealand, New Zealand repatriation amount, New Zealand resident, share, trading stock
Compare: 1994 No 164 s CG 8(6), (14)qualified transitory property
Subsection (1)(a) to (c) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for “; and”
.
CD 38 Cost of associated party equity
Shares in subsidiaries engaged in same business
(1)
The cost of associated party equity at any time excludes the cost of shares or options over shares acquired in a company if—
(a)
the CFC and the company are a wholly-owned group of companies at the time; and
(b)
the company carries on a business of the same nature as a substantial business carried on by the CFC before the acquisition; and
(c)
the CFC (or another CFC associated with it at the time) has a significant involvement in managing the company’s business; and
(d)
neither the company’s business nor the CFC’s business is carried on solely or mainly for the purpose of defeating the application of section CD 13; and
(e)
neither the company’s business nor the CFC’s business is of the same nature as a business also carried on in New Zealand at the time of the acquisition by a person that is—
(i)
a New Zealand resident; and
(ii)
associated at the time with the CFC; and
(iii)
not a company in which the CFC holds at the time shares that are excluded from the New Zealand repatriation amount measurement by this subsection.
Currency conversions
(2)
If any shares or options are not denominated in New Zealand dollars, the cost is calculated by converting the amount in the relevant foreign currency at the rate of exchange applying on the date the shares or options were acquired.
Defined in this Act: associated person, business, CFC, company, New Zealand, New Zealand resident, New Zealand repatriation amount, share, wholly-owned group of companies
Compare: 1994 No 164 s CG 8(7)
CD 39 Outstanding balances of financial arrangements
Rules for attributed repatriation calculation only
(1)
The rules in this section apply only for the purposes of calculating the amount of the associated party debt item in the formula in section CD 36(1).
Balance: amounts due
(2)
The outstanding balance of a financial arrangement to which the CFC is a party is the amount due to or by the CFC under the financial arrangement, whether or not payable at the time.
Calculation under CFC rules
(3)
The amount due is calculated by applying section EX 21 (Branch equivalent income or loss: calculation rules) and 1 of the spreading methods under the financial arrangements rules as if calculating the branch equivalent income or loss of the CFC.
Currency conversion
(4)
If the amount is not due in New Zealand dollars, the amount is converted by applying the exchange rate between the foreign currency and New Zealand dollars that applies on the date the financial arrangement is entered into.
All arrangements with same associate
(5)
In calculating the net outstanding balance of a financial arrangement to which the CFC and an associated person are parties, all financial arrangements entered into by those parties are treated as a single financial arrangement, with outstanding balances aggregated and netted off.
Short-term financial arrangements
(6)
No account is taken of a financial arrangement that, on the date it is entered into, is reasonably expected to and does mature within 365 days of the day on which it was entered into.
Aggregation of consecutive or successive arrangements
(7)
For the purposes of subsection (6), if 2 or more consecutive or successive financial arrangements may, having regard to the tenor of this section, fairly be regarded as 1 financial arrangement, those financial arrangements are to be regarded as 1 financial arrangement.
Accruing amounts
(8)
For the purposes of subsections (6) and (10)(c)(i), an amount accrued (including interest and discount on issue) on a financial arrangement is treated as—
(a)
a new financial arrangement entered into on the date of accrual; and
(b)
having been paid only when previous accruals on the financial arrangement have been paid.
Temporary adjustments
(9)
A temporary reduction or increase in the outstanding balance, at the end of an accounting period of the CFC, of any financial arrangement is disregarded if it has a purpose or effect of defeating the application of section CD 13.
When financial arrangement matures within 5 years or is remitted
(10)
Subsections (11) and (12) apply if—
(a)
a CFC is party to a financial arrangement; and
(b)
the outstanding balance of the financial arrangement has been or, but for subsection (11), would be taken into account in calculating the New Zealand repatriation amount of the CFC for an accounting period; and
(c)
either—
(i)
the financial arrangement matures within 5 years of the date on which it was entered into; or
(ii)
an amount owing under the financial arrangement is remitted or released and, as a result, a person derives a dividend; and
(d)
section CZ 10(4) (Transitional relief for calculation of attributed repatriation dividends: 2 July 1992) does not apply to the financial arrangement.
Retrospective exclusion of amounts
(11)
If a person with an income interest in the CFC notifies the Commissioner in writing of the maturity or dividend, for the purposes of calculating the dividend amount which the person has derived under section CD 13 from the CFC,—
(a)
the financial arrangement is disregarded, if subsection (10)(c)(i) applies; or
(b)
the amount remitted or released is disregarded, if subsection (10)(c)(ii) applies.
Amendment of assessments and refunds
(12)
In order to give effect to subsection (11), the Commissioner must—
(a)
amend any relevant assessment under section 113C of the Tax Administration Act 1994; and
(b)
refund any income tax, dividend withholding payment, dividend withholding payment penalty tax, or late payment penalty, despite section MD 1 (Refund of excess tax) but otherwise subject to this Act.
Substitution of financial arrangements
(13)
For the purposes of subsection (10)(c)(i), a financial arrangement (first financial arrangement) to which a CFC is a party is not treated as maturing within 5 years of the date on which it was entered into if—
(a)
on or after the date of maturity, another financial arrangement (second financial arrangement) is entered into by the CFC or a CFC associated with the first CFC at any time during the term of the second financial arrangement; and
(b)
the second financial arrangement is a substitute, in whole or part, for the first financial arrangement; and
(c)
the second financial arrangement was entered into with a purpose of ensuring that subsections (11) and (12) apply.
Defined in this Act: accounting period, amount, associated person, attributed repatriation, branch equivalent income, CFC, Commissioner, dividend, dividend withholding payment, dividend withholding payment penalty tax, financial arrangement, financial arrangements rules, income interest, income tax, interest, loss, maturity, New Zealand, New Zealand repatriation amount, pay, year
Compare: 1994 No 164 ss CF 2(17), (18), CG 8(8)
Subsection (12)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “113C”
for “113B”
.
CD 40 Property transfers between associated persons
Transfers between associated CFCs
(1)
Subsection (2) applies if—
(a)
a CFC disposes of any property to another CFC; and
(b)
the first CFC held the property at the start of the accounting period in which the disposal occurs; and
(c)
the 2 CFCs are associated persons at the time of the disposal.
Calculation as if property held by second CFC for whole period
(2)
A person can choose to calculate their attributed repatriation from both CFCs as if the disposal had occurred at the start of each CFC’s accounting period in which the disposal in fact occurs. The election is made by the person preparing their return of income accordingly.
Transfers to non-residents with mismatching accounting periods
(3)
Subsection (4) applies if—
(a)
a CFC disposes of property to an associated person who is not a New Zealand resident during an accounting period (transfer period); and
(b)
the CFC did not own the property at the end of the previous accounting period; and
(c)
the associated person has an accounting period that ends on a later date than the CFC’s transfer period ends; and
(d)
the associated person holds the property at the end of the CFC’s transfer period; and
(e)
the associated person does not hold the property at the end of its own accounting period in which the disposal occurs.
Calculation as if CFC holding property at the end of period
(4)
For the purposes of calculating the CFC’s New Zealand repatriation amount, it is treated as if it still held the property at the end of the transfer period.
Defined in this Act: accounting period, associated person, attributed repatriation, CFC, New Zealand repatriation amount, New Zealand resident, return of income
Compare: 1994 No 164 s CG 8(4), (10)
CD 41 Unrepatriated income balance
Formula
(1)
The unrepatriated income balance of a CFC for an accounting period is calculated using the formula—
shareholders’ funds – available subscribed capital – previous New Zealand repatriation amounts.
Definition of items in formula
(2)
In the formula,—
(a)
shareholders’ funds is the total shareholders’ funds of the CFC at the end of the accounting period, measured under generally accepted accounting practice:
(b)
available subscribed capital is the CFC’s available subscribed capital at the end of the accounting period, excluding any amount resulting from—
(i)
a bonus issue by the CFC derived by a person who is not a resident of New Zealand; or
(ii)
direct or indirect reinvestment of a distribution by the CFC after 2 July 1992 to a person not resident in New Zealand:
(c)
previous New Zealand repatriation amounts is the total of any—
(i)
New Zealand repatriation amount of the CFC for a previous accounting period, reduced under any amended assessment under section CD 39(12); and
(ii)
specified repatriation amount of the CFC for a previous accounting period ending after 2 July 1992 and before the 2003-04 tax year calculated under section CG 8 of the Income Tax Act 1994 as it applied before the 2003-04 tax year and reduced under any amended assessment under section CF 2(17) of the Income Tax Act 1994 as it similarly applied.
Positive amounts
(3)
The unrepatriated income balance can never be negative.
Defined in this Act: accounting period, assessment, available subscribed capital, bonus issue, CFC, generally accepted accounting practice, New Zealand repatriation amount, resident in New Zealand, resident of New Zealand, tax year
Compare: 1994 No 164 s CG 8(11)
Prevention of double taxation
CD 42 Prevention of double taxation of share cancellation dividends
Application of this section
(1)
This section applies if—
(a)
a person derives an amount from the cancellation of a share in a company; and
(b)
the amount is income of the person under 1 of the following provisions (other rules):
(i)
section CB 1 (Amounts derived from business); or
(ii)
section CB 2 (Profit-making undertaking or scheme); or
(iii)
section CB 3 (Personal property acquired for purpose of disposal); or
(iv)
section CB 4 (Business of dealing in personal property); or
(v)
any other provision of this Act outside this subpart.
Treatment of amount
(2)
For the purposes of the other rules, the amount derived by the person from the company is treated as if it were reduced (but not below zero) by the amount of any dividend derived by the person in relation to the cancellation (excluding any attached imputation credit or dividend withholding payment credit).
Non-taxable dividends
(3)
Subsection (2) does not apply to the extent to which—
(a)
the dividend is exempt income of the person under sections CW 9 to CW 11 (which relate to income from equity); and
(b)
section NH 1 (Liability to make deduction in respect of foreign withholding payment dividend) does not require the person to deduct a dividend withholding payment from the dividend.
Subsection (3)(b): formula
(4)
For the purposes of subsection (3)(b), the extent to which a person is required to deduct a dividend withholding payment is calculated using the formula—
Definition of items in formula
(5)
In the formula,—
(a)
dividend withholding payment is any dividend withholding payment that must be deducted from the dividend under section NH 2(1) (Amount of dividend withholding payment to be deducted):
(b)
tax rate is the basic rate of income tax for companies, expressed as a decimal, stated in schedule 1, part A, clause 5 (Basic rates of income tax and specified superannuation contribution withholding tax), that applies for the tax year in which the dividend is paid.
Relationship of dividend exclusions to other provisions
(6)
Subject to subsection (2), the amount derived by the person from the company may be income of the person despite the fact that the amount is excluded from being a dividend by any of sections CD 14 to CD 19.
Relationship with section FC 3
(7)
This section is overridden by section FC 3 (Share dealing).
Defined in this Act: amount, cancellation, company dividend, dividend withholding payment, dividend withholding payment credit, exempt income, imputation credit, income, income tax, share, tax year
Compare: 1994 No 164 s CF 2(15)
Returning share transfers
This heading was inserted, as from 1 July 2006, by section 14 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
CD 43 Replacement payments
The amount of a replacement payment derived by a person under a returning share transfer is income of the person when it is paid to the person.
Defined in this Act: income, pay, replacement payment, returning share transfer
Section CD 43 was inserted, as from 1 July 2006, by section 14 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Subpart CE—Employee or contractor income
Contents
Employment income
CE 1 Amounts derived in connection with employment
Income
(1)
The following amounts derived by a person in connection with their employment or service are income of the person:
(a)
salary or wages or an allowance, bonus, extra pay, or gratuity:
(b)
expenditure on account of an employee that is expenditure on account of the person:
(c)
[Repealed](d)
a benefit received under a share purchase agreement:
(e)
directors’ fees:
(f)
compensation for loss of employment or service:
(g)
any other benefit in money.
Benefit of accommodation
(1B)
The market value of the following benefits provided to a person is income of the person if the benefit is provided in relation to an office or position held by them:
(a)
the provision of accommodation:
(b)
the provision of an accommodation allowance instead of accommodation.
Meaning of accommodation
(2)
For the purposes of this section and section CX 24 (Accommodation), accommodation means board or lodging, or the use of a house or living premises, or the use of part of a house or living premises.
Defined in this Act: accommodation, amount, expenditure on account of an employee, extra pay, income, salary or wages, share purchase agreement
Compare: 1994 No 164 ss CH 3, OB 1monetary remuneration
Section CE 1(1) heading: inserted (with effect on 1 April 2005), on 6 October 2009, by section 741(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CE 1(1)(c): repealed (with effect on 1 April 2005), on 21 December 2010 (applying for the 2005–06 and later income years), by section 164(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section CE 1(1B) heading: inserted (with effect on 1 April 2005), on 21 December 2010 (applying for the 2005–06 and later income years), by section 164(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section CE 1(1B): inserted (with effect on 1 April 2005), on 21 December 2010 (applying for the 2005–06 and later income years), by section 164(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section CE 1(2) heading: added (with effect on 1 April 2005), on 6 October 2009, by section 741(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CE 1(2): added (with effect on 1 April 2005), on 6 October 2009, by section 741(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Paragraphs (a) to (f) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for “; and”
.
Section CE 1 list of defined terms accommodation: inserted (with effect on 1 April 2005), on 6 October 2009, by section 741(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
CE 2 Value and timing of benefits under share purchase agreements
What this section does
(1)
This section determines the value of a benefit that an employee receives under a share purchase agreement and the allocation of the benefit to a particular tax year. If restrictions apply to the disposal of shares received under a share purchase agreement, section CE 3 applies.
If employees acquire shares
(2)
If an employee acquires shares under a share purchase agreement, the value of the benefit to the employee is the amount by which the value of the shares when they were acquired is more than the amount paid or payable for them. The employee receives the benefit in the tax year in which they acquire the shares.
If employees dispose of rights to non-associates
(3)
If an employee disposes of their rights under a share purchase agreement to a person who is not associated with them, the value of the benefit is the consideration for the disposal of the rights. The employee receives the benefit in the tax year in which they dispose of the rights.
If associates acquire shares
(4)
If, following 1 or more transactions between associated persons, an associated person acquires the shares under a share purchase agreement, the value of the benefit is the difference between the value of the shares on the date of acquisition by the associated person and the amount paid or payable for them. If the difference is negative, the value is zero. The employee receives the benefit in the tax year in which the associated person acquires the shares.
If associates dispose of rights to non-associates
(5)
If, following 1 or more transactions between associated persons, a person who is not an associated person acquires the rights under a share purchase agreement, the value of the benefit is the consideration paid for that disposal. The employee receives the benefit in the tax year in which the last associated person disposes of the rights.
If shares transferred when employees end employment or die
(6)
The value of the benefit is zero if a share purchase agreement provides unconditionally that, when the employee ends their employment or service or dies, the shares must be transferred to the employer or to the person from whom they were acquired, either without consideration or for a consideration no more than that paid by the employee.
If benefits arise under approved schemes
(7)
The value of the benefit is zero if the benefit arises under a share purchase scheme.
Disposal of rights under share purchase option
(8)
For the purposes of subsection (3), a disposal of rights under a share purchase agreement includes the cancellation of a share option in return for a cash payment.
Reduction of value of benefit in circumstances relating to non-resident
(9)
The value of a benefit arising from a period of employment is reduced, from the value that the benefit would have in the absence of this subsection,—
(a)
if, when the employee acquires the shares under the share purchase agreement or disposes of the rights under the share purchase agreement, the employee is a transitional resident; and
(b)
by an amount given by the following formula:
Defined in this Act: amount, associated person, employee, employer, non-resident, share, share purchase agreement, share purchase scheme, tax year, transitional resident
Compare: 1994 No 164 s CH 2(2), (3) first proviso, second proviso
Subsection (8) was inserted, as from 1 April 2006, by section 15(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for income years beginning as from 1 April 2006.
Subsection (9) was inserted, as from 1 October 2005, by section 15(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 15(5) and (6) of that Act as to the application of this amendment.
The list of defined terms was amended, as from 1 October 2005, by section 15(3)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting the word “non-resident”
with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 15(5) and (6) of that Act as to the application of this amendment.
The list of defined terms was amended, as from 1 October 2005, by section 15(3)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “transitional resident”
with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 15(5) and (6) of that Act as to the application of this amendment.
CE 3 Restrictions on disposal of shares under share purchase agreements
Effect of restrictions
(1)
When the benefit to an employee under a share purchase agreement is being valued, a restriction in the agreement on the disposal of the shares is taken into account only if the restriction is of a kind described in subsection (2) or (3).
First restriction
(2)
The first restriction is one that applies for a period that ends—
(a)
at least 8 years after the end of the tax year in which the employee receives the benefit; or
(b)
with the date of the employee’s death.
Second restriction
(3)
The second restriction is one that—
(a)
applies for a period that ends—
(i)
at least 8 years after the end of the tax year in which the employee receives the benefit; or
(ii)
with the date of the employee’s death; and
(b)
provides that an employee who ends their employment or service before the end of the period must unconditionally transfer some or all of the shares to the employer or to the person from whom the employee acquired them, either without consideration or for a consideration that is no more than that paid by the employee.
Transfers of shares under relationship agreements
(4)
If a share purchase agreement does not restrict an employee from transferring the shares under a relationship agreement, but the disposal of the shares by the person to whom the shares are transferred is restricted for a period that ends at least 8 years after the end of the tax year in which the employee would otherwise have received the benefit or after the death of the employee, then the restriction is treated as applying to the employee.
Defined in this Act: employee, employer, matrimonial agreement, share, share purchase agreement, tax year, year
Compare: 1994 No 164 s CH 2(3)(a), (b), third proviso
The heading to subsection (4) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreements”
for “matrimonial agreements”
.
Subsection (4) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreements”
for “matrimonial agreements”
.
CE 4 Adjustments to value of benefits under share purchase agreements
The Commissioner may at any time adjust the previously determined value of a benefit under a share purchase agreement if the value is reduced because—
(a)
a restriction on disposal exists when the employee disposes of the shares that was not taken into account in valuing the benefit; or
(b)
further consideration is required for the shares; or
(c)
the shares are reacquired either without consideration or for a consideration no more than that paid by the employee.
Defined in this Act: Commissioner, employee, share, share purchase agreement
Compare: 1994 No 164 s CH 2(4)
Definitions
CE 5 Meaning of expenditure on account of an employee
Meaning
(1)
Expenditure on account of an employee means a payment made by an employer relating to expenditure incurred by an employee or to be incurred by an employee.
Inclusion
(2)
Expenditure on account of an employee includes a premium that an employer pays on a life insurance policy taken out for the benefit of the employee (or their spouse, civil union partner or de facto partner or their child). This subsection is overridden by subsection (3)(f) to (i).
Exclusions
(3)
Expenditure on account of an employee does not include—
(a)
expenditure for the benefit of an employee, or a payment made to reimburse an employee, under section CW 13 (Expenditure on account, and reimbursement, of employees):
(b)
an allowance for additional transport costs under section CW 14 (Allowance for additional transport costs):
(bb)
an amount paid under section CW 13B (Relocation payments) or section CW 13C (Payments for overtime meals and certain other allowances):
(c)
expenses that an employee pays in connection with their employment or service to the extent to which the expenditure is their employer’s liability, if the employee undertakes to discharge the liability in consideration of the making of the payment by the employer:
(d)
expenditure on an employment-related loan to which the FBT rules apply:
(e)
an employer’s superannuation contribution:
(f)
a premium that an employer pays on a life insurance policy taken out for the benefit of the employee (or their spouse, civil union partner or de facto partner or their child) if—
(i)
the premium cannot be refunded to, or converted to cash by, the employee or an associated person; and
(ii)
the only benefits that are payable under the policy are those payable on the death of the employee (or their spouse, civil union partner or de facto partner or their child) or those payable because of accident, disease, or sickness of the employee (or their spouse, civil union partner or de facto partner or their child):
(g)
a premium that an employer that is a close company pays on a life insurance policy taken out for the benefit of the employee (or their spouse, civil union partner or de facto partner or their child), to the extent to which the expenditure is treated as a dividend under subpart CD (Income from equity):
(h)
a premium that an employer pays on a life insurance policy taken out for the benefit of the employee (or their spouse, civil union partner or de facto partner or their child) if the policy is, or is included in, a superannuation category 1 scheme, a superannuation category 2 scheme, or a superannuation category 3 scheme:
(i)
a premium that an employer pays on a life insurance policy taken out for the benefit of the employee (or their spouse, civil union partner or de facto partner or their child) if the policy is held by or for the trustees of a superannuation category 3 scheme:
(j)
a premium for income protection insurance that an employer is liable to pay or make a contribution towards for the benefit of an employee.
Defined in this Act: additional transport costs , associated person , close company contribution , dividend , employee, employer , employer’s superannuation contribution , employment-related loan , expenditure on account of an employee , FBT rules , life insurance policy , premium , superannuation category 1 scheme , superannuation category 2 scheme , superannuation category 3 scheme , trustee
Compare: 1994 No 164 s OB 1 expenditure on account of an employee, specified fund
Section CE 5(1): replaced (with effect on 1 April 2005), on 2 November 2012 (applying for the 2005–06 and later income years), by section 241(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Subsection (2) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (2) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (3)(a) to (h) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Section CE 5(3)(bb): inserted (with effect on 1 April 2005), on 6 October 2009, by section 742 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CE 5(3)(bb): amended (with effect on 1 April 2005), on 7 December 2009, by section 150 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Subsection (3)(f) before subpara (i) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (3)(f) before subpara (i) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (3)(f)(ii) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
in both places it occurs.
Subsection (3)(f)(ii) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
in both places it occurs.
Subsection (3)(g) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (3)(g) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (3)(h) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (3)(h) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (3)(i) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (3)(i) was amended, as from 1 April 2006, by section 16(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “scheme:”
for “scheme.”
.
Subsection (3)(i) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (3)(j) was inserted, as from 1 April 2006, by section 16(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
The list of defined terms was amended, as from 1 April 2006, by section 16(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “contribution”
.
CE 6 Meaning of share: when share acquired
Meaning
(1)
In sections CE 2 to CE 4 and CE 7, share includes a convertible note.
Use in sections CE 2 to CE 4 and CE 7
(2)
For the purposes of sections CE 2 to CE 4 and CE 7,—
(a)
shares are treated as having been acquired on the date on which the right or option to buy them is exercised; and
(b)
if shares or rights are acquired or transferred under an agreement by a trustee for the benefit of an employee to whom section CE 2 applies, the employee is treated as having acquired or transferred the shares or rights.
Defined in this Act: convertible note, employee, share, trustee
Compare: 1994 No 164 s CH 2(5), (6), (8)
The heading to section CE 6 was amended, as from 1 April 2005, by section 6 Taxation (Savings Investment and Miscellaneous Provisions Act 2006 (2006 No 81) by adding “: when share acquired”
.
CE 7 Meaning of share purchase agreement
In sections CE 1 to CE 4, share purchase agreement means an agreement to sell or issue shares in a company to an employee that is entered into in connection with the employee’s employment or service, whether or not an employment relationship exists when the employee receives a benefit under the agreement.
Defined in this Act: company, employee, share, share purchase agreement
Compare: 1994 No 164 s CH 2(1), (7)
Attributed income
CE 8 Attributed income from personal services
When this section applies
(1)
This section applies when, under sections GC 14B to GC 14E (which relate to the attribution rule), a person is required to attribute an amount to another person.
Income
(2)
The amount attributed is income of the person to whom it is attributed.
Timing of income
(3)
The amount is allocated to the income year in which it is attributed.
Defined in this Act: amount, income, income year
Compare: 1994 No 164 ss CD 7, EN 8
Restrictive covenants and exit inducement payments
CE 9 Restrictive covenants
When this section applies
(1)
This section applies when—
(a)
a person (person A) gives an undertaking that restricts, or is intended to restrict, their ability to perform services as an employee, office holder, or independent contractor, whether or not the undertaking is legally enforceable; and
(b)
a person, whether or not person A, derives an amount for the undertaking.
Income
(2)
The amount is income of person A.
Exclusion
(3)
Subsection (2) does not apply if—
(a)
person A derives the amount because person A or an associated person sells a business to another person (person B); and
(b)
person A or the associated person and person B agree in writing that the transaction is the sale of a business; and
(c)
person A derives the amount as consideration for an undertaking by person A not to provide goods or services in competition with the goods or services that person B provides from the business; and
(d)
person A does not provide services to person B after the sale of the business, other than temporarily providing services incidental to the sale.
Sale of all shares in company
(4)
For the purposes of subsection (3),—
(a)
the sale of a business includes the sale of shares in a company, but only if the sale is of all the shares in the company and the company—
(i)
carries on a business; or
(ii)
directly or indirectly wholly owns another company that carries on a business; and
(b)
in that case, the words “person B”
in subsection (3)(c) and (d) mean the company that carries on the business, whether the company referred to in paragraph (a)(i) or the company referred to in paragraph (a)(ii).
Sale of part of business
(5)
For the purposes of subsection (3), the sale of a business includes the sale of part of a business, if the part can be operated separately.
Defined in this Act: amount, associated person, business, company, employee, income, share
Compare: 1994 No 164 s CHA 1
CE 10 Exit inducements
An amount is income of a person if they derive it for—
(a)
the loss of a vocation; or
(b)
the loss of a position; or
(c)
leaving a position; or
(d)
loss of status.
Defined in this Act: amount, income
Compare: 1994 No 164 s CHA 2
Income protection insurance
This heading was inserted, as from 1 April 2006, by section 17 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
CE 11 Proceeds from claims under policies of income protection insurance
When this section applies
(1)
This section applies if an employer is liable to pay, or contribute to the payment of, a premium under a policy of income protection insurance for the benefit of a person who is their employee.
Income
(2)
An amount that is or would be derived under the policy is income of the person.
Defined in this Act: amount, employee, employer, income, pay
Section CE 11 was inserted, as from 1 April 2006, by section 17 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Tax credits
Heading: added, on 1 July 2008, by section 14 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CE 12 Tax credits under section LD 1B added to provider’s income
When this section applies
(1)
This section applies when a person is allowed under section LD 1B (Tax deductions from certain accident compensation payments: credit allowed to provider) a credit against the person’s income tax liability in an income year.
Income
(2)
An amount equal to the credit is income of the person in the income year, if the amount is not income under any other provision.
Defined in this Act: income, income year, payment
Section CE 12: added, on 1 July 2008, by section 14 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subpart CF—Income from living allowances, compensation, and government grants
Contents
CF 1 Benefits, pensions, compensation, and government grants
Income
(1)
The following amounts are income:
(a)
an accident compensation payment:
(b)
an education grant:
(c)
an income-tested benefit:
(d)
a living alone payment:
(e)
a New Zealand superannuation payment:
(f)
a parental leave payment paid under Part 7A of the Parental Leave and Employment Protection Act 1987:
(g)
a pension:
(h)
a veteran’s pension.
Some definitions
(2)
In this section,—
accident compensation payment means—
(a)
a payment under the Accident Compensation Act 1982 of earnings-related compensation that is not recovered or recoverable by, or refunded to, to the chief executive of the department currently responsible for administering the Social Security Act 1964:
(b)
a payment under section 80(4) of the Accident Compensation Act 1982 that is not recovered or recoverable by, or refunded to, to the chief executive of the department currently responsible for administering the Social Security Act 1964:
(c)
a payment of any of the following kinds under the Accident Rehabilitation and Compensation Insurance Act 1992, none of which is recovered or recoverable:
(i)
a vocational rehabilitation allowance under section 25; or
(ii)
compensation for loss of earnings under any of sections 38, 39, and 43; or
(iii)
compensation for loss of potential earning capacity under section 45 or 46; or
(iv)
weekly compensation under any of sections 58, 59, and 60; or
(v)
continued compensation under section 138; or
(d)
a payment under the Accident Insurance Act 1998 of weekly compensation that is not recovered or recoverable:
(e)
a payment under a policy of personal accident or sickness insurance under section 188(1)(a) of the Accident Insurance Act 1998 (as it was immediately before its repeal by section 7 of the Accident Insurance Amendment Act 2000) of compensation for loss of earnings or loss of potential earning capacity as it relates to workrelated personal injury:
(f)
a payment under the Injury Prevention, Rehabilitation, and Compensation Act 2001 paid by the Corporation as defined in that Act, of weekly compensation that is not recovered or recoverable under section 248 of that Act:
(g)
a payment under section 81(1)(b) of the Injury Prevention, Rehabilitation, and Compensation Act 2001 paid by the Corporation as defined in that Act, for attendant care as defined in schedule 1, clause 12 of that Act.
education grant means a basic grant or an independent circumstances grant under regulations made under section 303 of the Education Act 1989
pension—
(a)
includes a gratuitous payment made to a person in return for services that the person (or their parent, child, spouse, civil union partner or de facto partner, former spouse, civil union partner or de facto partner, or dependant) provided to the payer when the payment would not have been made if the services had not been provided; and
(b)
does not include a payment made to the person because of, and within 1 year after, the death of that parent, child, spouse, civil union partner or de facto partner, former spouse, civil union partner or de facto partner, or dependant.
pension: this definition was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
in each place it occurs.
pension: this definition was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
in each place it occurs.
Defined in this Act: accident compensation payment, amount, chief executive of the department currently responsible for administering the Social Security Act 1964, education grant, income, income-tested benefit, living alone payment, New Zealand superannuation, pension, personal service rehabilitation payment, veteran’s pension, year
Compare: 1994 No 164 s CC 1
Subsection (1)(a) to (g) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
accident compensation payment: paragraphs (a), (b), (d), and (e) of this definition were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Section CF 1(2) accident compensation payment paragraph (f): substituted (with effect on 1 April 2005), on 6 October 2009, by section 743 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CF 1(2) accident compensation payment paragraph (g): substituted (with effect on 1 April 2005), on 6 October 2009, by section 743 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CF 1 list of defined terms personal service rehabilitation payment: inserted, on 1 July 2008, by section 15(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CF 2 Remission of specified suspensory loans
When this section applies
(1)
This section applies when a public authority—
(a)
grants a loan to a person for a business that the person carries on; and
(b)
designates the loan as a specified suspensory loan.
Income
(2)
An amount remitted on the specified suspensory loan is income of the person.
Timing of income
(3)
The amount is allocated in equal parts to the income year of remission and the following 2 income years. However, the person may choose to allocate some or all of the amount in the following 2 income years to a previous income year that is 1 of the 3 income years.
Business ceasing
(4)
If the person ceases to carry on the business for which the specified suspensory loan was granted, an amount remitted that is allocated to a later income year is allocated to the income year in which the person ceases business.
Defined in this Act: amount, business, income, income year, public authority
Compare: 1994 No 164 s DC 2
CF 3 Optional treatment of withdrawals from foreign superannuation schemes not included in return or assessed before 1 April 2014
When this section applies
(1)
This section applies when a person—
(a)
derives an amount, other than a pension or annuity, as a withdrawal from a foreign superannuation scheme in the period beginning with the beginning of the 2005–06 income year and ending with the end of the 2007–08 income year; and
(b)
does not include all or part of the withdrawal (the omitted withdrawal) in a return of income for the income year in which the amount was derived; and
(c)
is not assessed before 1 April 2014 for income included in the omitted withdrawal; and
(d)
chooses to include in a return of income for an income year (the return year) that is the 2013–14 or 2014–15 income year an amount of assessable income as relating to all omitted withdrawals from the foreign superannuation scheme.
Law applying at time of withdrawal overridden
(2)
In the circumstances described in subsection (1), the provisions of this Act applying to the taxation of the omitted withdrawal when the person derived the omitted withdrawal, and of the person’s interest in the foreign superannuation scheme for the period ending by 31 March 2014 in which the person had the interest, are overridden by section CZ 21B (Optional treatment of withdrawals from foreign superannuation schemes not included in return or assessed before 1 April 2014) of the Income Tax Act 2007.
Defined in this Act: amount, assessable income, income, income year, return of income, superannuation fund
Section CF 3: inserted, on 1 April 2014, by section 141 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
CF 4 Person deriving pension from foreign superannuation scheme and returning as income before 1 April 2014
When this section applies
(1)
This section applies when a person has, before 1 April 2014, an interest in a foreign superannuation scheme and—
(a)
the interest would, in the absence of this provision, be an attributing interest; and
(b)
on and after 1 April 2014 the interest is not an attributing interest; and
(c)
the person—
(i)
does not derive from the foreign superannuation scheme, in the period beginning with 1 January 2000 and ending before 1 April 2014, a payment that is a withdrawal:
(ii)
derives payments, each of which is a pension, from the foreign superannuation scheme in the period beginning with 1 January 2000 and ending before 1 April 2014 and includes each payment in a return of income, for the income year of the payment, that is received by the Commissioner by the due date for the return of income.
No FIF income or FIF loss from interest
(2)
The person is treated as having no FIF income or FIF loss from the interest for the period beginning with the start of the 2005–06 income year and ending with the finish of the 2007–08 income year.
Defined in this Act: attributing interest, Commissioner, FIF income, FIF loss, foreign superannuation scheme, income year, pension, return of income
Section CF 4: inserted (with effect on 31 March 2008), on 24 February 2016, by section 284 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Subpart CG—Recoveries
Contents
CG 1 Amount of depreciation recovery income
An amount of depreciation recovery income that a person has is income of the person.
Defined in this Act: amount, depreciation recovery income, income
CG 2 Remitted amounts
When this section applies
(1)
This section applies when—
(a)
a person is allowed a deduction in an income year of an amount that the person is liable to pay; and
(b)
the person’s liability for the amount is later remitted or cancelled, wholly or partly; and
(c)
the remission or cancellation is not a dividend; and
(d)
the person is not required to calculate a base price adjustment by section EW 29 (When calculation of base price adjustment required).
Income
(2)
The amount to which the remission or cancellation applies is income of the person.
Timing of income
(3)
The income is allocated to the income year in which the remission or cancellation occurs.
How remission or cancellation occurs
(4)
Remission or cancellation occurs, for the purposes of this section, in 1 of the following ways:
(a)
a liability is remitted to the extent to which the person is discharged from it without fully adequate consideration in money or money’s worth:
(b)
a liability is cancelled to the extent to which the person is released from it under the Insolvency Act 2006 or the Companies Act 1993 or the laws of a country or territory other than New Zealand:
(c)
a liability is cancelled to the extent to which the person is released from it by a deed or agreement of composition with the person’s creditors:
(d)
a liability is cancelled to the extent to which it is irrecoverable or unenforceable through lapse of time.
Defined in this Act: amount, deduction, dividend, income, income year, New Zealand
Compare: 1994 No 164 ss CE 4(1), (2), IE 1(4)(d)
Subsection (4)(a) to (c) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for “; or”
.
Section CG 2(4)(b): amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55).
CG 3 Bad debt repayment
An amount received by a person for a bad debt for which the person has been allowed a deduction is income of the person.
Defined in this Act: amount, deduction, income
Compare: 1994 No 164 s CE 1(1)(d)
CG 4 Recovered expenditure or loss
When this section applies
(1)
This section applies when—
(a)
a person is allowed a deduction for expenditure or loss; and
(b)
the person recovers some or all of the expenditure or loss, whether through insurance, indemnity, or otherwise; and
(c)
the amount recovered, to the extent of the deduction, is not income of the person under any other provision of this Act.
Income
(2)
The amount recovered is, to the extent of the deduction, income of the person.
Timing of income
(3)
The income is allocated to the income year in which the amount is recovered.
Defined in this Act: amount, deduction, income year, loss
Compare: 1994 No 164 ss DJ 1(c), DJ 5(2), DJ 7, DJ 8(1), DL 1(6), (12), DL 4
The list of defined terms was amended, as from 1 October 2005, by section 10 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting “, loss”
after “income year”
with application as from the 2005–06 income year.
CG 5 Recoveries or receipts by employers from superannuation schemes
When this section applies
(1)
This section applies when—
(a)
an employer makes an employer’s superannuation contribution to a superannuation scheme for their employee’s benefit; and
(b)
the employer is allowed a deduction for the contribution; and
(c)
the employer—
(i)
recovers the contribution from the superannuation scheme; or
(ii)
receives a benefit in money or money’s worth from the superannuation scheme, other than an amount paid to the employer under the scheme in return for contributions made by or for the employer in a personal capacity.
Income
(2)
The amount recovered or received is, to the extent of the deduction, income of the employer.
Timing of income
(3)
The income is allocated to the income year in which the amount is recovered or received.
Defined in this Act: amount, deduction, employee, employer, employer’s superannuation contribution, income, income year, superannuation scheme
Compare: 1994 No 164 s DF 3(3), (4)
CG 6 Receipts from insurance, indemnity, or compensation for trading stock
When this section applies
(1)
This section applies when a person receives an amount of insurance, indemnity, or compensation for the loss or destruction of, or damage to,—
(a)
trading stock:
(b)
anything acquired, manufactured, or produced for a purpose ancillary to a business of manufacturing or producing goods for sale or exchange.
Income
(2)
The part of the insurance, indemnity, or compensation that is attributable to the asset is income if—
(a)
the person is allowed a deduction in a tax year for the cost of the asset; and
(b)
the deduction is not for an amount of depreciation loss.
Timing of income
(3)
The income is allocated to the income year in which the amount is received.
Defined in this Act: amount, business, deduction, depreciation loss, income, income year, tax year, trading stock
Compare: 1994 No 164 s EE 19
Subsection (1)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Subpart CH—Adjustments
Contents
Matching rules: revenue account property, prepayments, and deferred payments
CH 1 Adjustment for closing values of trading stock, livestock, and excepted financial arrangements
When this section applies
(1)
This section applies when a person has some or all of the following at the end of an income year:
(a)
trading stock valued under subpart EB (Valuation of trading stock (including dealer’s livestock)):
(b)
livestock valued under subpart EC (Valuation of livestock):
(c)
excepted financial arrangements that are revenue account property valued under subpart ED (Valuation of excepted financial arrangements):
(d)
a share supplier’s share-lending right, if the original shares that relate to the right are excepted financial arrangements described in paragraph (c).
Income: closing value of trading stock
(2)
The value of the trading stock, calculated under section EB 3 (Valuation of trading stock), is income of the person in the income year.
Income: closing value of livestock
(3)
The value of the livestock, calculated under section EC 2 (Valuation of livestock), is income of the person in the income year.
Income: closing value of excepted financial arrangements
(4)
The value of the excepted financial arrangements or share-lending right, calculated under section ED 1 (Valuation of excepted financial arrangements), is income of the person in the income year.
Defined in this Act: excepted financial arrangement, income, income year, original share, revenue account property, share-lending right, share supplier, trading stock
Compare: 1994 No 164 s EE 2(4)
Subsection (1)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Subsection (1)(c) was amended, as from 1 July 2006, by section 20(1)Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “arrangements):”
for “arrangements).”
.
Subsection (1)(d) was inserted, as from 1 July 2006, by section 20(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Subsection (4) was amended, as from 1 July 2006, by section 20(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “arrangements or share-lending right,”
for “arrangements,”
.
The list of defined terms was amended, as from 1 July 2006, by section 20(3)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “original share”
..
The list of defined terms was amended, as from 1 July 2006, by section 20(3)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “share-lending right”
..
The list of defined terms was amended, as from 1 July 2006, by section 20(3)(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “share supplier”
..
CH 2 Adjustment for prepayments
When this section applies
(1)
This section applies when a person has, under section EA 3 (Prepayments), an unexpired amount of expenditure at the end of an income year.
Income
(2)
The unexpired amount is income of the person in the income year.
Defined in this Act: amount, income, income year
Compare: 1994 No 164 s EF 1(1)(b)
CH 3 Adjustment for deferred payment of employment income
When this section applies
(1)
This section applies when a person has, under section EA 4 (Deferred payment of employment income), an unpaid amount of expenditure on employment income that is to be treated as income in an income year.
Income
(2)
The unpaid amount is income of the person in the income year.
Defined in this Act: amount, employment income, income, income year
Compare: 1994 No 164 s EF 1(1)(b)
Change to accounting practice
CH 4 Adjustment for change to accounting practice
When this section applies
(1)
This section applies when a person has, under section EG 2(2)(a) or (3)(a) (Adjustment for changes to accounting practice), an amount owing to them or an amount owed by them as quantified in those paragraphs.
Income
(2)
An amount quantified and allocated under section EG 2(2)(a) or (3)(a) (Adjustment for changes to accounting practice) is income of the person.
Defined in this Act: amount, income
Compare: 1994 No 164 s EC 1
GST
CH 5 Adjustment for GST
Income
(1)
An amount calculated under sections 21F and 21G of the Goods and Services Tax Act 1985 relating to the application of goods and services is income of a person.
Exclusion
(2)
This section does not apply to an amount that relates to the application of a capital asset—
(a)
for the principal purpose of making taxable supplies, when the asset was acquired or produced other than for the principal purpose of making taxable supplies:
(b)
other than for the principal purpose of making taxable supplies, when the asset was acquired or produced for the principal purpose of making taxable supplies:
(c)
other than for the purpose of deriving income.
Timing of income
(3)
The income is allocated to the income year in which the amount is calculated.
Defined in this Act: amount, income, income year, taxable supply
Compare: 1994 No 164 s ED 4(3)
Subsection (2)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Subpart CP—Income from portfolio investment entities
Subpart CP: inserted, on 1 October 2007, by section 7 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
CP 1 Portfolio investor allocated income
The amount of portfolio investor allocated income of a person who is an investor in a portfolio tax rate entity is income of the person in the income year that includes the end of the entity’s income year for which the person is allocated the amount.
Defined in this Act: income, income year, investor, portfolio investor allocated income, portfolio tax rate entity
Subpart CQ—Attributed income from foreign equity
Contents
Attributed controlled foreign company income
CQ 1 Attributed controlled foreign company income
Attributed CFC income of a person is income.
Defined in this Act: attributed CFC income, income
Compare: 1994 No 164 s CG 1(a)
CQ 2 When attributed CFC income arises
General rule
(1)
A person has attributed CFC income from a foreign company in an income year if—
(a)
the foreign company is a CFC at any time during 1 of its accounting periods, under sections EX 1 to EX 7 (which relate to the definition of a controlled foreign company); and
(b)
the accounting period ends during the income year; and
(c)
the person has an income interest in the foreign company for the accounting period, under sections EX 8 to EX 13 (which relate to calculating a person’s income interest); and
(d)
at any time in the accounting period, the person is a New Zealand resident who is not a transitional resident; and
(e)
the person’s income interest is 10% or more for the part of the accounting period during which the person is a New Zealand resident who is not a transitional resident, under sections EX 14 to EX 17 (which relate to the 10% threshold); and
(f)
either—
(i)
the CFC has branch equivalent income for the accounting period under section EX 21 (Branch equivalent income or loss: calculation rules); or
(ii)
the special rule in section EX 19 (Taxable distribution from non-qualifying trust) applies because the CFC gets a distribution from a non-qualifying trust; and
(g)
the CFC is not an unqualified grey list CFC for the accounting period, under section EX 22 (Unqualified grey list CFCs).
Special rule: branch equivalent FIF with taxable distribution
(2)
A person also has attributed CFC income if section EX 43(5) (Branch equivalent method) applies because—
(a)
the person has an attributing interest in a FIF; and
(b)
the person is using the branch equivalent method to calculate FIF income; and
(c)
the FIF receives a taxable distribution from a non-qualifying trust.
Treated as derived while person New Zealand resident
(3)
Attributed CFC income of a person who has ceased to be a New Zealand resident is treated as being derived while the person was a New Zealand resident.
Dividend income can arise
(4)
A person with an income interest of 10% or more in a CFC can also have dividend income under section CD 13 (Attributed repatriations from controlled foreign companies) to the extent to which any attributed repatriation is calculated for the person and the CFC under sections CD 34 to CD 41 (which relate to CFC attributed repatriation calculation rules).
Defined in this Act: accounting period, attributed CFC income, attributed repatriation, attributing interest, branch equivalent income, branch equivalent method, CFC, distribution, dividend, FIF, FIF income, foreign company, grey list, income, income interest, income year, New Zealand resident, non-qualifying trust, taxable distribution, transitional resident
Compare: 1994 No 164 ss CG 6(1)(a), CG 7(1), (6), CG 13(1), CG 21(2)(a)
Subsection (1)(d) was substituted, as from 1 October 2005, by section 21(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 21(4) and (5) of that Act as to the application of this amendment.
Subsection (1)(e) was amended, as from 1 October 2005, by section 170 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “EX 17”
for “EX 16”
with application as from the 2005–06 income year.
Subsection (1)(e) was amended, as from 1 October 2005, by section 21(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “part of the accounting period during which the person is a New Zealand resident who is not a transitional resident”
for “accounting period”
with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 21(4) and (5) of that Act as to the application of this amendment.
The list of defined terms was amended, as from 1 October 2005, by section 21(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “transitional resident”
with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 21(4) and (5) of that Act as to the application of this amendment.
CQ 3 Calculation of attributed CFC income
The amount of attributed CFC income is calculated under the rules in sections EX 18 to EX 20 (which relate to the calculation of attributed CFC income or loss).
Defined in this Act: amount, attributed CFC income
Foreign investment fund income
CQ 4 Foreign investment fund income
FIF income of a person is income.
Defined in this Act: FIF income, income
Compare: 1994 No 164 s CG 1(b)
CQ 5 When FIF income arises
General rule
(1)
A person has FIF income in an income year if—
(a)
at any time in the year, the person has—
(i)
rights in a foreign company, or a foreign superannuation scheme, or an entity listed in schedule 4, part A (Foreign investment funds); or
(ii)
rights under a life insurance policy issued by a non-resident; and
(b)
at that time, the rights are an attributing interest in a FIF under sections EX 30 (Attributing interests in FIFs) and EX 31 (Direct income interests in FIFs); and
(c)
at that time, the rights are not exempt from being an attributing interest in a FIF under any of—
(i)
the CFC rules exemption in section EX 32 (CFC rules exemption):
(ii)
the grey list exemption in section EX 33(Exemptions: direct income interests in FIF in grey list country):
(iib)
the exemptions limited by income years in section EX 33B (Exemptions limited by income years: shares in certain grey list companies):
(iic)
the exemption for shares in a listed Australian company in section EX 33C (Exemption: shares in listed Australian company):
(iid)
the exemption for units in certain Australian unit trusts in section EX 33D (Exemption: units in certain Australian unit trusts):
(iie)
the Australian superannuation fund exemption in section EX 33E (Australian superannuation fund exemption):
(iii)
the foreign exchange control exemption in section EX 34 (Foreign exchange control exemption):
(iv)
the exemption for a non-resident or transitional resident in section EX 35 (Income interest of non-resident or transitional resident):
(v)
the immigrant’s accrued superannuation entitlement exemption in section EX 36 (Immigrant’s accrued superannuation entitlement exemption):
(vi)
the non-resident’s annuity or pension exemption in section EX 37 (Non-resident’s pension or annuity exemption); and
(d)
if the person is a natural person and not acting as a trustee, the person holds, at any time in the year when the person is a New Zealand resident, attributing interests in FIFs for which the total of the following amounts is more than $50,000:
(i)
if subparagraph (ii) does not apply to the interest, the cost of the interest calculated under section EX 56 (Measurement of cost):
(ii)
if the person acquired the interest before 1 January 2000 and chooses, for the year or an earlier year, that this subparagraph and section DN 6(1)(d)(ii) (When FIF loss arises) apply to all interests acquired before 1 January 2000, half of the market value of the interest on 1 April 2007; and
(db)
if the person is acting as a trustee of a trust that meets the requirements of subsection (5), the person holds, at any time in the year, attributing interests in FIFs for which the total of the following amounts is more than $50,000:
(i)
if subparagraph (ii) does not apply to the interest, the cost of the interest calculated under section EX 56 (Measurement of cost):
(ii)
if the person acquired the interest before 1 January 2000 and chooses, for the year or an earlier year, that this subparagraph and section DN 6(1)(d)(ii) apply to all interests acquired before 1 January 2000, half of the market value of the interest on 1 April 2007; and
(e)
at any time in the year, the person is a New Zealand resident who is not a transitional resident and holds the attributing interest; and
(f)
under the relevant calculation method chosen by the person, an income amount is calculated for the year under sections EX 38 to EX 45B (which relate to the calculation of FIF income or loss), EX 48 (Top-up FIF income: deemed rate of return method), or EX 49 (Top-up FIF income: 1 April 1993 uplift interests).
Treatment of deemed transaction under section EX 51, EX 53, or EX 54B
(1B)
If a person is treated under section EX 51(5) (Consequences of changes in method), EX 53 (Changes in application of FIF exemptions), or EX 54B (FIF rules first applying to interest for income year beginning on or after 1 April 2007) as disposing of or acquiring rights in an income year, the disposal or acquisition is ignored for the purposes of subsection (1)(d) and (db).
Look-through calculation methods
(2)
Despite subsection (1), if the calculation method is the accounting profits method or branch equivalent method,—
(a)
FIF income arises in the income year only if the relevant accounting period of the FIF ends during the year; and
(b)
the tests in subsection (1)(a), (b), (c), and (e) are applied on the basis that references in subsection (1)(a), (b), (c), and (e) to any time in the year are read as references to any time in the relevant accounting period.
Special rule: CFC with FIF interest
(3)
A person with an income interest of 10% or more in a CFC can also have FIF income in an income year under the special rule in section EX 46 (Additional FIF income or loss if CFC owns FIF), which applies when the CFC has an attributing interest in a FIF (whether or not the CFC is an unqualified grey list CFC under section EX 22 (Unqualified grey list CFCs)).
Treated as derived while person New Zealand resident
(4)
FIF income of a person who has ceased to be a New Zealand resident is treated as being derived while the person was a New Zealand resident.
When application of subsection (1) affected by subsection (1)(db)
(5)
Subsection (1)(db) applies to the trustee of a trust for an income year if—
(a)
the settlor of the trust—
(i)
is a relative or legal guardian of a beneficiary of the trust, or a person associated with a relative or legal guardian of a beneficiary of the trust under section OD 7 (Defining when 2 persons are associated persons); and
(ii)
is required by a court order to pay damages or compensation to the beneficiary:
(b)
the settlor of the trust—
(i)
is the estate of a deceased person; and
(ii)
is required by a court order to settle on the trust the proceeds of damages or compensation for the beneficiaries of the trust:
(c)
the settlor of the trust is the Accident Compensation Corporation:
(d)
the trust is of the estate of a deceased person and the income year begins on or before the day that is 5 years after the person’s death.
Defined in this Act: accounting period, accounting profits method, amount, associated person, attributing interest, branch equivalent method, calculation method, CFC, FIF, FIF income, foreign company, foreign superannuation scheme, grey list, income, income interest, income year, life insurance policy, New Zealand resident, non-resident, relative, transitional resident, trustee
Compare: 1994 No 164 ss CG 7(5), CG 15(1), (2), CG 16(2), (5)
Subsection (1)(c)(i) to (v) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Subsection (1)(c)(ii) was amended, as from 18 December 2006, by section 8(1)(a) Taxation (Savings Investment and Miscellaneous Provisions Act 2006 (2006 No 81) by substituting “(Exemptions: direct income interests in FIF in grey list country)”
for “(Grey list exemption)”
with application as from the 2006–07 income year.
Subsection (1)(c)(iib) to (iie) was inserted, as from 18 December 2006, by section 8(1)(b) Taxation (Savings Investment and Miscellaneous Provisions Act 2006 (2006 No 81) with application as from the 2006–07 income year.
Subsection (1)(c)(iv) was substituted, as from 1 October 2005, by section 22(1)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 22(3) and (4) of that Act as to the application of this amendment.
Subsection (1)(d) was substituted, as from 1 April 2007, by section 8(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) . See section 8(7) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
Section CQ 5(1)(d): amended (with effect from 1 April 2007), on 19 December 2007, by section 16(1)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (1)(db) was inserted, as from 1 April 2007, by section 8(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) . See section 8(7) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
Section CQ 5(1)(db): amended (with effect from 1 April 2007), on 19 December 2007, by section 16(1)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (1)(e) was substituted, as from 1 October 2005, by section 22(1)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 22(3) and (4) of that Act as to the application of this amendment.
Subsection (1)(f) was substituted, as from 1 April 2007, by section 8(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) . See section 8(7) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
Section CQ 5(1)(f): amended (with effect from 1 April 2007), on 19 December 2007, by section 16(1)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CQ 5(1B) heading: inserted (with effect from 1 April 2007), on 19 December 2007, by section 16(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CQ 5(1B): inserted (with effect from 1 April 2007), on 19 December 2007, by section 16(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (5) and the preceding heading were inserted, as from 1 April 2007, by section 8(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) . See section 8(7) of that Act as to the application of this amendment for income years beginning on or after 1 April 2007.
The list of defined terms was amended, as from 1 October 2005, by section 22(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “transitional resident”
with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 22(3) and (4) of that Act as to the application of this amendment.
The list of defined terms was amended, as from 1 April 2007, by section 8(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by inserting “associated person”
and “relative”
.
CQ 6 Calculation of FIF income
The amount of any FIF income is calculated, using the relevant calculation method, under sections EX 38 to EX 49 (which relate to the calculation of FIF income or loss).
Defined in this Act: amount, calculation method, FIF income
Section CQ 6 was amended, as from 1 October 2005, by section 171 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “EX 38”
for “EX 42”
.
Subpart CR—Income from life insurance
Contents
CR 1 Income of life insurer
Income: premium loading
(1)
The premium loading that a life insurer has in an income year is income of the life insurer in the income year.
Income: mortality profit
(2)
The mortality profit that a life insurer has in an income year is income of the life insurer in the income year.
Income: discontinuance profit
(3)
The discontinuance profit that a life insurer has in an income year is income of the life insurer in the income year.
Income: policyholder income
(4)
The policyholder income that a life insurer has in an income year is income of the life insurer in the income year.
Income: disposal amount
(5)
An amount that a life insurer derives from disposing of any property of their life insurance business is income of the life insurer.
Defined in this Act: amount, business, discontinuance profit, income, income year, life insurance, life insurer, mortality profit, policyholder income, premium loading, property
Compare: 1994 No 164 ss CM 5(1), CM 6(1), CM 7(1), CM 10, CM 15(3)
CR 2 Amount of income of life insurer
Premium loading
(1)
The premium loading that a life insurer has in an income year is quantified under sections EY 14 to EY 23 (which relate to premium loading).
Mortality profit
(2)
The mortality profit that a life insurer has in an income year is quantified under sections EY 24 to EY 33 (which relate to mortality profit).
Discontinuance profit
(3)
The discontinuance profit that a life insurer has in an income year is quantified under sections EY 34 to EY 40 (which relate to discontinuance profit).
Policyholder income
(4)
The policyholder income that a life insurer has in an income year is quantified under sections EY 41 to EY 44 (which relate to policyholder income).
Disposal of property
(5)
The amount of income that a life insurer derives from disposing of any property of their life insurance business is quantified under section EY 45 (Income from disposal of property).
Defined in this Act: amount, business, discontinuance profit, income, income year, life insurance, life insurer, mortality profit, policyholder income, premium loading, property
CR 3 Income for general insurance outstanding claims reserve
When this section applies
(1)
This section applies for—
(a)
an insurer who uses IFRS 4, Appendix D for general insurance contracts; and
(b)
general insurance contracts, excluding contracts having premiums to which section FC 14 applies.
When this section does not apply
(1B)
This section does not apply for contracts that section DZ 10 (General insurance with risk period straddling 1 July 1993) applies to.
Formula for insurer’s OCR income
(2)
For an income year (the current year), an insurer has income of the amount by which zero is less than the amount calculated using the formula—
| opening outstanding claims reserve − closing outstanding claims reserve. |
Definition of items in formula
(3)
In the formula,—
(a)
opening outstanding claims reserve is—
(i)
the amount of the insurer’s closing outstanding claims reserve for the income year before the current year (the prior year); or
(ii)
the amount of the insurer’s reserve for outstanding claims liability, calculated at the end of the prior year, using the basis the insurer used for tax purposes in that prior year, if the current year is the first year that this section applies to the insurer:
(b)
closing outstanding claims reserve is the amount of the insurer’s outstanding claims reserve, calculated at the end of the current year.
Defined in this Act: amount, general insurance contract, IFRS 4, income, income year, insurer, life insurer, outstanding claims reserve
Section CR 3: added (with effect on 1 April 2006), on 6 October 2009, by section 744(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CR 3(1B) heading: inserted (with effect on 1 April 2006, applying for the 2005–06 and later income years), on 17 July 2013, by section 153(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section CR 3(1B): inserted (with effect on 1 April 2006, applying for the 2005–06 and later income years), on 17 July 2013, by section 153(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Subpart CS—Superannuation funds
Contents
Withdrawals
CS 1 Withdrawals
When this section applies
(1)
This section applies when a withdrawal is made from a superannuation fund if—
(a)
the fund is—
(i)
a fund to which the member’s employer has made specified superannuation contributions for the member’s benefit; or
(ii)
a fund that has received a transfer from another superannuation fund for the member; and
(b)
the withdrawal is related to the member’s membership of the fund; and
(c)
the application of this section to the withdrawal is not excluded by any of sections CS 2 to CS 9.
Income of superannuation fund from withdrawal
(2)
The superannuation fund derives from the withdrawal an amount of assessable income that is given by the following formula:
Definition of items in formula
(3)
The items in the formula are defined in subsections (4) to (5).
Withdrawal
(4)
Withdrawal is the total of—
(a)
the amount of money that is withdrawn from the superannuation fund:
(b)
the market value of the part of the withdrawal that is not an amount of money, on the date of the withdrawal.
Other contributions
(4B)
Other contributions is the part of the withdrawal that the trustee of the superannuation fund establishes is not employer’s contributions to superannuation savings.
Tax rate
(5)
Tax rate is the basic rate of income tax stated in schedule 1, part A, clause 4 (Basic rates of income tax and specified superannuation contribution withholding tax).
Reduction of income
(6)
The superannuation fund may reduce the income by 25% for each tax year to which both the following apply:
(a)
the tax year is 1 of the 4 tax years before the tax year in which the withdrawal is made; and
(b)
in the tax year, the total of the member’s taxable income and the employer’s specified superannuation contributions to the fund for the member’s benefit is less than $60,000.
Timing of income
(7)
The income is allocated as follows:
(a)
if the superannuation fund is wound up or becomes a foreign superannuation scheme, the income is allocated to the tax year in which the withdrawal is made:
(b)
in any other case, the income is allocated to the tax year following the tax year in which the withdrawal is made.
Application of Tax Administration Act 1994
(8)
Sections 32A to 32C of the Tax Administration Act 1994 apply when this section applies.
Defined in this Act: amount, employer, employer’s contributions to superannuation savings, foreign superannuation scheme, income, income tax, member, specified superannuation contribution, superannuation fund, tax year, taxable income, trustee, withdrawal
Compare: 1994 No 164 ss CL 4, EN 6
Subsection (2) was substituted, as from 1 October 2005, by section 172(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from the 2005–06 income year.
Subsection (2) formula was amended, as from 18 December 2006, by section 9(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “withdrawal”
for “withdrawn”
with application as from the 2005–06 income year.
Subsection (3) was amended, as from 1 October 2005, by section 172(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “subsections (4) to (5)”
for “subsections (4) and (5)”
with application as from the 2005–06 income year.
Subsection (4) was substituted, as from 1 October 2005, by section 172(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Subsection (4B) was inserted, as from 1 October 2005, by section 172(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from the 2005–06 income year.
Subsection (7)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Exclusions
CS 2 Exclusions of withdrawals of various kinds
Withdrawal of member’s contributions
(1)
Section CS 1 does not apply to a withdrawal of a member’s contributions.
Withdrawal of employer’s contributions
(2)
Section CS 1 applies to a withdrawal of the employer’s contributions to superannuation savings for a member’s benefit only if—
(a)
the employer increases the level of the employer’s specified superannuation contributions on and after 1 April 2000, as compared with the level in the last pay period ending before 1 April 2000; and
(b)
the employer does not come within any of subsection (3)(a) to (c).
Increase not treated as such
(3)
An employer who increases the level of specified superannuation contributions is treated as not doing so—
(a)
to the extent to which the employer increases the level by making additional specified superannuation contributions for the member’s benefit to compensate for underpaying specified superannuation contributions for the member’s benefit; or
(b)
if the increase is required by a trust deed or a contract, or an amendment to a trust deed or a contract, and the requirement existed before 1 April 2000; or
(c)
if the level of specified superannuation contributions does not change as a percentage of salary as between the level on and after 1 April 2000 and the level in the last pay period ending before 1 April 2000.
Superannuation fund administration costs
(4)
Section CS 1 does not apply to a withdrawal for fees and expenses associated with the management and marketing of the superannuation fund.
Withdrawals from KiwiSaver schemes for purpose of purchase of first home[Repealed]
(4B)
[Repealed]Life, health, sickness, or accident insurance
(5)
Section CS 1 does not apply to—
(a)
a withdrawal for the payment of premiums for life insurance, health insurance, sickness insurance, or accident insurance held by or for a member of the superannuation fund, whether the insurance is group insurance or individual insurance; or
(b)
a withdrawal to pay an amount claimed under insurance described in paragraph (a).
Transfer between funds
(6)
Section CS 1 does not apply to a withdrawal that takes the form of a direct transfer of an amount from a superannuation fund to another superannuation fund.
Transfer from wound-up fund
(7)
Section CS 1 does not apply to a withdrawal that takes the form of a direct transfer to another superannuation fund of an amount from a superannuation fund that is wound up.
Amount in fund on certain dates
(8)
Section CS 1 does not apply to a withdrawal of an amount, or earnings on it, that is in the superannuation fund—
(a)
on the fund’s balance date that precedes 1 April 2000, if a trustee of the fund calculates the amount in the fund on the balance date; or
(b)
at the close of business on 31 March 2000, in any other case.
Interpretation of subsection (8)
(9)
For the purposes of subsection (8),—
(a)
the amount that is in the superannuation fund is calculated according to market value:
(b)
an amount in a superannuation fund includes specified superannuation contributions received after the fund’s balance date that precedes 1 April 2000 or 31 March 2000, as applicable, if the contributions relate to a pay period ending on or before the fund’s balance date or 31 March 2000, as applicable.
Application of Tax Administration Act 1994
(10)
Section 32C of the Tax Administration Act 1994 applies when this section applies.
Defined in this Act: amount , employer , employer’s contributions to superannuation savings l, ife insurance , member , member’s contribution , pay , pay period , premium , specified superannuation contribution , superannuation fund , trustee , withdrawal
Compare: 1994 No 164 ss CL 3, CL 21
Section CS 2(4B) heading: repealed, on 19 December 2007, by section 17 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CS 2(4B): repealed, on 19 December 2007, by section 17 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (4B) and the heading were inserted, as from 1 December 2006, by section 231 KiwiSaver Act 2006 (2006 No 40). See section 232 of that Act as to the transitional provision requiring all KiwiSaver contributions to be paid to the Commissioner in the first 3 months. See clause 2(2) KiwiSaver Act Commencement Order 2006 (SR 2006/357).
Subsection (9)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CS 3 Exclusion of withdrawal on grounds of hardship
Significant financial hardship
(1)
Section CS 1 does not apply to a withdrawal to the extent to which the withdrawal is necessary to alleviate significant financial hardship.
Meaning of significant financial hardship
(2)
In this section, significant financial hardship includes significant financial difficulties that arise because of—
(a)
a member’s inability to meet minimum living expenses; or
(b)
a member’s inability to carry out their usual occupation because of their temporary or permanent illness, injury, or disability; or
(c)
a member’s inability to meet mortgage repayments on their principal family residence resulting in the mortgagee seeking to enforce the mortgage on the residence; or
(d)
the cost of modifying a residence to meet special needs arising from a disability of a member or a member’s dependant; or
(e)
the cost of medical treatment for an illness or injury of a member or a member’s dependant; or
(f)
the cost of palliative care for a member or a member’s dependant; or
(g)
the cost of a funeral for a deceased member or a member’s deceased dependant.
Defined in this Act: member, mortgage, significant financial hardship, withdrawal
Compare: 1994 No 164 s CL 5
CS 4 Exclusion of withdrawal to settle division of relationship property
Section CS 1 does not apply to a withdrawal to the extent that the withdrawal is necessary to settle the division of relationship property under the Property (Relationships) Act 1976 upon the ending of a marriage, civil union or de facto relationship for the purpose of whichever is applicable of sections 2A(2), 2AB(2) and 2D(4) of that Act.
Section CS 4 was substituted, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2004 No 11).
CS 5 Exclusion of withdrawal paid as annuity or pension
Section CS 1 does not apply to a withdrawal if the amount withdrawn is—
(a)
used to buy an annuity that is payable for life or over 10 or more years; or
(b)
payable as an annuity for life or over 10 or more years; or
(c)
payable as a pension for life or over 10 or more years.
Defined in this Act: amount, withdrawal, year
Compare: 1994 No 164 s CL 7
CS 6 Exclusion of withdrawal on partial retirement
Partial retirement
(1)
Section CS 1 does not apply to a withdrawal made on or after the date on which a member partially retires, if, on the date the withdrawal is made,—
(a)
the member is employed for 30 hours per week or less; and
(b)
the member has reduced their working hours because they are nearing full retirement; and
(c)
the member stops contributing to the superannuation fund; and
(d)
the member’s employer stops making specified superannuation contributions to the superannuation fund for the member’s benefit; and
(e)
the member gives a notice as described in subsection (2) to the trustees of the superannuation fund.
Notice
(2)
The member’s notice to the trustees of the superannuation fund must—
(a)
state that the member does not intend to increase their hours in paid employment in the future; and
(b)
state that the member’s employer understands that the member’s hours in paid employment will not increase in the future; and
(c)
be signed by the employer to acknowledge that the employer’s understanding is as described in paragraph (b).
Later withdrawals
(3)
A member who makes a withdrawal after giving notice as required by subsection (2) is not required to give notice for each later withdrawal if their intention has not changed.
Defined in this Act: employer, member, notice, specified superannuation contribution, superannuation fund, trustee, withdrawal
Compare: 1994 No 164 s CL 12
CS 7 Exclusion of withdrawal when member ends employment
Ending employment because of injury, disability, or death
(1)
Section CS 1 does not apply to a withdrawal made on or after the date on which a member ends their employment with an employer if the member ends their employment because the member is injured or disabled or dies.
Ending employment after period of specified superannuation contributions
(2)
Section CS 1 does not apply to a withdrawal from a superannuation fund of specified superannuation contributions that have been made for the member by the employer, or another employer, if—
(a)
the member has been in employment throughout the period that—
(i)
starts on the 1st day of the tax year that starts 2 tax years before the start of the tax year in which the member ends their employment; and
(ii)
ends on the day on which the member ends their employment; and
(b)
the specified superannuation contributions are made to the superannuation fund or to a superannuation fund that has transferred, whether directly or indirectly, the funds relating to its members to the superannuation fund; and
(c)
the specified superannuation contributions have not been part of a withdrawal, other than a transfer between superannuation funds that is referred to in paragraph (b); and
(d)
the withdrawal—
(i)
satisfies subsections (3) and (4):
(ii)
satisfies subsection (4B):
(iii)
does not include employer contributions to superannuation savings of more than the amount found by multiplying $5,000 by the number of income years for which the specified superannuation contributions were made on behalf of the member; and
(e)
the withdrawal is made at the time described in subsection (5).
Limited increase in employer contributions between income years
(3)
A withdrawal satisfies this subsection if, at the time of the withdrawal, specified superannuation contributions have been made for the member by the employer, or another employer, such that—
(a)
the contributions relate to some or all of a period of employment that—
(i)
starts on the 1st day of the tax year that starts 2 tax years before the tax year in which the member ends their employment; and
(ii)
ends on the day on which the member ends their employment; and
(b)
in each of the first 2 tax years in the period referred to in paragraph (a), the contributions—
(i)
are in total less than 150% of the total of specified superannuation contributions made for the member in the previous tax year:
(ii)
satisfy subparagraph (i) after the application of subsection (4); and
(c)
in the tax year in which the member ends their employment, the contributions—
(i)
have an annualised value that is less than 150% of the specified superannuation contributions made for the member in the previous tax year:
(ii)
satisfy subparagraph (i) after the application of subsection (4).
Increases disregarded under subsection (3)(b)(i) or (c)(i)
(4)
For the purposes of subsection (3), specified superannuation contributions to a superannuation fund that are 150% or more of the specified superannuation contributions made in the previous tax year are treated as not being so—
(a)
to the extent to which the employer increases the level by making additional specified superannuation contributions for the member’s benefit to compensate for underpaying specified superannuation contributions for the member’s benefit; or
(b)
if the increase occurs before 1 April 2000; or
(c)
if the increase is required by a trust deed or a contract, or an amendment to a trust deed or a contract, and the requirement existed before 1 April 2000; or
(d)
if the employer starts making specified superannuation contributions for a member’s benefit under a contract, or an amendment to a contract, that was signed before 1 April 2000; or
(e)
if the level of specified superannuation contributions does not change as a percentage of salary as between the level on and after 1 April 2000 and the level in the last pay period ending before 1 April 2000.
Increases in employer contributions considered consistent by Commissioner
(4B)
A withdrawal satisfies this subsection if, at the time of the withdrawal, specified superannuation contributions have been made for the member by the employer, or another employer, such that—
(a)
the contributions relate to some or all of the period that—
(i)
starts on the 1st day of the tax year that starts 2 tax years before the tax year in which the member ends their employment; and
(ii)
ends on the day on which the member ends their employment; and
(b)
the Commissioner considers that the contributions are consistent in size and frequency with the employer’s specified superannuation contributions for other employees in comparable positions; and
(c)
the Commissioner considers that the contributions are consistent in size and frequency during the period or periods to which the employer’s specified superannuation contributions for the member relate.
Time for purposes of subsection (2)
(5)
For the purposes of subsection (2), the times are—
(a)
on or after the date on which a member ends their employment with an employer; or
(b)
shortly before the date on which the member ends their employment, in anticipation of the member’s ending their employment.
Ending employment in any other case
(6)
If a withdrawal is made on or after the date on which a member ends their employment with an employer and the application of section CS 1 is not excluded by subsection (1) or (2), section CS 1 applies only to the withdrawal of an amount equal to the employer’s contributions to superannuation savings calculated for the period starting on the first day of the tax year that starts 2 tax years before the date on which the member ends their employment and ending on the date of withdrawal.
What is not ending employment
(7)
Section CS 10 describes a case in which a member is treated as not ending their employment for the purposes of this section.
Defined in this Act: amount, employer, employer’s contributions to superannuation savings, member, pay period, specified superannuation contribution, superannuation fund, tax year, withdrawal
Compare: 1994 No 164 s CL 8(1)-(6)
Subsections (2) and (3) were substituted, as from 1 October 2005, by section 173(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from the 2005–06 income year.
The heading to subsection (4) was substituted, as from 1 October 2005, by section 173(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from the 2005–06 income year.
The heading to subsection (4B) was inserted, as from 1 October 2005, by section 173(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from the 2005–06 income year.
Subsection (4B) was substituted, as from 1 October 2005, by section 23(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the 2005–06 income year.
CS 8 Exclusion of withdrawal when member ends employment: lock-in rule
Deferral of withdrawal
(1)
Section CS 1 does not apply to a withdrawal of an amount made 2 years after the date on which a member ends their employment with an employer if, when the member ends their employment, the member defers the withdrawal for 2 years after the date of ending their employment.
What is not ending employment
(2)
Section CS 10 describes a case in which a member is treated as not ending their employment for the purposes of this section.
Defined in this Act: amount, employer, member, withdrawal, year
Compare: 1994 No 164 s CL 9
CS 9 Exclusion of withdrawal from defined benefit fund when member ends employment
Defined benefit fund
(1)
Section CS 1 does not apply to a withdrawal made from a defined benefit fund—
(a)
on or after the date on which a member ends their employment with an employer, irrespective of the member’s length of service; or
(b)
shortly before the date on which a member ends their employment with an employer, in anticipation of the member’s ending their employment, irrespective of the member’s length of service.
What is not ending employment
(2)
Section CS 10 describes a case in which a member is treated as not ending their employment for the purposes of this section.
Defined in this Act: defined benefit fund, employer, member, withdrawal
Compare: 1994 No 164 s CL 10(1)
CS 10 When member treated as not ending employment
When this section applies
(1)
This section applies for the purposes of sections CS 7 to CS 9.
Transfer to related employer
(2)
A member is treated as not ending their employment with an employer (employer A) if the member transfers from employer A to another employer (employer B) and employer B is a related employer of employer A.
Related employer
(3)
Employer B is a related employer of employer A if employer B—
(a)
is treated as a separate employer from employer A; and
(b)
is—
(i)
a branch or division of employer A; or
(ii)
associated with employer A.
Defined in this Act: associated person, employer, member
Compare: 1994 No 164 s CL 11
CS 10B Exclusion of permitted withdrawals from KiwiSaver schemes and complying superannuation funds
Section CS 1 does not apply to a permitted withdrawal from a KiwiSaver scheme or a complying superannuation fund.
Defined in this Act: complying superannuation fund, KiwiSaver scheme, permitted withdrawal
Section CS 10B: inserted (with effect from 1 July 2007), on 19 December 2007, by section 4 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
Transfers to or from superannuation funds and superannuation schemes
CS 11 Transfer by superannuation fund to another superannuation fund
Notification of nature of amount transferred
(1)
An amount transferred by a superannuation fund (transferor fund) to another superannuation fund (transferee fund) retains its nature in the transferee fund if—
(a)
the transferee fund is not a defined benefit fund; and
(b)
the trustees of the transferor fund, the member’s past employer, or the member’s present employer give notice to the transferee fund of the nature of the amount transferred.
No notification of nature of amount transferred
(2)
If the trustees of the transferor fund, the member’s past employer, or the member’s present employer do not give notice to the transferee fund of the nature of the amount transferred, the amount transferred is treated as being, in the transferee fund, the employer’s contributions to superannuation savings.
Notification of nature of amounts transferred to defined benefit fund
(3)
Amounts to which section CS 2(1) or (8) apply that are transferred by a superannuation fund to a defined benefit fund retain their nature in the defined benefit fund if the trustees of the superannuation fund give notice to the defined benefit fund of the nature of the amounts.
No notification of nature of amounts transferred to defined benefit fund
(4)
If the trustees of the superannuation fund do not give notice to the defined benefit fund of the nature of the amounts to which section CS 2(1) or (8) apply, section CS 1 applies to the amount transferred when it is withdrawn from the defined benefit fund unless the application of section CS 1 is excluded by any of sections CS 2 to CS 9.
Defined in this Act: amount, defined benefit fund, employer, employer’s contributions to superannuation savings, member, notice, notify, superannuation fund, trustee
Compare: 1994 No 164 s CL 14
CS 12 Transfer from superannuation scheme to superannuation fund
An amount transferred directly from a superannuation scheme to a superannuation fund is treated as being, in the superannuation fund, the member’s contribution.
Defined in this Act: amount, member’s contribution, superannuation fund, superannuation scheme
Compare: 1994 No 164 s CL 15
CS 13 Investment by superannuation fund in another superannuation fund
Superannuation fund investing in another superannuation fund
(1)
If a superannuation fund (superannuation fund A) is a member of another superannuation fund (superannuation fund B),—
(a)
superannuation fund A’s investment in superannuation fund B is not a transfer; and
(b)
a withdrawal of an amount related to superannuation fund A’s investment in superannuation fund B is not a transfer; and
(c)
a withdrawal of an amount related to superannuation fund A’s investment in superannuation fund B is not a withdrawal to which section CS 2 applies.
Superannuation fund investing in superannuation scheme
(2)
If a superannuation fund is a member of a superannuation scheme,—
(a)
the fund’s investment in the scheme is not a transfer; and
(b)
a withdrawal by the fund related to the investment is not a transfer.
Defined in this Act: amount, member, superannuation fund, superannuation scheme, withdrawal
Compare: 1994 No 164 s CL 16
Treatment of amounts when superannuation fund becomes superannuation scheme or vice versa
CS 14 Superannuation fund becomes superannuation scheme
Effect of change
(1)
If a superannuation fund becomes a superannuation scheme, other than a foreign superannuation scheme,—
(a)
an amount in the fund at the time it becomes a superannuation scheme retains its nature; and
(b)
the following sections apply to a withdrawal from the superannuation scheme as if the scheme were a superannuation fund:
(i)
sections CS 1 to CS 17 and NEA 1 (Recovery of tax paid by superannuation fund); and
(ii)
sections 32A, 32B, and 32C of the Tax Administration Act 1994.
Market value of amounts
(2)
The amount in the superannuation fund at the time it becomes a superannuation scheme is calculated according to market value.
Defined in this Act: amount, foreign superannuation scheme, superannuation fund, superannuation scheme, withdrawal
Compare: 1994 No 164 s CL 17
CS 15 Superannuation fund becomes foreign superannuation scheme
If a superannuation fund becomes a foreign superannuation scheme, every amount in the superannuation fund is treated as if it had been withdrawn immediately before the fund became a foreign superannuation scheme.
Defined in this Act: amount, foreign superannuation scheme, superannuation fund
Compare: 1994 No 164 s CL 18
CS 16 Superannuation scheme becomes superannuation fund
If a superannuation scheme becomes a superannuation fund, every amount in the superannuation scheme at the time it becomes a superannuation fund is treated as being a member’s contribution to the superannuation fund.
Defined in this Act: amount, member’s contribution, superannuation fund, superannuation scheme
Compare: 1994 No 164 s CL 19
Treatment of distributions when superannuation fund wound up
CS 17 Superannuation fund wound up
When a superannuation fund is wound up, a distribution related to a member’s membership is treated as being a withdrawal.
Defined in this Act: member, superannuation fund, withdrawal
Compare: 1994 No 164 s CL 20
Subpart CT—Income from petroleum mining
Contents
CT 1 Disposal of exploratory material or petroleum mining asset
Income: disposal of exploratory material
(1)
The consideration that a petroleum miner derives from disposing of exploratory material is income of the petroleum miner.
Income: disposal of petroleum mining asset
(2)
The consideration that a petroleum miner derives from disposing of a petroleum mining asset is income of the petroleum miner.
Relationship with section CX 37
(3)
This section is overridden by section CX 37 (Farm-out arrangements for petroleum mining).
Defined in this Act: consideration, dispose, exploratory material, income, petroleum miner, petroleum mining asset
Compare: 1994 No 164 s CJ 3
CT 2 Damage to assets
The consideration that a petroleum miner derives for damage to an asset of the kind described in section CT 7(1)(b) or (c) is income of the petroleum miner.
Defined in this Act: consideration, income, petroleum miner
Compare: 1994 No 164 s CJ 5
CT 3 Exploratory well used for commercial production
When this section applies
(1)
This section applies when a petroleum miner uses an exploratory well for commercial production of petroleum, whether or not the well has been sealed and abandoned previously.
Income
(2)
An amount equal to the amount of expenditure described in subsection (3) is treated as income of the petroleum miner.
Exploratory well expenditure
(3)
The expenditure is exploratory well expenditure to which all the following apply:
(a)
it is directly attributable to drilling or acquiring the exploratory well; and
(b)
the petroleum miner or a holder of a previous interest in the well is or has been allowed a deduction for it as petroleum exploration expenditure; and
(c)
it is incurred in relation to the permit held currently by the petroleum miner, or a previous permit surrendered in exchange for the permit currently held under section 32(3) of the Crown Minerals Act 1991.
Timing of income
(4)
The amount is allocated to the income year in which commercial production from the well starts.
Part interest
(5)
If the petroleum miner has a part interest in the exploratory well when that well is first used for commercial production, the amount of expenditure treated as income under this section must bear the same proportion to the exploratory well expenditure specified in subsection (3) as that part interest bears to all interests in the well.
Defined in this Act: amount, commercial production, deduction, exploratory well, exploratory well expenditure, income, income year, permit, petroleum, petroleum exploration expenditure, petroleum miner, seal and abandonment
Compare: 1994 No 164 s DM 1(9)(a)
CT 4 Partnership interests and disposal of part of asset
In this subpart, and in sections CX 36 (Disposal of ownership interests in controlled petroleum mining entities) and CX 37 (Farm-out arrangements for petroleum mining), unless the context requires otherwise,—
(a)
a partner is treated as having a share or interest in a petroleum permit or other property of a partnership to the extent of their interest in the income of the partnership:
(b)
references to the disposal of an asset apply equally to the disposal of part of an asset.
Defined in this Act: income, petroleum permit
Compare: 1994 No 164 ss DM 9, DM 10
Paragraph (a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CT 5 Petroleum mining operations outside New Zealand
This subpart, and sections CX 36 (Disposal of ownership interests in controlled petroleum mining entities) and CX 37 (Farm-out arrangements for petroleum mining), apply, with any necessary modifications, to a petroleum miner who undertakes petroleum mining operations that are—
(a)
outside New Zealand and undertaken through a branch or a controlled foreign company; and
Defined in this Act: controlled foreign company, New Zealand, petroleum miner, petroleum mining operations
Compare: 1994 No 164 s DM 7(1)
Definitions
CT 6 Meaning of petroleum miner
Meaning
(1)
Petroleum miner, for a permit area, means a person who undertakes petroleum mining operations in the permit area.
Exclusion
(2)
Petroleum miner does not include a person who undertakes petroleum mining operations for consideration that is not in the form of, or contingent on,—
(a)
the production of petroleum from the permit area; or
(b)
profits from the production of petroleum from the permit area; or
(c)
an interest or a right to an interest in the petroleum permit.
Activities: inclusions[Repealed]
(3)
[Repealed]Activities: exclusions[Repealed]
(4)
[Repealed]Defined in this Act: consideration, permit area, petroleum, petroleum miner, petroleum mining operations, petroleum permit
Compare: 1994 No 164 s OB 1 development operations, further processing, petroleum miner
Section CT 6(1): substituted (with effect from 1 April 2005), on 19 December 2007, by section 18(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6(2): amended (with effect from 1 April 2005), on 19 December 2007, by section 18(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6(3) heading: repealed (with effect from 1 April 2005), on 19 December 2007, by section 18(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6(3): repealed (with effect from 1 April 2005), on 19 December 2007, by section 18(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (3)(a) to (d) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Section CT 6(4) heading: repealed (with effect from 1 April 2005), on 19 December 2007, by section 18(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6(4): repealed (with effect from 1 April 2005), on 19 December 2007, by section 18(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6 list of defined terms petroleum mining operations: inserted (with effect from 1 April 2005), on 19 December 2007, by section 18(4)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6 list of defined terms removal or restoration operations: omitted (with effect from 1 April 2005), on 19 December 2007, by section 18(4)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CT 6B Meaning of petroleum mining operations
Meaning
(1)
Petroleum mining operations means an activity included in the activities described in subsection (2) and not excluded by subsection (3).
Activities: inclusions
(2)
The activities are those carried out in connection with—
(a)
prospecting or exploring for petroleum:
(b)
developing a permit area for producing petroleum:
(c)
producing petroleum:
(d)
processing, storing, or transmitting petroleum before its dispatch to a buyer, consumer, processor, refinery, or user:
(e)
removal or restoration operations.
Activities: exclusions
(3)
The activities do not include further treatment to which all the following apply:
(a)
it occurs after the well stream has been separated and stabilised into crude oil, condensate, or natural gas; and
(b)
it is done—
(i)
by liquefaction or compression; or
(ii)
for the extraction of constituent products; or
(iii)
for the production of derivative products; and
(c)
it is not treatment at the production facilities.
Defined in this Act: permit area, petroleum, petroleum mining operations, removal or restoration operations
Section CT 6B: inserted (with effect from 1 April 2005), on 19 December 2007, by section 19 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CT 7 Meaning of petroleum mining asset
Meaning
(1)
Petroleum mining asset means—
(a)
a petroleum permit:
(b)
an asset that—
(i)
is acquired by a petroleum miner for the purpose of carrying on an activity described in subsection (3) in a permit area or areas; and
(ii)
has an estimated useful life that depends on, and is no longer than, the remaining life of the petroleum permit for the area or areas:
(c)
a share or partial interest in an asset described in paragraph (a) or (b).
Exclusion
(2)
Petroleum mining asset does not include land.
Activities: inclusions
(3)
The activities are those carried out in connection with—
(a)
developing a permit area for producing petroleum:
(b)
producing petroleum:
(c)
processing, storing, or transmitting petroleum before its dispatch to a buyer, consumer, processor, refinery, or user:
(d)
removal or restoration operations.
Activities: exclusions
(4)
The activities do not include further treatment to which all the following apply:
(a)
it occurs after the well stream has been separated and stabilised into crude oil, condensate, or natural gas; and
(b)
it is done—
(i)
by liquefaction or compression; or
(ii)
for the extraction of constituent products; or
(iii)
for the production of derivative products; and
(c)
it is not treatment at the production facilities.
Defined in this Act: land, permit area, petroleum, petroleum miner, petroleum mining asset, petroleum permit, removal or restoration operations
Compare: 1994 No 164 s OB 1 development operations, further processing, permit specific asset, petroleum mining asset
Subsection (1)(a) and (b)(ii) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Subsection (3)(a) to (c) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Subpart CU—Income from mineral mining
Contents
Introductory provision
CU 1 Mining company’s 2 kinds of income
Income derived by a mining company is either income from mining or income other than income from mining.
Defined in this Act: income, income from mining, mining company
Compare: 1994 No 164 s DN 1(2)
Income from mining
CU 2 Mining company that processes or manufactures
When this section applies
(1)
This section applies when—
(a)
a mining company—
(i)
obtains specified minerals from its mining operations; or
(ii)
through a combination of its mining operations and its associated mining operations, brings specified minerals to the stage at which they are ready to be processed or used in a manufacturing operation; and
(b)
the company produces products by processing the specified minerals or using them in a manufacturing operation; and
(c)
the company disposes of the products.
Income classified
(2)
For the income year in which the mining company disposes of the products, the Commissioner must classify the mining company’s income from the disposal as income from mining or income other than income from mining. The Commissioner must classify the income by apportioning it under subsection (3) or by making a decision under subsection (4).
Apportionment
(3)
In apportioning the income, the Commissioner must make an appropriate apportionment of the value of the stock of products on hand at the start and end of the income year and must take into account the matters the Commissioner considers relevant and appropriate, including—
(a)
the capital employed, or the expenditure or losses incurred, in the mining operations, associated mining operations, and processing of the specified minerals or the use of the specified minerals in a manufacturing operation:
(b)
the extent of the steps involved in the mining operations, associated mining operations, and processing of the specified minerals or the use of the specified minerals in a manufacturing operation.
Decision
(4)
In making a decision, the Commissioner must take into account the amount that would have been—
(a)
the value received or receivable for the specified minerals if they had been disposed of in the income year to a wholly independent person in the state in which they resulted from the mining operations or the combination of mining operations and associated mining operations; and
(b)
the value of the products on hand at the end of the income year if the specified minerals from which they came had been valued for the purposes of subpart EB (Valuation of trading stock (including dealer’s livestock)) in the state in which they resulted from the mining operations or the combination of mining operations and associated mining operations.
Defined in this Act: amount, associated mining operations, Commissioner, income, income from mining, income year, mining company, mining operations, specified mineral
Compare: 1994 No 164 s DN 1(4)
Subsection (3)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CU 3 Disposal of assets
When this section applies
(1)
This section applies when—
(a)
a mining company acquires an asset, including mining prospecting information or a mining or prospecting right, by incurring mining exploration expenditure or mining development expenditure; and
(b)
the company, whether or not still a mining company, disposes of the asset.
Exclusion
(2)
This section does not apply when—
(a)
a mining company acquires an asset, including mining prospecting information or a mining or prospecting right, by incurring mining exploration expenditure or mining development expenditure; and
(b)
the company, whether or not still a mining company, passes the ownership of the asset to another person; and
(c)
the passing of ownership is not because the asset is sold to the other person; and
(d)
the company does not receive, and is not entitled to receive, consideration for the passing of ownership; and
(e)
the company and the other person deal with each other over the passing of ownership at arm’s length, even if they are associated persons at a time relevant to the passing of ownership.
Income
(3)
The following are income from mining of the mining company:
(a)
the consideration that the company derives from the disposal of the asset, unless paragraph (b) applies:
(b)
in the cases described in subsections (4) to (7), the consideration specified in subsection (4) or (5) or (7).
Consideration other than in cash
(4)
If some or all of the consideration for the disposal is other than in cash, and the disposal is not to an associated person, the consideration that is not in cash has the value agreed between the company and the person to whom the asset is disposed of. If the company and the person do not agree, or if the Commissioner considers that the value agreed is unreasonable, the consideration that is not in cash has the value that the Commissioner decides.
Disposal to associated person
(5)
If the disposal is to an associated person, the consideration for the disposal is the market value that the asset has on the date of the disposal.
When subsection (7) applies
(6)
Subsection (7) applies when—
(a)
the company disposes of the asset to a person acquiring it for use in carrying on their mining operations or associated mining operations or a mining venture; and
(b)
the company and the person give notice to the Commissioner that they have agreed to apply subsection (7); and
(c)
the notice is given to the Commissioner within 1 of the following times:
(i)
the time within which the company is required to file a return of income for the income year in which it disposes of the asset:
(ii)
a further time allowed by the Commissioner; and
(d)
the notice specifies an amount that—
(i)
is no more than the market value that the asset has at the date of the disposal; and
(ii)
is not less than the amount of any part of the consideration that is in cash.
Amount specified by parties to disposal
(7)
The consideration for the disposal is the amount that the company and the person specify in the notice.
Defined in this Act: amount, asset, associated mining operations, associated person, Commissioner, company, income year, mining company, mining development expenditure, mining exploration expenditure, mining operations, mining or prospecting right, mining prospecting information, mining venture, notice, return of income
Compare: 1994 No 164 s DN 1(9)-(12)(b)
Subsection (3)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Subsection (6)(c)(i) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
CU 4 Compensation for lost, destroyed, or damaged assets
When sections CU 5 to CU 8 apply
(1)
Sections CU 5 to CU 8 apply when—
(a)
a mining company acquires an asset by incurring mining exploration expenditure or mining development expenditure; and
(b)
the company is allowed a deduction for the expenditure under—
(i)
section DU 1 (Mining exploration expenditure and mining development expenditure); or
(ii)
section DZ 12(1)(a) (Mineral mining: 1954 to 2005); and
(c)
the asset is lost, destroyed, or damaged; and
(d)
the company, whether or not still a mining company,—
(i)
is paid insurance, indemnity, or compensation for the loss, destruction, or damage; or
(ii)
is entitled to receive payment for any scrap of the asset that it disposes of.
What sections CU 5 to CU 8 apply to
(2)
Sections CU 5 to CU 8 apply to any asset (asset A) that a mining company acquires by incurring mining exploration expenditure or mining development expenditure, except for an asset (asset B) used to derive income other than income from mining to which section CU 10 is applied. Sections CU 5 to CU 8 apply to asset B only if it is later used to derive income from mining and section DU 5 (Non-mining asset used to derive income from mining) is applied to it.
Defined in this Act: asset, company, deduction, income, income from mining, mining company, mining development expenditure, mining exploration expenditure
Compare: 1994 No 164 s DN 1(13)
CU 5 Compensation and scrap payment: income from mining
Income
(1)
When, under section CU 4, this section applies, the total of the following amounts is income from mining of the mining company:
(a)
the amount of insurance, indemnity, or compensation paid; and
(b)
the amount (if any) payable to the company for the disposal of any scrap of the asset.
Timing of income
(2)
The income from mining is allocated to the income year in which the insurance, indemnity, or compensation is paid.
Relationship with sections CU 6 to CU 8
(3)
This section is overridden by sections CU 6 to CU 8.
Defined in this Act: amount, asset, income from mining, income year, mining company
Compare: 1994 No 164 s DN 1(13), (14)
CU 6 Compensation and scrap payment: use to replace or repair asset
Choice between section CU 5 and sections CU 7 and CU 8
(1)
Choice of sections CU 7 and CU 8
(2)
The company must—
(a)
give notice to the Commissioner that the insurance, indemnity, or compensation will be used to replace or repair the asset; and
(b)
give the notice within the time within which the company must file a return of income for the income year in which the loss, destruction, or damage occurred; and
(c)
start the replacement or repair by the end of the second income year after the income year in which the loss, destruction, or damage occurred.
Defined in this Act: asset, Commissioner, income year, mining company, notice, return of income
Compare: 1994 No 164 s DN 1(14)
CU 7 Compensation and scrap payment: not income from mining
Defined in this Act: amount, asset, income from mining, mining company
Compare: 1994 No 164 s DN 1(14)(a), (b)
CU 8 Compensation and scrap payment: more than expenditure
When this section applies
(1)
This section applies when—
(a)
the mining company complies with section CU 6(2); and
(b)
the company incurs expenditure in replacing or repairing the asset; and
(c)
the company has an excess amount because the expenditure is less than the total of the following:
(i)
the amount of insurance, indemnity, or compensation paid; and
(ii)
the amount (if any) payable to the company for the disposal of any scrap of the asset.
Income
(2)
The excess amount is income from mining of the company, whether or not the company is still a mining company when the excess amount is determined.
Timing of income
(3)
The income from mining is allocated to the income year in which the replacement or repair of the asset is completed or is treated as completed.
When replacement or repair treated as completed
(4)
The replacement or repair, even if not completed, is treated as completed—
(a)
on the last day of the period (if any) considered by the Commissioner to be a reasonable period within which to complete the replacement or repair; or
(b)
on the day on which work on the replacement or repair stops; or
(c)
on the day on which the asset is transferred from the company’s mining operations and used, wholly or mainly, to derive income other than income from mining; or
(d)
on the day on which the company disposes of the asset other than for scrap; or
(e)
on the day on which the company stops being a mining company.
Limitation on calculation of excess amount
(5)
Expenditure incurred after the day on which the work is treated as completed is not taken into account to determine the existence or amount of an excess amount for the purposes of subsection (1)(c).
Defined in this Act: amount, asset, Commissioner, company, income, income from mining, income year, mining company, mining operations
Compare: 1994 No 164 s DN 1(14)(e), (g), (i)
CU 9 Previous deduction for income appropriated
Income
(1)
An amount equal to the amount for which a mining company is allowed a deduction under section DU 4 (Income appropriated to expenditure) is income from mining of the mining company.
Timing of income
(2)
The income is allocated to the income year following the income year in which the mining company is allowed the deduction.
Company stops mining
(3)
A mining company that stops being a mining company before the end of the income year to which the income is allocated is treated as if it were still a mining company in the income year.
Defined in this Act: amount, deduction, income from mining, income year, mining company
Compare: 1994 No 164 s DN 1(6)
CU 10 Mining asset used to derive income other than income from mining
When this section applies
(1)
This section applies when—
(a)
a mining company acquires an asset by incurring mining exploration expenditure or mining development expenditure; and
(b)
the company uses the asset, wholly or mainly, to derive income other than income from mining.
Income
(2)
An amount equal to the market value that the asset has on the first day of each period in which it is used, wholly or mainly, to derive income other than income from mining is income from mining of the mining company.
Timing of income
(3)
The income is allocated to the income year in which each first day falls.
Company stops mining
(4)
A mining company that stops being a mining company before the end of the income year to which the income is allocated is treated as if it were still a mining company in the income year.
Defined in this Act: asset, income, income from mining, income year, mining company, mining development expenditure, mining exploration expenditure
Compare: 1994 No 164 s DN 1(8)
CU 11 Meaning of asset for sections CU 3 to CU 10
Mining company’s share or interest in asset
(1)
Sections CU 3 to CU 10 apply to a share or interest that a mining company has in an asset—
(a)
to the extent to which the mining company acquired the share or interest by incurring—
(i)
mining exploration expenditure or mining development expenditure; or
(ii)
the exploration expenditure or development expenditure referred to in section DZ 12(2)(a) (Mineral mining: 1954 to 2005); and
(b)
to the extent to which the mining company uses the share or interest for the purpose of deriving income from mining.
Partner’s share or interest in asset
(2)
For the purposes of sections CU 3 to CU 10, a partner’s share or interest in each asset of the partnership is the same as the partner’s interest in the totality of the assets of the partnership.
Replaced or repaired asset
(3)
For the purposes of sections CU 3 to CU 10,—
(a)
an asset that a mining company acquires by incurring expenditure in replacing or repairing the asset is the same asset as the one that was lost, destroyed, or damaged:
(b)
part of an asset that a mining company acquires by incurring expenditure in repairing the asset is part of the asset that was damaged.
Defined in this Act: asset, income from mining, mining company, mining development expenditure, mining exploration expenditure
Compare: 1994 No 164 s DN 1(14)(f), (16), (17)
Subsection (3)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CU 12 Application of sections to resident mining operators
Sections in this subpart applying to resident mining operators
(1)
Sections CU 1 to CU 8, CU 10, and CU 11 apply, with any necessary modifications, to resident mining operators as if resident mining operators were mining companies.
Additional modification of sections CU 4 and CU 11
(2)
For the purposes of subsection (1),—
(a)
section CU 4(1)(b)(ii) applies as described in section DZ 12(1)(b) (Mineral mining: 1954 to 2005); and
(b)
section CU 11(1)(a)(ii) applies as described in section DZ 12(2)(b) (Mineral mining: 1954 to 2005).
Defined in this Act: mining company, resident mining operator
Compare: 1994 No 164 s DN 4(1), (5), (7)
CU 13 Application of sections to non-resident mining operators
Sections in this subpart applying to non-resident mining operators
(1)
Sections CU 3 to CU 11 apply, with any necessary modifications, to non-resident mining operators as if non-resident mining operators were mining companies, income from mining were income from a mining venture, mining operations were mining ventures, and associated mining operations were mining ventures.
Additional modification of sections CU 4 and CU 11
(2)
For the purposes of subsection (1),—
(a)
section CU 4(1)(b)(ii) applies as described in section DZ 12(1)(b) (Mineral mining: 1954 to 2005); and
(b)
section CU 11(1)(a)(ii) applies as described in section DZ 12(2)(b) (Mineral mining: 1954 to 2005).
Defined in this Act: associated mining operations, income from mining, mining company, mining operations, mining venture, non-resident mining operator
Compare: 1994 No 164 s DN 5(2)(a), (c)
CU 14 Recovery of reinvestment profit on disposal of mining shares
When this section applies
(1)
This section applies when—
(a)
a company derives an amount from disposing of a mining share, including a disposal described in section CU 20; and
(b)
an amount of the company’s reinvestment profit is used in calculating the deduction for the cost of the mining share under section DU 11(2)(b) (Disposal of mining shares by company).
Income
(2)
The lesser of the following amounts is income of the company:
(a)
the amount derived from the disposal of the mining share minus the deduction for the cost of the mining share; and
(b)
the amount of reinvestment profit used in calculating the deduction for the cost of the mining share.
Timing of income
(3)
The income is allocated to the income year in which the mining share is disposed of.
Relationship with sections CX 38 and CX 39
Defined in this Act: amount, company, deduction, income, income year, mining share, reinvestment profit
Compare: 1994 No 164 s DN 2(7), (8)(c)
CU 15 Recovery of reinvestment profit not used for mining purposes
When subsections (2) and (3) apply
(1)
Subsections (2) and (3) apply when some or all of a company’s reinvestment profit—
(a)
is used for purposes other than mining purposes within the prescribed period; and
(b)
will not be used for mining purposes within the prescribed period.
Income
(2)
The amount of reinvestment profit described by subsection (1) is income of the company.
Timing of income
(3)
The income is allocated to the income year in which the amount is used for purposes other than mining purposes.
When subsections (5) and (6) apply
(4)
Subsections (5) and (6) apply when some or all of a company’s reinvestment profit is not used for mining purposes within the prescribed period.
Income
(5)
The reinvestment profit is income of the company.
Timing of income
(6)
The income is allocated to the last income year of the prescribed period.
No longer reinvestment profit
(7)
The amount referred to in subsection (2) and the reinvestment profit referred to in subsection (5) cease to be reinvestment profit.
Defined in this Act: amount, company, income, income year, mining purposes, prescribed period, reinvestment profit
Compare: 1994 No 164 s DN 2(3), (4)
CU 16 Recovery of reinvestment profit on repayment of loans
When this section applies
(1)
This section applies when—
(a)
a company (lender company) makes a loan to a mining company or a mining holding company; and
(b)
the loan is made wholly or partly out of the lender company’s reinvestment profit; and
(c)
the loan is wholly or partly repaid.
Income
(2)
The amount calculated using the formula in subsection (3) is income of the lender company.
Formula
(3)
The formula is—
Definition of items in formula
(4)
In the formula,—
(a)
reinvestment profit amount is the amount of the loan made out of the lender company’s reinvestment profit:
(b)
loan amount is the amount of the loan:
(c)
repayment is the amount repaid.
Timing of income
(5)
The income is allocated to the income year in which the repayment is made.
Relationship with section CX 40
(6)
This section is overridden by section CX 40 (Repayment of loans made from reinvestment profit).
Defined in this Act: amount, company, income, income year, mining company, mining holding company, reinvestment profit
Compare: 1994 No 164 s DN 2(5)
CU 17 Repayment by mining company of amount written off
When this section applies
(1)
This section applies when—
(a)
a holding company of a mining company is allowed, under section DU 12 (Amount written off by holding company) or an earlier Act, a deduction for an amount it has written off a loan it made to the mining company; and
Income
(2)
The amount repaid, to the extent of the deduction, is income of the holding company.
Timing of income
(3)
The income is allocated to the income year in which the mining company repays the amount or is treated as repaying the amount.
Defined in this Act: amount, deduction, holding company, income, income year, loan, mining company
Compare: 1994 No 164 s DN 3(7), (8)
CU 18 Amount treated as repayment for purposes of section CU 17: excess
When this section applies
(1)
This section applies when,—
(a)
in a tax year, a holding company of a mining company is allowed, under section DU 12 (Amount written off by holding company) or an earlier Act, a deduction for an amount it has written off a loan it made to the mining company; and
(b)
in a later tax year, the holding company disposes of shares in the mining company or an interest in shares in the mining company; and
(c)
the holding company has an excess amount because the amount it derives from the disposal is more than the amount paid up in cash on the shares.
Repayment amount
(2)
For the purposes of section CU 17, the excess amount is treated as repayment by the mining company of the amount written off.
Defined in this Act: amount, deduction, holding company, loan, mining company, share, tax year
Compare: 1994 No 164 s DN 3(6), (8)
CU 19 Amount treated as repayment for purposes of section CU 17: net income
When this section applies
(1)
This section applies when—
(a)
a holding company of a mining company is allowed, under section DU 12 (Amount written off by holding company) or an earlier Act, a deduction for an amount it has written off a loan it made to the mining company; and
(b)
the deduction is allocated to an income year; and
(c)
the mining company would have had net income in a later tax year if—
(i)
the situation described in subsection (2) had existed; and
(ii)
the situation described in subsection (3) had existed.
First situation
(2)
The first situation is that in the later tax year no person is allowed a deduction for the mining company’s mining exploration expenditure or mining development expenditure.
Second situation
(3)
The second situation is that in the later tax year the mining company disposes of an asset in circumstances to which section CU 3 or CZ 2(1)(b) (Mining company’s 1970-71 tax year) applies and the amount received or receivable for the asset is the amount determined under subsection (4) or (5).
Amount for which asset disposed of: most cases
(4)
If any of section CU 3(3)(a), (4), or (5) applies to the disposal of the asset, the amount is the consideration determined under whichever one of the provisions applies.
Amount for which asset disposed of: election of section CU 3(7)
(5)
If section CU 3(7) applies to the disposal of the asset, the amount is the greater of the following up to the limit of the market value that the asset has on the date of disposal:
(a)
the part of the amount specified in the notice under section CU 3(7) that is in cash (which may be zero); and
(b)
the total amount of loans made on or before the date of disposal by all holding companies of the mining company to the mining company to the extent to which the loans—
(i)
relate to the asset (including a part not disposed of); and
(ii)
have been written off and allowed as a deduction under section DU 12 (Amount written off by holding company) or an earlier Act; and
(iii)
have not been repaid, and have not been treated as repaid under this section or section CU 18 or an earlier Act, on or before the date of disposal.
Asset
(6)
For the purposes of subsections (3) to (5),—
(a)
a reference to an asset means the part of the asset that is disposed of, which may be some of it or all of it, and a reference to an amount received or receivable for an asset means the amount for the part that is disposed of:
(b)
a reference to an asset includes a reference to a share or interest in the asset:
(c)
a partner’s share or interest in each asset of the partnership is the same as the partner’s interest in the totality of the assets of the partnership:
(d)
every member of any other association of persons who receive income jointly or carry on activities jointly has a share or interest in each asset of the association that is the same as the member’s interest in the totality of the assets of the association.
Amount of net income
(7)
For the purposes of section CU 17, the prescribed proportion of the amount that would have been the net income of the mining company is treated as repayment by the mining company of the amount written off. The repayment is treated as having been made on the day following the end of the tax year in which the mining company would have had net income.
Defined in this Act: amount, deduction, holding company, income, income year, loan, mining company, mining development expenditure, mining exploration expenditure, net income, notice, prescribed proportion, tax year
Compare: 1994 No 164 s DN 3(4), (5), (8), (9)
Subsection (6)(a) to (c) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CU 20 Mining company or mining holding company liquidated
Treatment of shares
(1)
If a mining company or a mining holding company is liquidated,—
(a)
a mining share held in the company is treated as disposed of to the company; and
(b)
a distribution received for the share on the liquidation is treated as an amount received for the disposal.
Relationship with section CU 14
(2)
Section CU 14 deals with the recovery of reinvestment profit on the disposal of mining shares.
Defined in this Act: amount, liquidation, mining company, mining holding company, mining share, reinvestment profit
Compare: 1994 No 164 s DN 2(8)
Definitions
CU 21 Meaning of income from mining
Meaning
(1)
Income from mining means the part of the income of a mining company that is derived in a tax year from the company’s mining operations or associated mining operations in the tax year.
Resident mining operators and non-resident mining operators
(2)
This definition applies to resident mining operators as if they were mining companies, and to non-resident mining operators as if they were mining companies, mining operations were mining ventures, and associated mining operations were mining ventures.
Defined in this Act: associated mining operations, income, income from mining, mining company, mining operations, mining venture, resident mining operator, non-resident mining operator, tax year
Compare: 1994 No 164 ss DN 4(4), DN 5(1), OB 1gross income from mining
CU 22 Meaning of mining company
Meaning
(1)
Mining company means a New Zealand company to which 1 of the following applies:
(a)
the company’s only source of income is the business described in subsection (2); or
(b)
the company’s main source of income is the business described in subsection (2); or
(c)
the company’s only activity is 1 of the activities described in subsection (3); or
(d)
the company’s main activity is 1 of the activities described in subsection (3); or
(e)
the company proposes that its only activity or its main activity be 1 of the activities described in subsection (3).
Business
(2)
The business referred to in subsection (1)(a) and (b) is the business of mining a specified mineral in New Zealand.
Activities
(3)
The activities referred to in subsection (1)(c), (d), and (e) are—
(a)
exploring, searching, or mining for a specified mineral in New Zealand; or
(b)
performing development work for exploring, searching, or mining for a specified mineral in New Zealand.
Service for reward
(4)
An activity described in subsection (3) does not include an activity done or to be done as a service to another person for reward unless the reward—
(a)
is wholly or mainly related to and dependent on the production of the specified mineral; or
(b)
arises wholly or mainly through participation in profits from the production of the specified mineral.
Defined in this Act: business, income, mining company, New Zealand, New Zealand company, specified mineral
Compare: 1994 No 164 s DN 1(1)
CU 23 Meaning of mining development expenditure
Meaning
(1)
Mining development expenditure means development expenditure that a mining company incurs in its mining operations or associated mining operations.
Inclusions
(2)
Mining development expenditure includes expenditure that the company incurs—
(a)
on acquiring land as a site for its mining operations or associated mining operations:
(b)
on preparing the site for its mining operations or associated mining operations:
(c)
on restoring the site during or after its mining operations or associated mining operations:
(d)
on any of the following for its mining operations or associated mining operations:
(i)
buildings, mineshafts, platforms, tunnels, wells, or other improvements:
(ii)
plant or machinery, including vehicles:
(iii)
production equipment or facilities:
(iv)
storage facilities:
(e)
on vessels or aircraft for use wholly or mainly in its mining operations or associated mining operations:
(f)
on providing, or contributing to the cost of providing, communication equipment, fuel, light, power, or water for the site of its mining operations or associated mining operations:
(g)
on buildings or facilities that—
(i)
are situated at, or adjacent to, the site of any of its mining operations or associated mining operations; and
(ii)
are for use in the education, housing, or welfare of, or the supply of meals to, its employees in or connected with its mining operations or associated mining operations or in the education, housing, or welfare of, or the supply of meals to, the employees’ dependants:
(h)
on providing, or contributing to the cost of providing, communication equipment, fuel, light, power, or water for the buildings or facilities described in paragraph (g).
Exclusions
(3)
Mining development expenditure does not include expenditure that the company incurs—
(a)
on a building or facility provided for the purpose of deriving income; or
(b)
on or in relation to an office building that is not situated at, or adjacent to, the site of any of its mining operations or associated mining operations.
Resident mining operators and non-resident mining operators
(4)
This definition applies to resident mining operators as if they were mining companies, and to non-resident mining operators as if they were mining companies, mining operations were mining ventures, and associated mining operations were mining ventures.
Defined in this Act: associated mining operations, employee, income, mining company, mining development expenditure, mining operations, mining venture, non-resident mining operator, resident mining operator
Compare: 1994 No 164 ss DN 4(4), DN 5(1), OB 1 development expenditure (d)
Subsection (2)(a) to (c), (d)(i) to (iv), (e), (f) and (g)(ii) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
CU 24 Meaning of mining exploration expenditure
Meaning
(1)
Mining exploration expenditure means expenditure that a mining company incurs in exploring or searching in New Zealand for a specified mineral.
Inclusions
(2)
Mining exploration expenditure includes expenditure that the company incurs—
(a)
on acquiring mining prospecting information:
(b)
on acquiring a mining or prospecting right:
(c)
on geological mapping and geophysical surveys:
(d)
on systematic searches for areas containing specified minerals:
(e)
on searching by drilling in areas containing specified minerals:
(f)
on searching for ore containing a specified mineral within or in the vicinity of an ore body by crosscuts, drilling, drives, rises, shafts, or winzes.
Exclusions
(3)
Mining exploration expenditure does not include—
(a)
mining development expenditure:
(b)
expenditure on operations in the course of working a mining property.
Resident mining operators and non-resident mining operators
(4)
This definition applies to resident mining operators as if they were mining companies, and to non-resident mining operators as if they were mining companies, mining operations were mining ventures, and associated mining operations were mining ventures.
Defined in this Act: associated mining operations, mining company, mining development expenditure, mining exploration expenditure, mining operations, mining or prospecting right, mining prospecting information, mining venture, New Zealand, non-resident mining operator, resident mining operator, specified mineral
Compare: 1994 No 164 ss DN 4(4), DN 5(1), OB 1 exploration expenditure (c)
Subsection (2)(a) to (e) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Subsection (3)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
CU 25 Meaning of mining operations
Meaning
(1)
Mining operations means operations that—
(a)
are carried on by a mining company on a mining property in New Zealand for the purpose of deriving income; and
(b)
consist of—
(i)
exploring, searching, or mining for 1 or more specified minerals; or
(ii)
performing development work for exploring, searching, or mining for 1 or more specified minerals.
Resident mining operators and non-resident mining operators
(2)
This definition applies to resident mining operators as if they were mining companies, and to non-resident mining operators as if they were mining companies, mining operations were mining ventures, and associated mining operations were mining ventures.
Defined in this Act: associated mining operations, income, mining company, mining operations, mining venture, New Zealand, non-resident mining operator, resident mining operator
Compare: 1994 No 164 ss DN 4(4), DN 5(1), OB 1mining operations
CU 26 Meaning of mining venture
Meaning
(1)
Mining venture means a venture that—
(a)
is carried on, or is proposed to be carried on,—
(i)
in New Zealand; and
(ii)
as a business; and
(iii)
under an exploration permit, prospecting permit, or mining permit granted under the Crown Minerals Act 1991 or under an existing privilege as defined in section 106 of the Act; and
(b)
consists, or is proposed to consist, wholly or mainly of—
(i)
exploring, searching, or mining for a specified mineral in New Zealand; or
(ii)
performing development work for exploring, searching, or mining for a specified mineral in New Zealand.
Service for reward
(2)
An activity described in subsection (1)(b) does not include an activity done or to be done as a service to another person for reward unless the reward—
(a)
is wholly or mainly related to and dependent on the production of the specified mineral; or
(b)
arises wholly or mainly through participation in profits from the production of the specified mineral.
Activities not carried on jointly
(3)
If 2 or more persons carry on, or propose to carry on, a joint mining venture, but 1 or more of them carries on an activity of the kind described in subsection (1)(b) outside the joint mining venture, the carrying on of the activity is not part of the joint mining venture.
Defined in this Act: business, mining venture, New Zealand, specified mineral
Compare: 1994 No 164 s OB 1mining venture
CU 27 Meaning of resident mining operator
Meaning
(1)
Resident mining operator means a person who—
(a)
is resident in New Zealand; and
(b)
is not a mining company or a petroleum mining company; and
(c)
carries on, or proposes to carry on, the activities of—
(i)
exploring, searching, or mining for a specified mineral in New Zealand; or
(ii)
performing development work for exploring, searching, or mining for a specified mineral in New Zealand.
How activities carried on
(2)
The person must carry on the activities described in subsection (1)(c), or propose to carry them on,—
(a)
personally and actively in the field; and
(b)
as a business; and
(c)
under an exploration permit, prospecting permit, or mining permit granted under the Crown Minerals Act 1991 or under an existing privilege as defined in section 106 of the Act.
Service for reward
(3)
An activity described in subsection (1)(c) does not include an activity done or to be done as a service to another person for reward unless the reward—
(a)
is wholly or mainly related to and dependent on the production of the specified mineral; or
(b)
arises wholly or mainly through participation in profits from the production of the specified mineral.
Defined in this Act: business, mining company, New Zealand, petroleum mining company, resident in New Zealand, specified mineral
Compare: 1994 No 164 s OB 1 active miner, resident mining operator
CU 28 Meaning of specified mineral
Meaning
(1)
Specified mineral—
(a)
means alumina minerals (for example, bauxite, corundum, diaspore, and gibbsite), aluminous refractory clays containing over 30% alumina in the fired state, aluminous refractory fireclays containing over 30% alumina in the fired state, andalusite, antimony, asbestos, barite, bentonite (except bentonite mined in the area formerly known as Malvern County), bituminous shale, chromite, copper, diatomite, dolomite, feldspar, fluorite, gold, halloysite, kaolin, kyanite, lead, magnesite, manganese, mercury, mica, molybdenite, nickel, perlite, phosphate, platinum group, pyrite, silica in lump form used only in producing silicon carbide or silicon metal or ferro silicon, silica in sand form used only in producing silicon carbide, sillimanite, silver, sodium chloride, sulphur, talc, tin, titanium, titanomagnetite, tungsten, uranium, wollastonite, zeolite, zinc, and zircon:
(b)
includes a mineral that is declared to be a specified mineral in a Gazette notice given by the Minister.
Minister to consider
(2)
Before giving a Gazette notice about a particular mineral, the Minister must consider whether the mineral is or is likely to be of importance—
(a)
in the industrial development of New Zealand:
(b)
as a means of reducing the quantity of industrial minerals or industrial rock required to be imported into New Zealand:
(c)
as an item of export from New Zealand.
Defined in this Act: mineral, Minister, New Zealand
Compare: 1994 No 164 s OB 1specified mineral
Subsection (1)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Subsection (2)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
CU 29 Other definitions
In this Act,—
associated mining operations means operations that—
(a)
are carried on in New Zealand in association with mining operations; and
(b)
consist of the accumulation, initial treatment, and transport of specified minerals, up to the stage at which the minerals—
(i)
are in a saleable form and in a location suitable for a person to acquire them; or
(ii)
are ready to be processed beyond the initial treatment or to be used in a manufacturing operation
holding company, for a mining company, means a New Zealand company that holds shares, or for which shares are held, in the mining company
initial treatment, for a specified mineral,—
(a)
means—
(i)
breaking, cleaning, crushing, grading, grinding, leaching, screening, or sizing; or
(ii)
a treatment that is applied before concentration or, for a specified mineral not requiring concentration, that would have been applied before concentration if the specified mineral had required concentration; or
(iii)
concentration; and
(b)
does not include—
(i)
calcining or sintering; or
(ii)
the production of, or processes carried on in connection with the production of, alumina, or pellets or other agglomerated forms of iron
loan, for a holding company and a mining company, means a loan by the holding company to the mining company made when the holding company is a holding company of the mining company
mining holding company means a New Zealand company that is engaged wholly or mainly in—
(a)
holding shares in a mining company or a petroleum mining company; or
(b)
investing money in a mining company or a petroleum mining company; or
(c)
making loans to a mining company or a petroleum mining company
mining or prospecting right—
(a)
means an authority, concession, easement, lease, licence, option, permit, privilege, right, or title relating to exploring, searching, or mining for, or carrying on an operation to recover, a specified mineral; and
(b)
includes a share or interest in any such authority, concession, easement, lease, licence, option, permit, privilege, right, or title
mining prospecting information means geological, geophysical, or technical information—
(a)
that is about the presence, absence, extent, or volume of specified minerals in an area; or
(b)
that is likely to assist in determining the presence, absence, extent, or volume of specified minerals in an area
mining purposes means—
(a)
subscribing for shares in a mining company or in a mining holding company; or
(b)
paying calls on shares in a mining company or in a mining holding company; or
(c)
making loans to a mining company to enable it—
(i)
to finance its mining exploration expenditure or mining development expenditure; or
(ii)
to carry on its mining operations or associated mining operations; or
(d)
making, to a mining holding company, loans that are to be used—
(i)
to finance a mining company’s mining exploration expenditure or mining development expenditure; or
(ii)
to finance a mining company’s mining operations or associated mining operations
mining share means a share in a mining company or a mining holding company
non-resident mining operator means a person who—
(a)
is not resident in New Zealand; and
(b)
carries on, personally and actively in the field, a mining venture
prescribed period means,—
(a)
for an amount derived from a disposal of a mining share, the tax year in which the disposal occurs and the next 6 tax years; or
(b)
for an amount repaid for a loan made to a mining company or a mining holding company, the tax year in which the amount is repaid and the next 6 tax years
prescribed proportion means the proportion that an amount (amount A) bears to another amount (amount B), when—
(a)
amount A is the amount owing on all loans made by a holding company to a mining company; and
(b)
amount B is the amount owing on all loans by all holding companies to the mining company
reinvestment profit means an amount that—
(a)
is excluded income of a company under any of sections CX 38 to CX 40 (which relate to mineral mining) or under a corresponding provision of an earlier Act; and
(b)
has not ceased to be reinvestment profit under section CU 15(7).
Defined in this Act: amount, associated mining operations, company, excluded income, holding company, initial treatment, lease, loan, mining company, mining development expenditure, mining exploration expenditure, mining holding company, mining operations, mining share, mining venture, New Zealand, New Zealand company, petroleum mining company, resident in New Zealand, share, specified mineral, tax year
Compare: 1994 No 164 ss DN 2(10), DN 3(12), OB 1
Subpart CV—Income specific to certain entities
Contents
CV 1 Group companies
An amount that a company derives in an income year and that would not otherwise be income of the company is treated as its income if—
(a)
the company is for that income year a member of a wholly-owned group of companies; and
(b)
had the group of companies been a single company, the amount would have been income of that single company.
Defined in this Act: amount, company, income, income year, wholly-owned group of companies
Compare: 1994 No 164 s CK 1
CV 2 Crown Research Institutes
An amount that a Crown Research Institute derives is income of the institute if the amount is for the purpose of producing outputs relating to public good science and technology, as defined in section 2 of the Foundation for Research, Science, and Technology Act 1990.
Defined in this Act: amount, Crown Research Institute, income
Compare: 1994 No 164 s CK 4(1)
CV 3 Australian wine producer rebate
An amount of Australian wine producer rebate derived by a New Zealand resident wine producer is income of the wine producer.
Defined in this Act: amount, Australian wine producer rebate, income, New Zealand resident
Sections CV 3 and CV 4 were inserted, as from 21 December 2005, by section 4 Taxation (Urgent Measures) Act 2005 (2005 No 121).
CV 4 Regulations: Australian wine producer rebate
Order in Council
(1)
For the purpose of enabling the Commissioner to administer the entitlement of New Zealand resident wine producers to Australian wine producer rebates in respect of wine produced in New Zealand, the Governor-General may from time to time, by Order in Council, make regulations relating to—
(a)
the claim by a New Zealand resident wine producer for payment of an Australian wine producer rebate in respect of wine produced in New Zealand that is sold in Australia:
(b)
the approval or verification of the entitlement of a New Zealand resident wine producer to a payment of an Australian wine producer rebate:
(c)
any matter necessary to give effect to a provision relating to Australian wine producer rebates in the agreement for the time being in force between the Government of New Zealand and the Government of Australia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
Force and effect
(2)
An Order in Council under subsection (1)—
(a)
has force and effect despite any provision in this Act or any other Inland Revenue Act:
(b)
may come into force On or after 1 July 2005:
(c)
may apply for Australian financial years commencing on or after 1 July 2005.
Definitions
(3)
In this section,—
Australian financial year means a year starting on and including 1 July
wine has the meaning given in section 31-1 of A New Tax System (Wine Equalisation Tax) Act 1999 (Aust), as amended from time to time, and regulations made under that Act.
Defined in this Act: amount, Australian financial year, Australian wine producer rebate, Inland Revenue Acts, New Zealand resident, wine
Sections CV 3 and CV 4 were inserted, as from 21 December 2005, by section 4 Taxation (Urgent Measures) Act 2005 (2005 No 121).
Subpart CW—Exempt income
Contents
Income from business or trade-like activities
CW 1 Forestry companies established by Crown, Maori owners, and holding companies buying land with standing timber from founders
When this section applies
(1)
This section applies when a forestry company buys land with standing timber on it from a seller who is the Crown, the Maori owners, or a holding company of the forestry company.
Land sold by Maori Trustee, trustee for Maori owners, or Maori incorporation
(2)
For the purposes of subsection (1),—
(a)
land sold to the forestry company by the Maori Trustee or by a trustee for a Maori owner is treated as if it had been sold by the beneficial owners:
(b)
land sold to the forestry company by a Maori incorporation is treated as if it had been sold by the members of the incorporation.
Exempt income
(3)
The amount described in section CB 23(3) (Disposal of land with standing timber) is exempt income of the seller.
Relationship with section DP 8
(4)
Section DP 8 (Cost of acquiring timber: forestry business on land bought from Crown, Maori owners, or holding company) deals with the cost to the forestry company of acquiring the timber.
Defined in this Act: amount, exempt income, forestry company, holding company, Maori incorporation, Maori owners, standing timber, trustee
Compare: 1994 No 164 s DL 5(1)(d)(i)-(iii)
Subsection (2)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CW 1B Treaty of Waitangi claim settlements: rights to take timber
When this section applies
(1)
This section applies when a person’s right to take timber (the old right) is extinguished, and new rights (the new rights) to take timber are granted to the person in place of the old right, if—
(a)
the sole reason for the new rights replacing the old right is to facilitate a Treaty of Waitangi claim settlement process; and
(b)
the rights and obligations of the new rights are equivalent to the old right, ignoring differences that are solely for the reason in paragraph (a).
Exempt income
(2)
An amount under section CB 22(1)(b) (Disposal of timber or right to take timber) for the extinguishing of the old right, or for the granting of the new rights, is exempt income of the relevant person. The amount is not income under that section.
Exception
(3)
Subsection (2) does not apply to an amount to the extent it is compensation paid, for the new rights replacing the old right, to the person who is granted the new rights.
Relationship with section DP 8B
(4)
Section DP 8B (Treaty of Waitangi claim settlements: rights to take timber) deals with the cost of the new rights for the person who is granted them.
Defined in this Act: amount, exempt income, income, pay, person, right to take timber
Section CW 1B: inserted (with effect on 1 April 2005), on 29 August 2011, by section 192 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
CW 2 Forestry encouragement agreements
When this section applies
(1)
This section applies when a person makes a forestry encouragement agreement under the Forestry Encouragement Act 1962.
Exempt income: advance
(2)
An amount of income advanced to the person under the agreement is exempt income, even if the person is later relieved from some or all of their liability to repay the principal.
Exempt income: interest
(3)
The amount from which the person is relieved in the circumstances described in subsection (4) is exempt income.
Circumstances for purposes of subsection (3)
(4)
The circumstances are that—
(a)
the person is liable to pay interest on an advance made under the agreement; and
(b)
the interest has not been paid; and
(c)
the person has been denied a deduction for the interest; and
(d)
the person is relieved from some or all of their liability to pay the interest.
Defined in this Act: amount, deduction, exempt income, income, interest
Compare: 1994 No 164 s DL 6(2)(a), (3)
CW 3 Forestry companies and Maori investment companies
When this section applies
(1)
This section applies when a forestry company or a Maori investment company issues a qualifying debenture.
Exempt income
(2)
Interest derived from the qualifying debenture is exempt income to the extent to which it is paid by the issue of a further qualifying debenture.
Defined in this Act: exempt income, forestry company, interest, Maori investment company, pay, qualifying debenture
Compare: 1994 No 164 s DL 5(1)(a)
CW 3B Pre-1990 forest land units: emissions trading scheme
[Repealed]Section CW 3B: repealed (with effect on 26 September 2008), on 6 October 2009, by section 745 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Income from holding property (excluding equity)
CW 4 Annuities under life insurance policies
When this section applies
(1)
This section applies when—
(a)
a person is paid an annuity under a life insurance policy offered or entered into in New Zealand by a life insurer; or
(b)
a person is paid an annuity under a life insurance policy offered or entered into outside New Zealand by a life insurer resident in New Zealand.
Exempt income
(2)
The annuity is exempt income.
Excluded annuities
(3)
An annuity that is excluded income of a superannuation fund under section CX 34 (Superannuation fund deriving amount from life insurance policy) is not also exempt income of the fund under this section.
Defined in this Act: excluded income, exempt income, life insurance policy, life insurer, New Zealand, offered or entered into in New Zealand, resident in New Zealand, superannuation fund
Compare: 1994 No 164 s CB 9(f)
CW 5 Payments of interest: post-war credits
Interest derived by a person under section 2 of the Income Tax (Repayment of Post-War Credits) Act 1959 of the United Kingdom Parliament is exempt income.
Defined in this Act: exempt income, interest
Compare: 1994 No 164 s CB 1(1)(b)
CW 6 Payments of interest: farm mortgages
Exempt income
(1)
Fifty percent of the interest that a person derives from a mortgage securing a loan made by a seller of a farm is exempt income, if—
(a)
the Rural Banking and Finance Corporation of New Zealand approves the mortgage; and
(b)
the Corporation gives the Commissioner notice of the approval and each variation.
Exclusions
(2)
This section does not apply if the person is—
(a)
an absentee; or
(b)
a company; or
(c)
a Maori authority; or
(d)
a public authority; or
(e)
a trustee liable for income tax under sections HH 3 to HH 6 (which relate to trustee income) and HZ 2 (Trusts that may become qualifying trusts); or
(f)
an unincorporated body.
Relationship with section KE 1
(3)
A person who derives interest that is exempt income under this section is not entitled to a rebate for the interest under section KE 1 (Rebate for interest on home vendor mortgages).
Defined in this Act: absentee, Commissioner, company, exempt income, income tax, interest, Maori authority, mortgage, notice, public authority, trustee
Compare: 1994 No 164 s CB 1(1)(c), (2)
CW 7 Foreign-sourced interest
Interest that a person derives from a country or territory outside New Zealand is exempt income if—
(a)
the person was not resident in New Zealand during the period for which the interest was payable; and
(b)
the interest was exempt under the laws of the overseas country or territory from a tax that is substantially the same as income tax imposed under this Act.
Defined in this Act: exempt income, income tax, interest, New Zealand, pay, resident in New Zealand
Compare: 1994 No 164 s CB 2(1)(e)
CW 8 Money lent to government of New Zealand
What this section applies to
(1)
This section applies to—
(a)
interest derived from money lent under a binding contract entered into on or after 29 July 1983; and
(b)
a redemption payment made on a commercial bill to which both the following apply; issue is defined in section 2 of the Bills of Exchange Act 1908:
(i)
it was issued on or after 29 July 1983; and
(ii)
it was not issued under a binding contract entered into before that date.
Exempt income
(2)
Interest or a redemption payment that is payable outside New Zealand is exempt income if—
(a)
it is derived by a person who is a non-resident; and
(b)
it is derived from or in relation to money lent to—
(i)
the government of New Zealand; or
(ii)
a local authority or a public authority; and
(c)
in the case of money lent to a local or public authority,—
(i)
it is lent for the purposes of a non-commercial activity carried on in New Zealand by the local or public authority; and
(ii)
the government of New Zealand has approved the exempt status of the interest or redemption payment.
Defined in this Act: commercial bill, exempt income, interest, local authority, money lent, New Zealand, non-resident, pay, public authority, redemption payment
Compare: 1994 No 164 ss CB 2(1)(b), CZ 2
Income from equity
CW 9 Dividend derived by company from overseas
Exempt income
(1)
A dividend from a foreign company is exempt income if derived by a company that is—
(a)
resident in New Zealand; and
(b)
not a portfolio tax rate entity.
Dividend withholding payment rules apply
(2)
The dividend withholding payment rules apply to the dividend.
Defined in this Act: company, dividend, dividend withholding payment rules, exempt income, foreign company, portfolio tax rate entity, resident in New Zealand
Compare: 1994 No 164 s CB 10(1)
Section CW 9(1): substituted, on 1 October 2007, by section 10(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section CW 9 list of defined terms portfolio tax rate entity: inserted, on 1 October 2007, by section 10(2) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
CW 10 Dividend within New Zealand wholly-owned group
Exempt income
(1)
A dividend is exempt income if—
(a)
it is derived by a company (recipient) that is resident in New Zealand; and
(b)
it is derived from a company (payer) that is in the same wholly-owned group of companies as the recipient at the time the dividend is derived; and
(c)
the payer is not a foreign company; and
(d)
the payer is not a company that can derive only exempt income; and
(e)
the requirements in subsections (2) to (7) are met.
Aligned balance dates
(2)
At the time the dividend is derived,—
(a)
the recipient and the payer have income years that end on the same date; or
(b)
a difference in balance dates—
(i)
is necessary to avoid a material distortion in the net income of 1 of them because aspects of a single business cycle would otherwise be split between 2 income years; and
(ii)
is not part of a tax avoidance arrangement.
Exclusion: dividends from council-controlled organisations
(3)
The dividend must not be derived by a local authority from—
(a)
a council-controlled organisation; or
(b)
a port company, subsidiary company of a port company, or energy company that would be a council-controlled organisation if section 6(4) of the Local Government Act 2002 did not exist.
Exclusion: debt release dividends
(4)
The dividend must not be the release of an obligation to repay an amount lent, treated as a dividend under section CD 4(2) (What is a transfer of value?).
Exclusion: certain friendly society dividends
(5)
The dividend must not be derived by a friendly society from a company registered as an insurer under the Accident Insurance Act 1998 that is under the control of the society.
Exclusion: certain sickness, accident, or death benefit fund dividends
(6)
The dividend must not be derived by a trustee in trust for a sickness, accident, or death benefit fund from a company registered as an insurer under the Accident Insurance Act 1998 that is under the control of the trustee.
Relationship with section FZ 1
(7)
This dividend must not be a dividend for which a deduction arises under section FZ 1 (Deduction for dividends paid on certain preference shares).
Defined in this Act: amount, company, council-controlled organisation, deduction, dividend, exempt income, foreign company, friendly society, income year, local authority, net income, New Zealand, resident in New Zealand, sickness accident or death benefit fund, tax avoidance arrangement, trustee, wholly-owned group of companies
Compare: 1994 No 164 s CB 10(2), (3)
CW 11 Dividend of conduit tax relief holding company
Exempt income: credit
(1)
If a conduit tax relief holding company derives a dividend with a conduit tax relief credit attached, the dividend is exempt income to the extent to which it is fully conduit tax relief credited.
Exempt income: additional dividend
(2)
If a conduit tax relief holding company derives a conduit tax relief additional dividend, the conduit tax relief additional dividend is exempt income.
Defined in this Act: conduit tax relief additional dividend, conduit tax relief credit, conduit tax relief holding company, dividend, exempt income, fully conduit tax relief credited
Compare: 1994 No 164 s CB 10(4), (5)
CW 11B Proceeds of share disposal by qualified foreign equity investor
(1)
An amount that a person derives from the sale or other disposal by a qualifying foreign equity investor of a share, or option to buy a share, in a company (called the resident company) is exempt income if—
(a)
the resident company is resident in New Zealand; and
(b)
the share or option, or an option or convertible note relating to the share, is bought on a day that is 12 months or more before the day of the sale or other disposal; and
(c)
the person who buys the share or option, or the option or convertible note relating to the share, and disposes of the share or option is a qualifying foreign equity investor from the time of the purchase to the time of the disposal; and
(d)
at some time in the 12-month period that starts from the time of the purchase referred to in paragraph (b), the shares of the resident company are quoted on no official list of a recognised exchange; and
(e)
the resident company satisfies either or both of subsections (2) and (3).
Requirements relating to main activity of resident company
(2)
A resident company satisfies this subsection if, throughout the period referred to in subsection (1)(c), the resident company does not have as a main activity 1 or more of—
(a)
land development:
(b)
land ownership:
(c)
mining:
(d)
provision of financial services:
(e)
insurance:
(f)
construction of public infrastructure assets:
(g)
acquisition of public infrastructure assets:
(h)
investing with a main aim of deriving, from the investment, income in the form of interest, dividends, rent, or personal property lease payments that are not royalties.
Requirements relating to resident company that provides capital to others
(3)
A resident company that has a main activity of providing capital in the form of debt or equity funding to other companies satisfies this subsection if—
(a)
throughout the period referred to in subsection (1)(c), each other company that is resident in New Zealand—
(i)
does not have, as a main activity, an activity that is referred to in subsection (2)(a) to (c) and (e) to (g); and
(ii)
does not have, as a main activity, an activity that is referred to in subsection (2)(d) and (h) and is not the provision of capital to other companies; and
(iii)
does not provide capital, directly or indirectly, to a company that is resident in New Zealand and has, as a main activity, an activity that is referred to in subsection (2)(a) to (c) and (e) to (g); and
(iv)
does not provide capital, directly or indirectly, to a company that is resident in New Zealand and has, as a main activity, an activity that is referred to in subsection (2)(d) and (h) and is not the provision of capital to other companies; and
(b)
throughout the period referred to in subsection (1)(c), each other company that is not resident in New Zealand does not provide capital, directly or indirectly, to a company that is resident in New Zealand and has, as a main activity, an activity that is referred to in subsection (2)(a) to (h); and
(c)
for each other company there is a time in the period referred to in subsection (1)(c) at which—
(i)
the shares of the other company are quoted on no official list of a recognised exchange; and
(ii)
the shares of the resident company are quoted on no official list of a recognised exchange.
Some definitions
(4)
In this section—
foreign exempt entity means a person who—
(a)
is established as a legal entity under the laws of a territory that is approved for the purposes of this section by the Governor-General by an Order in Council or under the laws of a part of such a territory; and
(b)
has persons (called in this definition members) who hold interests in the capital of the legal entity and who are entitled to shares of the income of the legal entity; and
(c)
under the laws of the territory, or of the part of the territory, is not subject to a tax on income other than as a body that handles income of the members; and
(d)
is resident in no territory that has laws that treat the legal entity as being subject to a tax on income other than as a body that handles income of the members; and
(e)
does not have a member who—
(i)
has, when treated as holding the interests of any person who is associated with the member under section OD 8(1) (Further definitions of associated persons), an interest of 10% or more in the capital of the legal entity; and
(ii)
is resident in no territory that is approved for the purpose of this section by the Governor-General by an Order in Council; and
(f)
does not have a member who, when treated as holding the interests of any person who is associated with the member under section OD 8(1) (Further definitions of associated persons), has an interest of 10% or more in the capital of the legal entity and who—
(i)
would be entitled to receive an amount derived from a disposal to which this section would apply; and
(ii)
would receive an amount referred to in subparagraph (i) that, in the absence of this section, would have been reduced by a tax imposed by the Act on the amount or on the proceeds of the disposal in the hands of the legal entity; and
(iii)
would in any circumstances, under the laws of the territory in which the member is resident or under the laws of part of the territory, be entitled to receive from the government of the territory or of the part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness or other compensation for the reduction referred to in subparagraph (ii); and
(g)
does not have a holder of a direct or indirect interest in the capital of the legal entity who—
(i)
is a resident of New Zealand; and
(ii)
holds a total direct or indirect interest of 10% or more in the capital of the legal entity, when treated as holding the interests of any person who is associated with the holder under section OD 8(1)
foreign exempt partnership means an unincorporated body that—
(a)
is established under the laws of a territory that is approved for the purposes of this section by the Governor-General by an Order in Council or under the laws of a part of such a territory; and
(b)
consists of persons (called in this definition partners); and
(c)
under the laws of the territory, or of the part of the territory, is not subject to a tax on income other than as a body that handles income of the partners; and
(d)
has at least 1 partner (called in this definition a general partner) who is liable for all debts of the unincorporated body and who has significant involvement in, and control of, the business activities of the unincorporated body; and
(e)
has at least 1 partner (called in this definition a special partner) whose liability for debts of the unincorporated body is limited and who has limited involvement in, and control of, the business activities of the unincorporated body; and
(f)
does not have a general partner who is resident in no territory that is approved for the purposes of this section by the Governor-General by an Order in Council; and
(g)
does not have a partner who—
(i)
has, when treated as holding the interests of any person who is associated with the partner under section OD 8(1) (Further definitions of associated persons), an interest of 10% or more in the capital of the unincorporated body; and
(ii)
is resident in no territory that is approved for the purpose of this section by the Governor-General by an Order in Council; and
(h)
does not have a partner who, when treated as holding the interests of any person who is associated with the partner under section OD 8(1) (Further definitions of associated persons), has an interest of 10% or more in the capital of the unincorporated body and who—
(i)
would, under the Act in the absence of this section, be subject to tax on an amount derived from a disposal to which this section would apply; and
(ii)
would in any circumstances, under the laws of the territory in which the partner is resident or under the laws of part of the territory, be entitled to receive from the government of the territory or of the part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness or other compensation for a payment of the tax referred to in subparagraph (i); and
(i)
does not have a holder of a direct or indirect interest in the capital of the unincorporated body who—
(i)
is a resident of New Zealand; and
(ii)
holds a total direct or indirect interest of 10% or more in the capital of the unincorporated body, when treated as holding the interests of any person who is associated with the holder under section OD 8(1)
foreign exempt person means a person who—
(a)
is resident in a territory that is approved for the purposes of this section by the Governor-General by an Order in Council; and
(b)
is not part of an unincorporated body that satisfies paragraphs (a) to (c) of the definition of foreign exempt partnership; and
(c)
is not a legal entity that satisfies paragraphs (a) to (c) of the definition of foreign exempt entity; and
(d)
under the laws of the territory, or of the part of the territory, derives the proceeds from a disposal of shares or options that are held by the person; and
(e)
is not a person who—
(i)
would, under the Act in the absence of this section, be subject to tax on an amount derived from a disposal to which this section would apply; and
(ii)
would in any circumstances, under the laws of the territory in which the person is resident or under the laws of part of the territory, be entitled to receive from the government of the territory or of the part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness or other compensation for a payment of the tax referred to in subparagraph (i); and
(f)
does not have a holder of a direct or indirect interest in the person who—
(i)
is a resident of New Zealand; and
(ii)
holds a total direct or indirect interest of 10% or more in the capital of the person, when treated as holding the interests of any person who is associated with the holder under section OD 8(1)
qualifying foreign equity investor means a person who is not resident in New Zealand and who is 1 or more of the following
(a)
a foreign exempt entity:
(b)
a person who is part of a foreign exempt partnership:
(c)
a foreign exempt person.
Residency of territory
(5)
For the purpose of this section, whether a person is resident in a territory other than New Zealand is determined—
(a)
under a double tax agreement between New Zealand and the territory that is in force under the terms of the double tax agreement, if—
(i)
there is such a double tax agreement; and
(ii)
the double tax agreement provides for the residency of the person:
(b)
under the laws of the territory, if paragraph (a) does not apply.
Approval and withdrawal of approval for territory
(6)
The Governor-General may, from time to time by Order in Council—
(a)
approve a territory for the purpose of this section:
(b)
withdraw the approval of a territory for the purpose of this section.
Defined in this Act: amount, business, company, dividend, double tax agreement, exempt income, foreign exempt entity, foreign exempt partnership, foreign exempt person, income, insurance, interest, land, payment, personal property lease payment, qualifying foreign equity investor, recognised exchange, resident in New Zealand, royalty, share, tax
Section CW 11B was inserted, as from 1 October 2005, by section 174 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Section CW 11B(4) foreign exempt entity paragraph (c): substituted, on 19 December 2007, by section 20(1)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(4) foreign exempt entity paragraph (f)(iii): amended, on 19 December 2007, by section 20(1)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(4) foreign exempt entity paragraph (f)(iii): amended, on 19 December 2007, by section 20(1)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(4) foreign exempt entity paragraph (g): added, on 19 December 2007, by section 20(1)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(4) foreign exempt partnership paragraph (c): substituted, on 19 December 2007, by section 20(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(4) foreign exempt partnership paragraph (h)(ii): amended, on 19 December 2007, by section 20(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(4) foreign exempt partnership paragraph (h)(ii): amended, on 19 December 2007, by section 20(2)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(4) foreign exempt partnership paragraph (i): added, on 19 December 2007, by section 20(2)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(4) foreign exempt person paragraph (d): substituted, on 19 December 2007, by section 20(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(4) foreign exempt person paragraph (e)(ii): amended, on 19 December 2007, by section 20(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(4) foreign exempt person paragraph (e)(ii): amended, on 19 December 2007, by section 20(3)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(4) foreign exempt person paragraph (f): added, on 19 December 2007, by section 20(3)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(5)(a): substituted, on 19 December 2007, by section 20(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 11B(5)(b): substituted, on 19 December 2007, by section 20(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CW 11C Proceeds from share or option acquired under venture investment agreement
Exempt income: proceeds from share or option
(1)
An amount of income that a non-resident derives from the sale or other disposal of a share, or option to buy a share, in a company is exempt income if the requirements of subsections (2) to (5) are satisfied.
Requirement relating to company at time of acquisition
(2)
The first requirement is that, when the non-resident first acquires a share, or option to buy a share, in the company in a way that satisfies subsection (3), the company must have in New Zealand—
(a)
more than 50% in value of the company’s assets; and
(b)
more than 50% in number of the company’s employees.
Requirement relating to acquisition of first share or option
(3)
The second requirement is that, when the non-resident first acquires a share or option to buy a share (first interest) in the company, a person (venture capital manager) must acquire, at the same time and on the same terms,—
(a)
the first interest, on behalf of the non-resident; and
(b)
another share or option that confers the same rights and imposes the same obligations as the first interest—
(i)
on behalf of the Venture Investment Fund or a company owned by the Venture Investment Fund; and
(ii)
under a venture investment agreement.
Continuing requirement relating to company
(4)
The third requirement is that, while the non-resident holds the share or option, the company must not have 1 or more of the following as a main activity:
(a)
land development:
(b)
land ownership:
(c)
mining:
(d)
provision of financial services:
(e)
insurance:
(f)
construction of public infrastructure assets:
(g)
acquisition of public infrastructure assets:
(h)
investing with a main aim of deriving, from the investment, income in the form of interest, dividends, rent, or personal property lease payments that are not royalties.
Requirement relating to situation at disposition of share or option
(5)
The fourth requirement is that, when the non-resident disposes of the share or option,—
(a)
the venture capital manager must have complied with the venture capital manager’s obligations under the venture investment agreement; and
(b)
the non-resident must have complied with the non-resident’s obligations under any agreement between the non-resident and the Venture Investment Fund or a company owned by the Venture Investment Fund; and
(c)
no person who is resident in New Zealand and no group of associated persons who are resident in New Zealand has a direct or indirect interest of more than 10% in the share or option.
Venture investment agreement
(6)
In this section, venture investment agreement means an agreement that—
(a)
is an agreement, relating to investment in companies, between parties that include—
(i)
a venture capital manager; and
(ii)
the Venture Investment Fund or a company owned by the Venture Investment Fund; and
(b)
provides for investments under the agreement to be managed by the venture capital manager; and
(c)
provides that an investment under the agreement must be in a company that, when the first investment in the company under the agreement is made, has in New Zealand—
(i)
more than 50% in value of the company’s assets; and
(ii)
more than 50% in number of the company’s employees.
Defined in this Act: employee, income, interest, non-resident, resident in New Zealand, share, venture investment agreement, Venture Investment Fund
Section CW 11C was inserted, as from 3 April 2006, by section 24(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for shares or options purchased for a non-resident by a venture capital manager in relation to a venture investment agreement made on or before 31 March 2010.
Employee or contractor income
CW 12 Income of Governor-General
Defined in this Act: exempt income
Compare: 1994 No 164 s CB 7(a), (b)
Paragraph (a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CW 13 Expenditure on account, and reimbursement, of employees
Exempt income: expenditure on account
(1)
Expenditure on account of an employee, being a payment to which section CE 5 (Meaning of expenditure on account of an employee) applies, that is incurred by an employer in connection with the employee’s employment or service is exempt income of the employee to the extent to which the expenditure is expenditure for which the employee would be allowed a deduction if they incurred the expenditure and if the employment limitation did not exist.
Exempt income: reimbursement
(2)
An amount that an employer pays to an employee in connection with the employee’s employment or service is exempt income of the employee to the extent to which it reimburses the employee for expenditure for which the employee would be allowed a deduction if the employment limitation did not exist.
Estimated expenditure of employees
(3)
For the purposes of subsection (2),—
(a)
the employer may make, for a relevant period, a reasonable estimate of the amount of expenditure likely to be incurred by the employee or a group of employees for which reimbursement is payable; and
(b)
the amount estimated is treated as if it were the amount incurred during the period to which the estimate relates.
Relationship with sections CW 13B and CW 13C
(4)
This section does not apply to an amount referred to in section CW 13B or CW 13C.
Depreciation loss included
(5)
In this section, expenditure includes an amount of depreciation loss.
Defined in this Act: amount, deduction, depreciation loss, employee, employer, employment limitation, exempt income, expenditure on account of an employee
Compare: 1994 No 164 s CB 12(1), (3), (3B), (3C)
Section CW 13(1): amended (with effect on 1 April 2005), on 2 November 2012 (applying for the 2005–06 and later income years), by section 242(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section CW 13(4) heading: added (with effect on 1 April 2005), on 6 October 2009, by section 746(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 13(4): added (with effect on 1 April 2005), on 6 October 2009, by section 746(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 13(4): amended (with effect on 1 April 2005), on 7 December 2009, by section 151 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section CW 13(5) heading: added (with effect on 1 April 2005), on 6 October 2009, by section 746(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 13(5): added (with effect on 1 April 2005), on 6 October 2009, by section 746(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 13 list of defined terms depreciation loss: inserted (with effect on 1 April 2005), on 6 October 2009, by section 746(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
CW 13B Relocation payments
Exempt income
(1)
An amount that an employer pays to or on behalf of an employee in connection with the expenses of the employee in a work-related relocation is exempt income of the employee.
Actual expenditure
(2)
The amount paid must be no more than the actual cost incurred by or on behalf of the employee on an expense that the Commissioner lists as an eligible relocation expense in a determination made under subsection (6).
Time limit
(3)
Subsection (1) applies only to expenditure incurred to the end of the tax year following that in which the relocation occurs. For the purposes of this subsection, a temporary move that has not been treated as a work-related relocation under this section is ignored.
Meaning of work-related relocation
(4)
For the purposes of this section, work-related relocation means a relocation of the place where an employee lives that is required—
(a)
because the employee’s workplace is not within reasonable daily travelling distance of their residence; and
(b)
as a result of the employee—
(i)
taking up new employment with a new employer; or
(ii)
taking up new duties at a new location with their existing employer; or
(iii)
continuing in their current position but at a new location.
Exemption from distance test
(5)
The requirement in subsection (4)(a) for a workplace to be beyond reasonable travelling distance of the person’s residence does not apply to a person whose accommodation forms an integral part of their work.
Determinations
(6)
The Commissioner may issue a determination for the purposes of this section under section 91AAR of the Tax Administration Act 1994 to provide a list of eligible relocation expenses, and may extend or modify the list from time to time as required. The Commissioner must give at least 30 days notice of the implementation date of any alteration.
Defined in this Act: amount, Commissioner, employee, employer, exempt income, tax year, work-related relocation
Section CW 13B: inserted (with effect on 1 April 2005), on 6 October 2009, by section 747 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
CW 13C Payments for overtime meals and certain other allowances
Exempt income: overtime meals
(1)
An amount that an employer pays to or on behalf of an employee for a meal for the employee when the employee is working overtime is exempt income of the employee.
Exempt income: certain sustenance allowances
(2)
An amount that an employer pays to an employee as a sustenance allowance for the employee for a day is exempt income of the employee if—
(a)
the employee works a minimum of 7 hours on the day; and
(b)
their employment requires them—
(i)
to work outdoors and away from their employment base for most of the day; and
(ii)
to undertake a long period of physical activity in travelling through a neighbourhood or district on foot or by bicycle; and
(c)
it is not practicable for the employer to provide sufficient sustenance on the day for the period when the employee is working outdoors; and
(d)
the allowance recognises—
(i)
the arduous physical nature of the employee’s work as described in paragraph (b); and
(ii)
that the employer would normally provide tea, coffee, water, or similar refreshments at the employment base in the course of their business.
Eligibility requirements: overtime meals
(3)
Subsection (1) applies only if—
(a)
the employee has worked at least 2 hours’ overtime on the day of the meal; and
(b)
either—
(i)
the employee’s employment agreement provides for pay for overtime hours worked; or
(ii)
the employer has an established policy or practice of paying for overtime meals.
Eligibility requirements: sustenance allowances
(4)
Subsection (2) applies only if the employer has an established policy or practice of paying a sustenance allowance.
Actual cost or reasonable estimate
(5)
The amount paid must be—
(a)
the actual cost to the employee, and for an overtime meal referred to in subsection (1), with documentation required for amounts over $20 per meal; or
(b)
a reasonable estimate of the expenditure likely to be incurred by the employee or a group of employees for whom an amount is payable.
Meaning of overtime
(6)
For the purposes of this section, overtime, for a person and a day, means time worked for an employer on the day beyond the person’s ordinary hours of work as set out in their employment agreement.
Defined in this Act: amount, employee, employer, exempt income, overtime, pay
Section CW 13C: inserted (with effect on 1 April 2005), on 6 October 2009, by section 747 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
CW 14 Allowance for additional transport costs
Exempt income
(1)
An allowance that an employee receives from an employer to reimburse the employee’s additional transport costs is exempt income to the extent to which the employee incurs the costs in connection with their employment and for the employer’s benefit or convenience.
Estimated expenditure of employees
(2)
For the purposes of subsection (1),—
(a)
the employer may make, for a relevant period, a reasonable estimate of the amount of expenditure likely to be incurred by the employee or a group of employees for which reimbursement is payable; and
(b)
the amount estimated is treated as if it were the amount incurred during the period to which the estimate relates.
Meaning of additional transport costs
(3)
In this section, additional transport costs means the costs to an employee of travelling between their home and place of work that are more than would ordinarily be expected. The costs must be attributable to 1 or more of the following factors:
(a)
the day or time of day when the work duties are performed:
(b)
the need to transport any goods or material for use or disposal in the course of the employee’s work:
(c)
the requirement to fulfil a statutory obligation:
(d)
a temporary change in the employee’s place of work while in the same employment:
(e)
any other condition of the employee’s work:
(f)
the absence of an adequate public passenger transport service that operates fixed routes and a regular timetable for the employee’s place of work.
Quantifying additional transport costs
(4)
Additional transport costs are quantified as follows:
(a)
when the additional transport costs are attributed to a factor described in any of subsection (3)(a) to (e), the amount by which the costs are more than the employee’s ordinarily expected travel costs without reference to that factor:
(b)
when the additional transport costs are attributed to the factor described in subsection (3)(f), the amount by which the costs are more than $5 for each day on which the employee attends work:
(c)
except in special circumstances, the costs of travelling any distance over 70 kilometres in 1 day are not taken into account in calculating additional transport costs.
Defined in this Act: additional transport costs, amount, employee, employer, exempt income
Compare: 1994 No 164 s CB 12(2)-(4)
Subsection (3)(a) to (e) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Subsection (4)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CW 15 Amounts derived during short-term visits
Exempt income
(1)
Income that a non-resident person derives in a tax year from performing personal or professional services in New Zealand during a visit is exempt income if—
(a)
the visit is for 92 or fewer days (counting the days of arrival and departure as a whole day each); and
(b)
the total number of days on which the person is present in New Zealand in the tax year is 92 or fewer; and
(c)
the services are performed for or on behalf of a person who is not resident in New Zealand; and
(d)
the amount derived from the personal or professional services is chargeable in the country or territory in which the person is resident with a tax that is substantially the same as income tax imposed under this Act.
Exclusion
(2)
This section does not apply to the income of a public entertainer.
Meaning of public entertainer
(3)
In this section, public entertainer includes—
(a)
circus performers, dancers, lecturers, motion picture artists, musicians, radio artists, singers, television artists, and theatre artists; and
(b)
athletes, boxers, wrestlers, and other professional sportspersons.
Defined in this Act: amount, exempt income, income, income tax, New Zealand, non-resident, public entertainer, resident in New Zealand, tax year
Compare: 1994 No 164 s CB 2(1)(c)
CW 16 Amounts derived by visiting entertainers (including sportspersons)
Exempt income: cultural activities
(1)
Income that a non-resident entertainer derives from carrying out their activity or performance in New Zealand during a visit is exempt income if—
(a)
the activity or performance occurs under a cultural programme of the New Zealand government or an overseas government; or
(b)
the activity or performance occurs under a cultural programme wholly or partly sponsored by the New Zealand government or an overseas government; or
(c)
the activity or performance occurs as part of a programme of an overseas foundation, trust, or other organisation that—
(i)
exists wholly or partly to promote cultural activity; and
(ii)
is not carried on for the private pecuniary profit of any member, proprietor, or shareholder.
Exempt income: sporting activities
(2)
Income that a non-resident entertainer derives from carrying out an activity or performance that relates to a game or sport in New Zealand during a visit is exempt income if the participants are the official representatives of a body that administers the game or sport in an overseas country.
Exempt income: employer of non-resident entertainer
(3)
If income derived from an activity or performance of a non-resident entertainer would be exempt income under this section if derived by the non-resident entertainer, that amount is exempt income if derived by a person who—
(a)
provides the services of the non-resident entertainer during the visit to New Zealand; and
(b)
is 1 of the following:
(i)
the entertainer’s employer; or
(ii)
a company of which the entertainer is an officer; or
(iii)
a firm of which the entertainer is a principal.
Meaning of non-resident entertainer
(4)
In this section, non-resident entertainer means a non-resident person, as defined in subpart OE (Source of income and residence), who carries out an activity or performance in connection with—
(a)
a solo or group performance by actors, compères, dancers, entertainers, musicians, singers, or other artists, whether for cultural, educational, entertainment, religious, or other purposes; or
(b)
lectures, speeches, or talks for any purpose; or
(c)
a sporting event or sporting competition of any nature.
Defined in this Act: amount, company, employer, exempt income, income, New Zealand, non-resident, non-resident entertainer
Compare: 1994 No 164 s CB 2(1)(a)
CW 17 Amounts derived by visiting crew of pleasure craft
Exempt income
(1)
Income that a non-resident crew member derives from performing services in New Zealand relating to a pleasure craft while it is in New Zealand is exempt income if—
(a)
the services are performed for a person who is not resident in New Zealand; and
(b)
the pleasure craft is the subject of a security given under section 116 of the Customs and Excise Act 1996; and
(c)
the pleasure craft is not owned, wholly or partly or directly or indirectly, by—
(i)
a resident of New Zealand; or
(ii)
a controlled foreign company.
Some definitions
(2)
In this section,—
non-resident crew member means a person who—
(a)
is a crew member of a pleasure craft; and
(b)
is a non-resident, a matter determined without applying section OE 1(2) (Determination of residence of person other than company); and
(c)
is not present in New Zealand on more than 365 days in any 2 year period that starts on or after 28 May 2002; and
(d)
is not in New Zealand unlawfully under the Immigration Act 1987
pleasure craft is defined in section 2 of the Maritime Transport Act 1994.
Defined in this Act: amount, controlled foreign company, exempt income, income, New Zealand, non-resident, non-resident crew member, pleasure craft, resident in New Zealand, year
Compare: 1994 No 164 s CB 2(1)(f), (3B), (4)
CW 18 Amounts derived by overseas experts and trainees in New Zealand by government arrangement
Exempt income: personal services
(1)
Income that a non-resident person derives from performing personal services, including professional services, in New Zealand during a visit is exempt income if—
(a)
the services are performed for or on behalf of a non-resident employer; and
(b)
the purpose of the visit is all or any of the following:
(i)
providing professional or expert advice or assistance:
(ii)
teaching or lecturing:
(iii)
making investigations:
(iv)
receiving education, training, or experience; and
(c)
the visit occurs under an arrangement for assistance entered into by the government of New Zealand.
Exempt income: maintenance or bursaries
(2)
An amount of income that a non-resident person derives from a payment of maintenance or of an allowance, or from a bursary or scholarship, provided for or paid to the person during or in relation to their presence in New Zealand during a visit, is exempt income if—
(a)
the purpose of the visit is all or any of the following:
(i)
providing professional or expert advice or assistance:
(ii)
teaching or lecturing:
(iii)
making investigations:
(iv)
receiving education, training, or experience; and
(b)
the visit occurs under an arrangement for assistance entered into by the government of New Zealand.
Some definitions
(3)
In this section,—
arrangement for assistance entered into by the government of New Zealand means an arrangement entered into by the government of New Zealand—
(a)
in relation to or under—
(i)
the Commonwealth Education Scheme; or
(ii)
a programme of the United Nations, or any specialised agency of the United Nations, for cultural, economic, educational, expert, professional, or technical assistance; or
(b)
for the purpose of providing education, training, or experience for officers of the Samoan, Cook Islands, Niuean, or Tokelauan public services, or for persons resident in Samoa, the Cook Islands, Niue, or Tokelau; or
(c)
with the government of any other country or with any international organisation, if it is an arrangement that—
(i)
is for the purpose of providing cultural, economic, educational, expert, professional, or technical assistance, or administrative or other training, or the means or facilities for making investigations, whether upon a bilateral, co-operative, multilateral, mutual, or unilateral basis; and
(ii)
is in principle similar to any arrangement to which paragraph (a) or (b) applies
international organisation means an organisation whose members are sovereign powers, whether countries of the Commonwealth or foreign sovereign powers, or the governments of those countries or powers
non-resident person means a person who would not be resident in New Zealand if they were not present in New Zealand under an arrangement for assistance entered into by the government of New Zealand. The residence of the person is determined without applying section OE 1(2) (Determination of residence of person other than company).
Defined in this Act: amount, arrangement, arrangement for assistance entered into by the government of New Zealand, Commonwealth, employer, exempt income, income, international organisation, New Zealand, non-resident person, resident in New Zealand
Compare: 1994 No 164 s CB 2(1)(d), (3), (4)
Subsection (1)(b)(i) to (iii) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Subsection (2)(a)(i) to (iii) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
CW 19 Income for military or police service in operational area
When this section applies
(1)
This section applies if a member of the New Zealand Defence Force or the police (the member) derives an amount of income for serving in an operational area.
Exempt income
(2)
The following amounts are exempt income of the member:
(a)
an amount of operational allowance:
(b)
an amount exempted by a decision of the ministerial committee under subsection (3).
Ministerial committee
(3)
A ministerial committee that includes the Prime Minister, the Minister of Defence, the Minister of Police, the Minister of Finance, and the Minister of Foreign Affairs may, for the purposes of subsection (2)(b), decide to exempt an amount of income derived by a member for being in an operational area.
Some definitions
(4)
In this section,—
operational allowance, for a member, means an allowance payable by the Government of New Zealand that—
(a)
is paid directly and solely for being in an operational area; and
(b)
is not—
(i)
a regular force gratuity:
(ii)
a bonus or bounty for re-engagement in a regular force
operational area means an area—
(a)
to which the Minister of Defence has ordered the deployment of New Zealand Defence Force members for a specific mission authorised by the Government; and
(b)
that the Chief of Defence Force delineates for that mission.
Defined in this Act: amount, exempt income, income, New Zealand, operational allowance, operational area
Section CW 19 was substituted, as from 18 March 2007, by section 11 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
CW 20 Deferred military pay for active service
Exempt income
(1)
Deferred military pay that is granted or paid under the Defence Act 1990 to a person for service in the New Zealand armed forces in an active service area is exempt income.
Some definitions
(2)
In this section,—
active service area means an area outside New Zealand that is designated as an active service area by the Minister of Defence, with the agreement of the Minister of Finance
deferred military pay means pay declared to be deferred by the Minister of Defence, with the agreement of the Minister of Finance.
Defined in this Act: active service area, deferred military pay, exempt income, New Zealand
Compare: 1994 No 164 s CB 9(b)
CW 21 Value of board for religious society members
The value of personal board and lodging and other basic personal necessities received by a member of a religious society or order is exempt income if—
(a)
the member’s sole occupation is service in a religious society or order; and
(b)
it is in the nature of the service that members are not paid for their work and do not receive a reward for it, other than those necessities.
Defined in this Act: exempt income
Compare: 1994 No 164 s CB 6(b)
CW 22 Jurors’ and witnesses’ fees
Fees paid by the Crown to jurors and to witnesses, other than expert witnesses, are exempt income.
Defined in this Act: exempt income
Compare: 1994 No 164 s CB 6(c)
Certain income of transitional resident
This heading was inserted, as from 1 October 2005, by section 25(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 25(2) and (3) of that Act as to the application of this amendment.
CW 22B Certain income derived by transitional resident
Income derived by a person who is a transitional resident is exempt income if the income is a foreign-sourced amount that is none of the following:
(a)
employment income of a type described in section CE 1 (Amounts derived in connection with employment) in connection with employment or service performed while the person is a transitional resident:
(b)
income from a supply of services.
Defined in this Act: employment income, exempt income, foreign-sourced amount, income, transitional resident
Section CW 22B was inserted, as from 1 October 2005, by section 25(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 25(2) and (3) of that Act as to the application of this amendment.
Income from living allowances, compensation, and government grants
CW 23 Pensions
Exempt income
(1)
The following are exempt income:
(a)
a pension or allowance under the War Pensions Act 1954, other than a veteran’s pension:
(b)
a pension or allowance of any other kind granted in New Zealand or overseas by any government relating to any war or to disability attributable to or aggravated by service in the armed forces or the police:
(c)
a payment of portable New Zealand superannuation:
(d)
a payment of portable veteran’s pension:
(e)
an overseas pension.
Meaning of overseas pension
(2)
In this section, overseas pension means—
(a)
an overseas pension, to the extent of sums subtracted under section 70 of the Social Security Act 1964, by the department currently responsible for administering the Act, from—
(i)
a monetary benefit paid under Part 1 of the Act; or
(ii)
a monetary benefit, other than New Zealand superannuation or a veteran’s pension, paid under the Social Welfare (Transitional Provisions) Act 1990:
Defined in this Act: amount, exempt income, income-tested benefit, New Zealand superannuation, overseas pension, portable New Zealand superannuation, portable veteran’s pension, veteran’s pension
Compare: 1994 No 164 s CB 5(1)(a), (f), (fa), (o)
Subsection (1)(a) to (d) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Subsection (2)(a)(ii) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CW 23B Reinvested amount from foreign superannuation scheme in Australia
An amount of income derived in an income year by a natural person as a withdrawal from a foreign superannuation scheme is exempt income if—
(a)
the person in the income year invests the amount in another foreign superannuation scheme; and
(b)
each foreign superannuation scheme is constituted in Australia and is—
(i)
an Australian approved deposit fund:
(ii)
an Australian exempt public sector superannuation scheme:
(iii)
an Australian regulated superannuation fund:
(iv)
an Australian retirement savings account.
Defined in this Act: Australian approved deposit fund, Australian exempt public sector superannuation scheme, Australian regulated superannuation fund, Australian retirement savings account, exempt income, foreign superannuation scheme, income, income year
Section CW 23B was inserted, as from 1 April 2005, by section 12(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2006–07 income year.
CW 24 Annuities from Crown Bank Accounts
An annuity is exempt income if—
(a)
it is granted by the Executive Council of New Zealand; and
(b)
it is paid from the Crown Bank Account; and
(c)
it is not designated as being subject to tax.
Defined in this Act: exempt income, New Zealand tax
Compare: 1994 No 164 s CB 7(c)
CW 25 Services for members of Parliament
An amount is exempt income of a person to the extent to which it is income of the person and is not exempt income under another provision of subpart CW, if the amount is travel, accommodation, attendance, and communication services, as defined in section 20A(7) of the Civil List Act 1979, and,—
(a)
the amount is—
(i)
referred to in section 20A of that Act:
(ii)
paid under section 25 of that Act; and
(b)
the amount is—
(i)
provided to a person to whom any of section 25(1)(b) to (e) of that Act applies:
(ii)
provided to a member of the family of a person described in subparagraph (i).
Defined in this Act: amount, exempt income, income
Section CW 25: replaced (with effect on 1 April 2005, applying for the 2005–06 and later income years), on 17 July 2013, by section 154(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
CW 26 Maintenance payments
The following are exempt income:
(a)
child support or spousal maintenance under the Child Support Act 1991:
(b)
a payment in the nature of maintenance out of money belonging to a person’s spouse, civil union partner, de facto partner, former spouse, former civil union partner or former de facto partner.
Defined in this Act: exempt income
Compare: 1994 No 164 s CB 9(a)
Paragraph (a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Paragraph (b) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, former spouse or former civil union partner”
for “spouse or former spouse”
.
Paragraph (b) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner, de facto partner, former spouse, former civil union partner or former de facto partner”
for “spouse, civil union partner, former spouse or former civil union partner”
.
CW 27 Allowances and benefits
Exempt income
(1)
The following are exempt income:
(a)
a monetary benefit under the Social Security Act 1964, except an income-tested benefit:
(b)
a payment under Part 5 or 13 of the Accident Insurance Act 1998, or under Part 11 of the Injury Prevention, Rehabilitation, and Compensation Act 2001, of any of the following kinds:
(i)
a payment to an insured person for treatment or rehabilitation:
(ii)
an independence allowance:
(iii)
a funeral grant:
(iv)
a survivor’s grant:
(v)
a childcare payment:
(c)
a participation allowance under regulations made under the Social Security Act 1964:
(d)
a disabled workshop payment:
(e)
an amount derived by a trustee of a trust created for the benefit of persons harmed by thalidomide, or a distribution to a beneficiary from the trust:
(f)
an amount derived by a trustee of the New Zealand Agent Orange Trust that represents the settlement fund and income attributable to the fund, or a distribution to a beneficiary from the trust.
Meaning of disabled workshop payment
(2)
In this section, disabled workshop payment means a payment to a disabled person for undertaking therapeutic activities in a sheltered workshop, as defined in the Disabled Persons Employment Promotion Act 1960, or in a similar workshop, if the average amount paid in a tax year is $50 or less per week.
Defined in this Act: amount, disabled workshop payment, exempt income, income, income-tested benefit, tax year, trustee
Compare: 1994 No 164 ss CB 5(1)(e), (l), (m), (q), CB 6(a), (e)
Subsection (1)(a), (b)(v), and (c) to (e) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Subsection (1)(b)(i) to (iv) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
CW 28 Compensation payments
Exempt income
(1)
An amount of income from the following payments is exempt income:
(a)
a payment relating to incapacity for work:
(b)
a payment under the Workers Compensation Act 1956:
(c)
a payment under the Criminal Injuries Compensation Act 1963:
(d)
a distribution from funds approved by the Minister in charge of War Pensions to ex-prisoners of war held in German concentration camps in World War 2:
(e)
a payment under the laws of a State of the Federal Republic of Germany or the Republic of Austria to the victims of National Socialist persecution:
(g)
payments of compensation, solatium payments, or payments to lessors for the purchase of leases under the Maori Reserved Land Amendment Act 1997 (but not interest paid under section 23 of the Act).
Some definitions
(2)
In this section,—
accident insurance contract is defined in section 13 of the Accident Insurance Act 1998
payment relating to incapacity for work means a payment of 1 of the following kinds made to a person because they are, or another person is, incapacitated for work
(a)
a payment under section 25 of the National Provident Fund Act 1950:
(b)
a payment by a friendly society, but not a payment referred to in paragraph (d) or (e) of the definition of the term accident compensation payment in section CF 1(2) (Benefits, pensions, compensation, and government grants):
(c)
a payment from a sickness, accident, or death benefit fund to which the person was a contributor when the period of incapacity began, but not a payment referred to in paragraph (d) or (e) of the definition of the term accident compensation payment in section CF 1(2) (Benefits, pensions, compensation, and government grants):
(d)
a payment under a policy of personal sickness or accident insurance, or an accident insurance contract, but neither a payment referred to in paragraph (d) or (e) or
(f)
of the definition of the term accident compensation payment in section CF 1(2) (Benefits, pensions, compensation, and government grants) nor a payment calculated according to loss of earnings or profits.
payment relating to incapacity for work: paragraphs (a) to (c) of this definition were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Defined in this Act: accident insurance contract, exempt income, friendly society, interest, lease, payment relating to incapacity for work, sickness accident or death benefit fund
Compare: 1994 No 164 s CB 5(1)(b), (c), (g), (h), (j), (k), (n), (p)
Subsection (1)(a) to (f) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
CW 28B Payment of certain accident compensation payments
The amount paid to a person (the claimant) for an income year as a personal service rehabilitation payment for the person under the Injury Prevention, Rehabilitation, and Compensation Act 2001 is exempt income of the claimant if—
(a)
the claimant pays an amount to another person for providing a key aspect of social rehabilitation referred to in the definition of personal service rehabilitation payment in section OB 1; and
(b)
the amount paid by the claimant for a key aspect of social rehabilitation for the income year is equal to or more than the amount of personal service rehabilitation payments, after any deduction of tax under this Act, paid to the claimant for the year.
Defined in this Act: exempt income, income year, payment, personal service rehabilitation payment
Section CW 28B: inserted, on 1 July 2008, by section 21 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CW 29 Scholarships and bursaries
A basic grant or an independent circumstances grant under regulations made under section 303 of the Education Act 1989 is not exempt income, but any other scholarship or bursary for attendance at an educational institution is exempt income.
Defined in this Act: exempt income
Compare: 1994 No 164 s CB 9(d)
CW 30 Film production grants
An amount derived by a company as a large budget screen production grant is exempt income.
Defined in this Act: company, exempt income, large budget screen production grant
Compare: 1994 No 164 s CB 9(i)
Income of certain entities
CW 31 Public authorities
Exempt income
(1)
An amount of income derived from sinking funds relating to the debt of a public authority is exempt income.
Exempt income
(2)
Any other amount of income derived by a public authority is exempt income.
Exclusion: amounts received in trust
(3)
Subsection (2) does not apply to an amount of income that a public authority derives as a trustee.
Exclusion: superannuation schemes
(4)
Subsection (2) does not apply to a public authority to the extent to which it is a superannuation scheme.
Exclusion: certain public authorities
(5)
Subsection (2) does not apply to an amount of income derived by the following public authorities:
(a)
Public Trust:
(b)
State enterprises:
(c)
Crown Research Institutes:
(d)
the department or ministry that is currently responsible for administering the Marketing Act 1936, if the amount is derived for a function that the department or ministry exercises under the Act.
Meaning of public authority
(6)
In this section, public authority includes the Reserve Bank of New Zealand.
Defined in this Act: amount, Crown Research Institute, exempt income, income, public authority, State enterprise, superannuation scheme, trustee
Compare: 1994 No 164 s CB 3(a), (c), (e)
Subsection (5)(a) to (c) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
CW 32 Local authorities
Exempt income
(1)
An amount of income derived from sinking funds relating to the debt of a local authority is exempt income.
Exempt income
(2)
Any other amount of income derived by a local authority is exempt income.
Exclusion: amounts received in trust
(3)
Subsection (2) does not apply to an amount of income that a local authority derives as a trustee.
Exclusion: certain amounts from commercial undertakings
(4)
Subsection (2) does not apply to an amount of income that—
(a)
is derived by a local authority; and
(b)
is not rates; and
(c)
is derived from—
(i)
a council-controlled organisation, other than a council-controlled organisation operating a hospital as a charitable activity on behalf of the local authority:
(ii)
an organisation that is a port company, a subsidiary of a port company, or an energy company and that would be a council-controlled organisation if section 6(4) of the Local Government Act 2002 did not exist.
Exclusion: local authority as port operator
(5)
Subsection (2) does not apply to an amount of income derived by a local authority in its capacity as a port operator from a port-related commercial undertaking. Port operator and port-related commercial undertaking are defined in section 38(4) of the Port Companies Act 1988.
Defined in this Act: amount, council-controlled organisation, exempt income, income, local authority, trustee
Compare: 1994 No 164 s CB 3(b), (c)
Section CW 32(4)(c)(i): substituted (with effect from 1 April 2005), on 19 December 2007, by section 22 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CW 33 Local and regional promotion bodies
Exempt income: beautification societies
(1)
An amount of income derived by an association or society is exempt income if—
(a)
the association or society is established mainly to—
(i)
advertise, beautify, or develop a city or other district so as to attract population, tourists, trade, or visitors:
(ii)
create, develop, or increase amenities for the general public in a city or other district; and
(b)
none of the funds of the association or society is used, or is or may become available to be used, for any other purpose that is not a charitable purpose.
Exclusion: council-controlled organisation
(2)
Subsection (1) does not apply to an amount of income derived—
(a)
by a council-controlled organisation:
(b)
by a local authority from a council-controlled organisation.
Exempt income: trustees of Cornwall Park
(3)
An amount of income that the trustees of Cornwall Park, Auckland, derive from the property of the trust is exempt income.
Defined in this Act: amount, charitable purpose, council-controlled organisation, exempt income, income, local authority, trustee
Compare: 1994 No 164 s CB 4(1)(j), (l), (3)
Subsections (1)(a)(i) and (2)(a) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Section CW 33 list of defined terms associated person: repealed (with effect on 1 April 2005), on 6 October 2009, by section 748 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
CW 34 Charities: non-business income
Exempt income
(1)
The following are exempt income:
(a)
an amount of income derived by a trustee in trust for charitable purposes:
(b)
an amount of income derived by a society or institution established and maintained exclusively for charitable purposes and not carried on for the private pecuniary profit of any individual.
Exclusion: trustees, society, or institution not registered
(1B)
This section does not apply to an amount of income if, at the time that the amount of income is derived, the trustee or trustees of the trust, the society, or the institution is not, or are not, registered as a charitable entity.
Exclusion: business income
(2)
This section does not apply to an amount of income derived from a business carried on by, or for, or for the benefit of a trust, society, or institution of a kind referred to in subsection (1).
Exclusion: council-controlled organisation income
(3)
This section does not apply to income derived by—
(a)
a council-controlled organisation, other than a council-controlled organisation operating a hospital as a charitable activity:
(b)
a local authority from a council-controlled organisation, other than from a council-controlled organisation operating a hospital as a charitable activity on behalf of the local authority.
Defined in this Act: amount, business, charitable purpose, council-controlled organisation, exempt income, income, local authority, trustee
Compare: 1994 No 164 s CB 4(1)(c), (e), (3)
Subsection (1)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Section CW 34(1B) heading: inserted, on 1 July 2008, by section 65 of the Charities Act 2005 (2005 No 39).
Section CW 34(1B): inserted, on 1 July 2008, by section 65 of the Charities Act 2005 (2005 No 39).
Section CW 34(3): substituted (with effect from 1 April 2005), on 19 December 2007, by section 23 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CW 35 Charities: business income
Exempt income
(1)
Income derived directly or indirectly from a business carried on by, or for, or for the benefit of a trust, society, or institution of a kind referred to in section CW 34(1) is exempt income if—
(a)
the trust, society, or institution carries out its charitable purposes in New Zealand; and
(ab)
the trustee or trustees of the trust, the society, or the institution is or are, at the time that the income is derived, registered as a charitable entity; and.
(b)
no person with some control over the business is able to direct or divert, to their own benefit or advantage, an amount derived from the business.
Subsections (3) to (8) expand on this subsection.
Exclusion
(2)
This section does not apply to income derived by—
(a)
a council-controlled organisation, other than a council-controlled organisation operating a hospital as a charitable activity:
(b)
a local authority from a council-controlled organisation, other than from a council-controlled organisation operating a hospital as a charitable activity on behalf of the local authority.
Carrying on a business: trustee
(3)
For the purposes of subsection (1), a trustee is treated as carrying on a business if—
(a)
the trustee derives rents, fines, premiums, or other revenues from an asset of the trust; and
(b)
the asset was disposed of to the trust by a person of a kind described in subsection (5)(b); and
(c)
either—
(i)
the person retains or reserves an interest in the asset; or
(ii)
the asset will revert to the person.
Charitable purposes in New Zealand and overseas
(4)
For the purposes of subsection (1)(a), if the charitable purposes of the trust, society, or institution are not limited to New Zealand, income derived from the business in a tax year is apportioned reasonably between those purposes in New Zealand and those outside New Zealand. Only the part apportioned to the New Zealand purposes is exempt income.
Control over business
(5)
For the purposes of subsection (1)(b) for a tax year, a person is treated as having some control over the business, and as being able to direct or divert amounts from the business to their own benefit or advantage if, in the tax year,—
(a)
they are, in any way, whether directly or indirectly, able to determine, or materially influence the determination of,—
(i)
the nature or extent of a relevant benefit or advantage; or
(ii)
the circumstances in which a relevant benefit or advantage is, or is to be, given or received; and
(b)
their ability to determine or influence the benefit or advantage arises because they are—
(i)
a settlor or trustee of the trust by which the business is carried on; or
(ii)
a shareholder or director of the company by which the business is carried on; or
(iii)
a settlor or trustee of a trust that is a shareholder of the company by which the business is carried on; or
(iv)
a person associated with a settlor, trustee, shareholder, or director referred to in any of subparagraphs (i) to (iii).
Control: settlor asset disposed of to trust
(6)
For the purposes of subsection (5), a person is treated as a settlor of a trust, and as gaining a benefit or advantage in the carrying on of a business of the trust, if—
(a)
they have disposed of an asset to the trust, and the asset is used by the trust in the carrying on of the business; and
(b)
they retain or reserve an interest in the asset, or the asset will revert to them.
No control
(7)
For the purposes of subsection (1)(b), a person is not treated as having some control over the business merely because—
(a)
they provide professional services to the trust or company by which the business is carried on; and
(b)
their ability to determine, or materially influence the determination of, the nature or extent of a relevant benefit or advantage arises because they—
(i)
provide the services in the course of and as part of carrying on, as a business, a professional public practice; or
(ii)
are a trustee company; or
(iii)
are Public Trust; or
(iv)
are the Maori Trustee.
Benefit or advantage
(8)
For the purposes of subsection (1)(b), a benefit or advantage to a person—
(a)
may or may not be something that is convertible into money:
(b)
unless excluded under paragraph (d), includes deriving an amount that would be income of the person under 1 or more of the following provisions:
(i)
section CA 1(2) (Amounts that are income):
(ii)
sections CB 1 to CB 21 (which relate to income from business or trade-like activities):
(iii)
section CB 28 (Property obtained by theft):
(iv)
sections CC 1 (Land), CC 3 to CC 8 (which relate to income from financial instruments), and CC 9 (Royalties):
(v)
section CD 1 (Dividend):
(vi)
(vii)
section CF 1 (Benefits, pensions, compensation, and government grants):
(viii)
section CG 3 (Bad debt repayment):
(c)
includes retaining or reserving an interest in an asset in the case described in subsection (3), if the person has disposed of the asset to the trust or the asset will revert to them; and
(d)
does not include earning interest on money lent, if the interest is payable at no more than the current commercial rate, given the nature and term of the loan.
Non-exempt business income
(9)
If an amount derived from the carrying on of a business by or for a trust is not exempt income because of a failure to comply with subsection (1)(b), the amount is trustee income.
Defined in this Act: amount, associated person, business, charitable purpose, company, council-controlled organisation, director, exempt income, income, interest, local authority, money lent, New Zealand, shareholder, tax year, trustee, trustee company, trustee income
Compare: 1994 No 164 s CB 4(1)(e), (3)
Section CW 35(1)(ab): inserted, on 1 July 2008, by section 66 of the Charities Act 2005 (2005 No 39).
Section CW 35(2): substituted (with effect from 1 April 2005), on 19 December 2007, by section 24 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (8)(a), (b)(ix), and (c) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Subsection (8)(b)(i) to (viii) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Subsection (8)(b)(v) was amended, as from 1 April 2005, by section 13(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “Dividend”
for “Income”
with application as from the 2005–06 income year.
CW 36 Charitable bequests
Exempt income
(1)
An amount of income derived by a deceased’s executor or administrator is exempt income to the extent to which the requirements in subsections (2) and (3) are met, having regard to all relevant matters including—
(a)
the terms of the deceased’s will, including the rights of annuitants, legatees, and other beneficiaries; and
(b)
the nature and extent of the debts and liabilities of, and other charges against, the estate and their likely effect on the income and assets available for distribution to the beneficiaries; and
(c)
the shares and prospective shares of the beneficiaries in the income and assets of the estate.
Gift to charity
(2)
The first requirement is that the amount arises from or is attributable to assets of the estate that have been left to a trust, society, or institution of a kind referred to in section CW 34(1).
Exempt in hands of charity
(3)
Registration as charitable entity not required until end of income year that follows income year in which deceased died
(4)
An amount of income derived by a deceased’s executor or administrator that is derived during the period beginning on the deceased’s date of death and ending at the end of the income year that follows the income year in which the deceased died is not prevented from being exempt income under this section merely because the trustee or trustees of the trust, the society, or the institution is not, or are not, registered as a charitable entity.
(5)
For the purposes of subsection (4), until the end of the income year that follows the income year in which the deceased died, the requirements in sections CW 34 and CW 35 for the trustee or trustees of the trust, the society, or the institution to be registered as a charitable entity must be disregarded when applying those sections for the purposes of this section.
(6)
This section does not apply to an amount of income derived after the end of the income year that follows the income year in which the deceased died if, at the time that the amount of income is derived, the trustee or trustees of the trust, the society, or the institution is not, or are not, registered as a charitable entity.
Defined in this Act: amount, business, distribution, exempt income, income, New Zealand
Compare: 1994 No 164 s CB 4(1)(d)
Section CW 36(4) heading: added, on 1 July 2008, by section 67 of the Charities Act 2005 (2005 No 39).
Section CW 36(4): added, on 1 July 2008, by section 67 of the Charities Act 2005 (2005 No 39).
Section CW 36(5): added, on 1 July 2008, by section 67 of the Charities Act 2005 (2005 No 39).
Section CW 36(6): added, on 1 July 2008, by section 67 of the Charities Act 2005 (2005 No 39).
CW 37 Friendly societies
An amount of income derived by a friendly society is exempt income, except to the extent to which the amount is derived from—
(a)
a business carried on beyond the membership of the friendly society; or
(b)
a company registered as an insurer under the Accident Insurance Act 1998.
Defined in this Act: amount, business, company, exempt income, friendly society, income
Compare: 1994 No 164 s CB 4(1)(a)
CW 38 Funeral trusts
Interest or a dividend derived by a trustee in trust for a fund is exempt income if, when the interest or dividend is derived by the trustee,—
(a)
the sole purpose of the fund is the payment of the expenses associated with the funerals of—
(i)
employees of an employer:
(ii)
spouses, civil union partners, de facto partners and dependants of employees of the employer:
(iii)
surviving spouses, civil union partners and de facto partners and surviving dependants of deceased employees of the employer; and
(b)
the employer has at least 10 employees; and
(c)
all persons eligible for benefits from the fund are eligible equally for benefits from the fund; and
(d)
no contributions to the fund are made by a person who is not the employer or an employee of the employer; and
(e)
the fund is approved by the Commissioner.
Defined in this Act: Commissioner, dividend, employee, employer, exempt income, interest, trustee
Compare: 1994 No 164 s CB 5(1)(ib)
Paragraph (a)(i) and (ii) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Paragraph (a)(ii) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouses, civil union partners”
for “spouses”
.
Paragraph (a)(ii) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouses, civil union partners, de facto partners”
for “spouses, civil union partners”
.
Paragraph (a)(iii) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouses and civil union partners”
for “spouses”
.
Paragraph (a)(iii) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouses, civil union partners and de facto partners”
for “spouses and civil union partners”
.
CW 39 Bodies promoting amateur games and sports
An amount of income derived by a club, society, or association is exempt income if—
(a)
the club, society, or association is established mainly to promote an amateur game or sport; and
(b)
the game or sport is conducted for the recreation or entertainment of the general public; and
(c)
no part of the funds of the club, society, or association is used or is available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them.
Defined in this Act: amount, associated person, exempt income, income
Compare: 1994 No 164 s CB 4(1)(h), (2)
CW 40 TAB and racing clubs
Exempt income: racing organisations
(1)
An amount of income derived by any of the following bodies is exempt income:
(a)
the New Zealand Racing Board:
(b)
New Zealand Thoroughbred Racing:
(c)
Harness Racing New Zealand:
(d)
the New Zealand Greyhound Racing Association (Incorporated).
Exempt income: racing clubs
(2)
An amount of income derived by a racing club, as defined in section 5 of the Racing Act 2003, is exempt income, if none of the club’s funds is used or is available to be used for the private pecuniary profit of a member of the club or an associate of a member.
Defined in this Act: amount, associated person, exempt income, income
Compare: 1994 No 164 s CB 4(1)(i), (2)
Subsection (1)(a) to (c) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
CW 40B Income from conducting gaming-machine gambling
An amount of income derived by a person that is gross gambling proceeds from gaming-machine gambling is exempt income if—
(a)
the person is authorised to conduct the gaming-machine gambling under the Gambling Act 2003 by a gaming-machine operator’s licence and a gaming-machine venue licence; and
(b)
the person complies with the Gambling Act 2003 in applying and distributing the net gambling proceeds from the gaming-machine gambling.
Defined in this Act: exempt income, gaming-machine gambling, gaming-machine operator’s licence, gaming-machine venue licence, gross gambling proceeds, net gambling proceeds
Section CW 40B was inserted, as from 3 April 2006, by section 27 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
CW 41 Bodies promoting scientific or industrial research
Exempt income
(1)
An amount of income derived by a society or association established mainly to promote or encourage scientific or industrial research is exempt income if—
(a)
the society or association is approved by the Royal Society of New Zealand; and
(b)
none of its funds is used or available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them.
Exclusion
(2)
This section does not apply to a Crown Research Institute.
Defined in this Act: amount, associated person, Crown Research Institute, exempt income, income
Compare: 1994 No 164 ss CB 4(1)(b), (2), CK 4(2)
CW 42 Veterinary services bodies
Exempt income: veterinary clubs
(1)
An amount of income derived by a veterinary association, club, or society is exempt income if—
(a)
the association, club, or society was established mainly to promote efficient veterinary services in New Zealand; and
(b)
none of its funds is used or available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them.
Exempt income: Veterinary Council
(2)
An amount of income derived by the Veterinary Council of New Zealand is exempt income.
Defined in this Act: amount, associated person, exempt income, income, New Zealand
Compare: 1994 No 164 s CB 4(1)(f), (2)
CW 43 Herd improvement bodies
An amount of income derived by a herd improvement association or society is exempt income if—
(a)
the association or society was established mainly to promote the improvement of the standard of dairy cattle in New Zealand; and
(b)
none of its funds is used or available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them.
Defined in this Act: amount, associated person, exempt income, income, New Zealand
Compare: 1994 No 164 s CB 4(1)(g), (2)
CW 44 Community trusts
An amount of income derived by the trustee of a community trust is exempt income.
Defined in this Act: amount, community trust, exempt income, income, trustee
Compare: 1994 No 164 s CB 4(1)(m)
Income from certain activities
CW 45 Non-resident aircraft operators
Exempt income
(1)
An amount of income derived by a non-resident aircraft operator from air transport from New Zealand, or from air transport to New Zealand, is exempt income to the extent to which the Commissioner determines that an aircraft operator resident in New Zealand is, in circumstances corresponding to the circumstances of the non-resident aircraft operator, exempt from, or not liable to, income tax imposed by the laws of the country or territory in which the non-resident aircraft operator is resident.
Determination
(2)
A determination by the Commissioner for the purposes of subsection (1) may relate to a class of non-resident aircraft operators or a class of resident aircraft operators.
Some definitions
(3)
In this section,—
air transport from New Zealand —
(a)
means the carriage outside New Zealand by an aircraft of cargo, mail, or passengers emplaned or embarked on the aircraft at an airport in New Zealand; and
(b)
includes a flight by the aircraft between the airport in New Zealand where the emplaning or embarking occurred and another airport in New Zealand at which the aircraft calls before leaving New Zealand on the international flight for which the emplaning or embarking occurred
air transport to New Zealand—
(a)
means the carriage to an airport in New Zealand by an aircraft of cargo, mail, or passengers emplaned or embarked on the aircraft at an airport in a country or territory outside New Zealand; and
(b)
includes a flight by the aircraft to the airport in New Zealand for carriage to which the emplaning or embarking occurred from another airport in New Zealand at which the aircraft calls en route
non-resident aircraft operator means a person who—
(a)
is engaged in the business of operating an aircraft for air transport from an airport; and
(b)
is resident in a country or territory outside New Zealand and is not resident in New Zealand.
Defined in this Act: air transport from New Zealand, air transport to New Zealand, amount, business, Commissioner, exempt income, income, income tax, New Zealand, non-resident aircraft operator, resident in New Zealand
Compare: 1994 No 164 s CB 14
Section CW 45(1): amended (with effect on 1 April 2005), on 23 March 2020, by section 256(1) (and see section 256(5) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
Section CW 45(3) air transport from New Zealand paragraph (b): replaced (with effect on 1 April 2005), on 23 March 2020, by section 256(2) (and see section 256(5) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
Section CW 45(3) air transport to New Zealand: inserted (with effect on 1 April 2005), on 23 March 2020, by section 256(3) (and see section 256(5) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
Section CW 45 list of defined terms air transport to New Zealand: inserted (with effect on 1 April 2005), on 23 March 2020, by section 256(4) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
CW 45B Non-resident company involved in exploration and development activities
Exempt income
(1)
An amount of income derived by a non-resident company from exploration and development activities in an offshore permit area is exempt income if it is derived in the period that—
(a)
starts on the beginning of the 2005-06 income year for the non-resident company; and
(b)
ends on 31 December 2009.
Some definitions
(2)
In this section,—
exploration and development activities means the following activities undertaken for the purposes of identifying and developing exploitable petroleum deposits or occurrences in an offshore permit area
(a)
operating a ship to provide seismic survey readings:
(b)
drilling an exploratory well or other well
offshore permit area means an area of land that is—
(a)
in New Zealand; and
(b)
on the seaward side of the mean high-water mark; and
(c)
a permit area or part of a permit area.
Defined in this Act: amount, exempt income, exploration and development activities, exploratory well, New Zealand, non-resident company, offshore permit area, permit area
Section CW 45B was inserted, as from 1 October 2005, by section 11 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
CW 46 Disposal of companies’ own shares
An amount of income derived by a company from disposing of shares in the company is exempt income if—
(a)
the company acquired the shares; and
(b)
the acquisition was treated under section 67A(1) of the Companies Act 1993 as not resulting in the cancellation of the shares.
Defined in this Act: amount, cancellation, company, exempt income, income, share
Compare: 1994 No 164 s CB 15
CW 47 New Zealand companies operating in Niue
Exempt income: income wholly or mainly from Niue
(1)
An amount of income derived in a tax year by a New Zealand company that derives its income wholly or mainly from Niue is exempt income.
Exclusion
(2)
Subsection (1) does not apply if the company, if it were a foreign company, would at any time during the tax year be a controlled foreign company.
Exempt income: dividends
(3)
A dividend derived in a tax year from a New Zealand company that derives its income wholly or mainly from Niue is exempt income, unless the dividend is derived by—
(a)
a person who is resident in New Zealand; or
(b)
a company that is a controlled foreign company at any time during the tax year; or
(c)
a trustee of a trust of which a settlor or beneficiary is resident in New Zealand during the tax year.
Exempt income: Niue development projects
(4)
An amount of income derived by a New Zealand company from a business or enterprise that the company carries on in Niue is exempt income if—
(a)
the business or enterprise is declared by an Order in Council made under subsection (7) to be a development project for the purposes of this section; and
(b)
the company’s income is derived wholly or mainly from that business or enterprise; and
(c)
the amount is derived from sources in Niue; and
(d)
the amount is derived while the Order in Council is in force.
Exclusions
(5)
Subsections (1), (3), and (4) do not apply to—
(a)
an amount of income derived from sources in New Zealand; or
(b)
a dividend, to the extent to which it constitutes distribution of an amount derived by the company from sources in New Zealand.
Attributed CFC income and FIF income
(6)
This section does not restrict the application of section CQ 1 (Attributed controlled foreign company income), or CQ 4 (Foreign investment fund income), or the FIF rules. For the purposes of the FIF rules, a company that derives its income wholly or mainly from Niue and has exempt income under subsection (1) is treated as a foreign company.
Order in Council declaring Niue development project
(7)
The Governor-General may make an Order in Council declaring a business or enterprise to be a development project for the purposes of this section if satisfied that the business or enterprise—
(a)
has been or will be entered upon wholly or mainly for the purpose of developing Niue; or
(b)
is or will be important in the development of Niue.
Defined in this Act: amount, attributed CFC income, business, company, controlled foreign company, dividend, exempt income, FIF, FIF rules, foreign company, income, New Zealand company, resident in New Zealand, settlor, source in New Zealand, tax year, trustee
Compare: 1994 No 164 s CB 8
CW 48 Stake money
Stake or prize money for a dog race, horse race, or trotting race is exempt income if—
(a)
it is paid by a club that is licensed to use the totalisator under the Racing Act 2003; or
(b)
the race is held outside New Zealand.
Defined in this Act: exempt income, New Zealand
Compare: 1994 No 164 s CB 9(c), (ca)
CW 49 Providing standard-cost household service
An amount of income derived in an income year by a natural person from providing a standard-cost household service is exempt income if—
(a)
the amount is exempt income under a determination made under section 91AA(2)(a) of the Tax Administration Act 1994:
(b)
the person—
(i)
may be treated, under a determination made under section 91AA of the Tax Administration Act 1994, as incurring an amount of costs that is greater than or equal to the amount of income; and
(ii)
in calculating the person’s income tax liability for the income year, elects to include in the taxpayer’s annual total deduction no amount that, in the absence of this paragraph, would be a deduction incurred by the taxpayer in providing the standard-cost household service.
Defined in this Act: amount, annual total deduction, exempt income, income, income tax liability, income year, standard-cost household service
Section CW 49 was substituted, as from 1 October 2005, by section 175 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
CW 49B Interest paid under KiwiSaver Act 2006
Interest paid by the Commissioner under section 84 of the KiwiSaver Act 2006 is exempt income.
Section CW 49B was inserted, as from 1 December 2006, by section 231 KiwiSaver Act 2006 (2006 No 40). See section 232 of that Act as to the transitional provision requiring all KiwiSaver contributions to be paid to the Commissioner in the first 3 months. See clause 2(2) KiwiSaver Act Commencement Order 2006 (SR 2006/357).
Income of, and distributions by, certain international funds
Heading: inserted (with effect from 1 April 2005), on 19 December 2007, by section 25(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CW 49C Income of certain international funds
An amount of income derived by a person is exempt income if the person is—
(a)
the trustee of the Niue International Trust Fund:
(b)
the trustee of the Tokelau International Trust Fund.
Defined in this Act: amount, exempt income, income, Niue International Trust Fund, Tokelau International Trust Fund, trustee
Section CW 49C: inserted (with effect from 1 April 2005), on 19 December 2007, by section 25(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CW 49D Distributions by certain international funds
An amount of income derived by a person is exempt income if the income is a distribution by—
(a)
the trustee of the Niue International Trust Fund:
(b)
the trustee of the Tokelau International Trust Fund.
Defined in this Act: amount, distribution, exempt income, income, Niue International Trust Fund, Tokelau International Trust Fund, trustee
Section CW 49D: inserted (with effect from 1 April 2005), on 19 December 2007, by section 25(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Income exempt under other Acts
CW 50 Exemption under other Acts
An amount of income expressly exempted from income tax by any other Act is exempt income.
Defined in this Act: amount, exempt income, income, income tax
Compare: 1994 No 164 s CB 9(e)
Income exempt under Parts F to I
CW 51 Exemption under Parts to be rewritten
An amount of income is exempt income if it is exempt under a provision in any of Parts F to I.
Defined in this Act: amount, exempt income, income
Compare: 1994 No 164 s BD 1(2)(a)
Subpart CX—Excluded income
Contents
Goods and services tax
CX 1 GST
The following are excluded income of a registered person:
(a)
output tax on goods and services they supply:
(b)
GST payable to them by the Commissioner.
Defined in this Act: Commissioner, excluded income, goods, GST payable, output tax, registered person, services
Compare: 1994 No 164 s ED 4(1), (3)(b), (g), (7)
Paragraph (a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
KiwiSaver and complying superannuation fund tax credits
This heading was inserted, as from 1 July 2007, by section 6 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
CX 1B KiwiSaver and complying superannuation fund tax credits
A payment by the Commissioner of an amount of a tax credit under subpart KJ (KiwiSaver scheme and complying superannuation fund tax credits) is excluded income of the person deriving the payment.
Defined in this Act: amount, Commissioner, excluded income
Section CX 1B was inserted, as from 1 July 2007, by section 6 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Fringe benefits
Introductory provisions
CX 2 Meaning of fringe benefit
Meaning
(1)
A fringe benefit is a benefit that—
(a)
is provided by an employer to an employee in connection with their employment; and
(b)
either—
(i)
arises in a way described in any of sections CX 6, CX 8, CX 9, or CX 11 to CX 15; or
(ii)
is an unclassified benefit; and
(c)
is not a benefit excluded from being a fringe benefit by any provision of this subpart.
Arrangement to provide benefit
(2)
A benefit that is provided to an employee through an arrangement made between their employer and another person for the benefit to be provided is treated as having been provided by the employer.
Past, present, or future employment
(3)
It is not necessary to the existence of a fringe benefit that an employment relationship exists when the employee receives the benefit.
Relationship with subpart ND
(4)
Subpart ND (Fringe benefit tax) deals with the calculation of the taxable value of fringe benefits.
Defined in this Act: arrangement, employee, employer, employment, fringe benefit, unclassified benefit
Compare: 1994 No 164 ss CI 1, CI 2(1)
CX 3 Excluded income
A fringe benefit is excluded income of the employee.
Defined in this Act: employee, excluded income, fringe benefit
CX 4 Relationship with assessable income
To the extent to which a benefit that an employer provides to an employee in connection with their employment is assessable income, the benefit is not a fringe benefit.
Defined in this Act: assessable income, employee, employer, employment, fringe benefit
Compare: 1994 No 164 s CI 1(o)(i)
CX 5 Relationship with exempt income
Exempt income not fringe benefit
(1)
To the extent to which a benefit that an employer provides to an employee in connection with their employment is exempt income, the benefit is not a fringe benefit.
Exclusions
(2)
Subsection (1) does not apply to—
(a)
a payment of a premium on a life insurance policy that is excluded from being expenditure on account of an employee under section CE 5(3)(f) to (i) (Meaning of expenditure on account of an employee):
(b)
an allowance that is exempt income under section CW 13 (Expenditure on account, and reimbursement, of employees) to the extent to which it is made to enable the employee to provide a benefit to another person.
Exempt cash payment not fringe benefit
(3)
To the extent to which a benefit that an employer provides to an employee in connection with their employment would have been exempt income if it had been paid in cash, the benefit is not a fringe benefit.
Exclusion
(4)
Subsection (3) does not apply to interest, dividends, or an allowance under subsection (2)(b).
Defined in this Act: dividend, employee, employer, employment, exempt income, expenditure on account of an employee, fringe benefit, interest, life insurance policy, premium
Compare: 1994 No 164 s CI 1(o)(ii), (iii)
Subsection (2)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Fringe benefits
CX 6 Private use of motor vehicle
When fringe benefit arises
(1)
A fringe benefit arises when—
(a)
a motor vehicle is made available to an employee for their private use; and
(b)
the person who makes the vehicle available to the employee—
(i)
owns the vehicle:
(ii)
leases or rents the vehicle:
(iii)
has a right to use the vehicle under an agreement or arrangement with the employee or a person associated with the employee.
Exclusion: work-related vehicles
(2)
Subsection (1) does not apply when the vehicle is a workrelated vehicle.
Exclusion: emergency calls
(3)
Subsection (1) does not apply when the vehicle is used for an emergency call.
Exclusion: absences from home
(4)
Subsection (1) does not apply when the employee is absent from home, with the vehicle, for a period of at least 24 hours continuously, if the employee is required, in the performance of their duties, to use a vehicle and regularly to be absent from home.
Use on part of day
(5)
For the purposes of subsections (3) and (4), the whole of the day on which a motor vehicle is used as described in the applicable subsection is treated as a day on which the vehicle is not available for private use.
Defined in this Act: emergency call, employee, fringe benefit, lease, motor vehicle, private use, work-related vehicle
Compare: 1994 No 164 ss CI 1(a), (b), CI 11(16), OB 1private use or enjoyment
Subsection (1)(b) was substituted, as from 1 April 2006, by section 28 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
CX 6B Employer or associated person treated as having right to use vehicle under arrangement
When this section applies
(1)
This section applies for the application of the FBT rules to an agreement or arrangement—
(a)
between an employer, or a person associated with the employer, and an employee, or a person associated with the employee; and
(b)
transferring to the employer or person associated with the employer a right to use a motor vehicle under terms agreed between the parties.
Person treated as having right to use vehicle
(2)
The employer or associated person is treated as having a right to use the motor vehicle for a period during which the employee—
(a)
uses the vehicle privately:
(b)
has a right to use the vehicle privately.
Defined in this Act: employee, employer, FBT rules, lease, motor vehicle
Section CX 6B was inserted, as from 1 April 2006, by section 29(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3). See section 29(2) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
CX 7 Private use of motor vehicle: use by more than 1 employee
If, on any day, a motor vehicle is made available by an employer for the private use of more than 1 employee, this availability is treated as a single instance. The taxable value of the fringe benefit is reduced by the total amount of any contributions paid by an employee or employees.
Defined in this Act: amount contribution , employee , employer , fringe benefit , motor vehicle , private use
Compare: 1994 No 164 s CI 2(4)
CX 8 Subsidised transport
A fringe benefit arises when an employer provides subsidised transport to an employee.
Defined in this Act: employee, employer, fringe benefit, subsidised transport
Compare: 1994 No 164 s CI 1(d)
CX 9 Employment-related loans
When fringe benefit arises
(1)
A fringe benefit arises when an employer provides a loan to an employee.
Exclusions
(2)
Subsection (1) does not apply to a loan made—
(a)
as an employee share loan:
(b)
under a share purchase scheme:
(c)
by a superannuation fund to the extent to which the value of the loan constitutes income of the fund under section GD 6 (Value of loans provided by superannuation fund deemed to be income of fund):
(d)
as an advance of salary and wages, if,—
(i)
in the period for which the employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax), the total outstanding of such advances to the employee is not more than $2,000; and
(ii)
the contract of employment does not require the employer to make the advance.
Loan owing
(3)
The employer provides a fringe benefit in a tax year in which the loan is owing. The circumstances in which a loan is owing include a case in which, under the arrangement for the loan, an amount is payable in the future, or would be payable in the future if a particular event happened, and the employee or an associated person is or would be liable to pay the amount.
Defined in this Act: amount, arrangement, associated person, employee, employee share loan, employer, employment-related loan, fringe benefit, income, share purchase scheme, superannuation fund, tax year
Compare: 1994 No 164 ss CI 1(c), (i), (ia), (j), OB 1owing
Subsection (2)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Subsection (2)(c) was amended, as from 1 April 2006, by section 30(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “fund):”
for “fund).”
. See section 29(2) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
Subsection (2)(d) was inserted, as from 1 April 2006, by section 30(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3). See section 29(2) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
CX 10 Employment-related loans: loans by life insurers
When fringe benefit treated as arising
(1)
A life insurer provides a benefit that is treated as an employment-related loan if—
(a)
the life insurer makes a loan to a person who holds a life insurance policy (person A) or to a person associated with person A; and
(b)
the life insurance policy is offered or entered into in New Zealand; and
(c)
either—
(i)
the loan is made because of the capacity or status of person A as a policyholder; or
(ii)
the interest charged on the loan depends on the capacity or status of person A as a policyholder.
Life insurer as employer
(2)
For the purposes of the FBT rules, the life insurer is treated as an employer and person A or the person associated with them is treated as an employee.
Meaning of life insurer
(3)
In this section, life insurer —
(a)
means a person who is the insurer under the life insurance policy:
(b)
includes—
(i)
a person associated with the life insurer:
(ii)
a person with whom the life insurer has entered into an arrangement relating to the making of the loan.
Defined in this Act: arrangement, associated person, employee, employer, employment-related loan, FBT rules, fringe benefit, interest, life insurance policy, life insurer, offered or entered into in New Zealand
Compare: 1994 No 164 s CI 2(8), (9)
Subsection (3)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CX 11 Services for members of Parliament
When fringe benefit arises
(1)
A fringe benefit arises when travel, accommodation, attendance, and communications services are exempt income under section CW 25 (Services for members of Parliament).
Relationship with sections CX 5 and CX 24
(2)
This section overrides sections CX 5 and CX 24.
Defined in this Act: exempt income, fringe benefit
Section CX 11: replaced (with effect on 1 April 2005, applying for the 2005–06 and later income years), on 17 July 2013, by section 155(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
CX 12 Contributions to superannuation schemes
When fringe benefit arises
(1)
A fringe benefit arises when an employer contributes to a superannuation scheme for the benefit of an employee.
Exclusion
(2)
This section does not apply if the contribution is a specified superannuation contribution.
Defined in this Act: contribution employee , employer , fringe benefit, specified superannuation contribution , superannuation scheme
Compare: 1994 No 164 s CI 1(g), (k)
CX 13 Contributions to sickness, accident, or death benefit funds
A fringe benefit arises when an employer makes a contribution for the benefit of an employee to a sickness, accident, or death benefit fund.
Defined in this Act: contribution employee , employer , fringe benefit, sickness, accident, or death benefit fund
Compare: 1994 No 164 s CI 1(e)
CX 14 Contributions to funeral trusts
A fringe benefit arises when an employer makes a contribution to a fund in the circumstances described in section CW 38 (Funeral trusts).
Defined in this Act: contribution employer , fringe benefit
Compare: 1994 No 164 s CI 1(eb)
CX 15 Contributions to life or health insurance
When fringe benefit arises
(1)
A fringe benefit arises when an employer pays a specified insurance premium or makes a contribution to the insurance fund of a friendly society for the benefit of an employee.
Exclusion
(2)
This section does not apply to a premium or contribution described in section CZ 15 (Accident insurance contracts before 1 July 2000).
Meaning of specified insurance premium
(3)
In this section, specified insurance premium means a premium paid for the benefit of an employee, their spouse, civil union partner or de facto partner, or their child on a policy described in any of subsections (4) to (6).
Life insurance
(4)
The first kind of policy referred to in subsection (3) is a policy of insurance on the life of the employee or their spouse, civil union partner or de facto partner or on their joint lives, or on the life of their child, to which all the following apply:
(a)
for policies other than whole of life policies, the minimum term is—
(i)
10 years; or
(ii)
5 years, for a policy whose maturity date is no earlier than the date on which a life assured reaches 60 years of age; and
(b)
the only benefits payable earlier than 10 years from the start of the policy or its maturity date, whichever is earlier, are—
(i)
benefits payable for the death of a life assured; or
(ii)
additional benefits payable for an accident to a life assured or disease or sickness of a life assured; and
(c)
the policy—
(i)
provides for a payment on the death of a life assured of a benefit that is not a return of premiums, is substantially capital, and is not materially less than the total benefit payable under the policy otherwise than for death; or
(ii)
is a policy on the life of a person who, because of ill health or physical disability, is unable to effect a policy of the kind described in subparagraph (i) at ordinary rates; or
(iii)
is a deferred life assurance policy on the life of a child.
Life insurance: pension benefit
(5)
The second kind of policy referred to in subsection (3) is a policy described in subsection (4), or that would be described if it satisfied subsection (4)(c)(i), and under which the only benefits payable are for a life assured and by way of—
(a)
a pension starting on or after the date on which the life assured reaches 60 years of age and continuing for the life of the employee, their spouse, civil union partner or de facto partner, or their child; or
(b)
on the death of the life assured,—
(i)
the return of the part of the premiums paid for the assurance to secure the payment of a pension dependent on the life of the employee, their spouse, civil union partner or de facto partner, or their child; and
(ii)
the payment of the part of each bonus declared on the policy attributable to the part of the premiums described in subparagraph (i).
Health insurance
(6)
The third kind of policy referred to in subsection (3) is a policy of insurance under which the benefits are payable only for—
(a)
an accident, whether fatal or not, to the employee, their spouse, civil union partner or de facto partner, or their child; or
(b)
disease or sickness of the employee, their spouse, civil union partner or de facto partner, or their child.
Defined in this Act: contribution employee , employer , friendly society, fringe benefit , life insurance , specified insurance premium, year
Compare: 1994 No 164 ss CI 1(f), (ja), CI 3(8A), OB 1 policy of life insurance, policy of pension insurance, policy of personal accident or sickness insurance
Subsection (3) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (3) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (4) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (4) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (5)(a) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (5)(a) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (5)(b)(i) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (5)(b)(i) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (6)(a) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (6)(a) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (6)(b) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (6)(b) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
CX 16 Benefits provided to employees who are shareholders or investors
Benefit provided in connection with employment
(1)
If a company or a trustee of a group investment fund provides a non-cash benefit to an employee who holds shares in the company or who is an investor in the fund, the benefit is treated as having been provided in connection with the employment. The shares or investment may be held in the employee’s own right or beneficially.
Whether fringe benefit or dividend
(2)
A company or a trustee of a group investment fund that has provided a non-cash benefit to an employee who holds shares in the company or who is an investor in the fund may choose to treat the benefit as a fringe benefit or a dividend. If the company or trustee does not make an election, the benefit is treated as a fringe benefit. If the company or trustee chooses to treat the benefit as a dividend, the FBT rules do not apply.
Exclusion
(3)
Neither subsection (1) nor subsection (2) applies to a non-cash benefit provided by a company to a non-executive director of the company.
Non-cash benefits
(4)
Subsection (2) applies to non-cash benefits that would,—
(a)
if section CD 23 (Employee benefits) did not exist, be dividends under section CD 3 (Transfers of value generally) if provided to a person in their capacity as a shareholder; and
(b)
if section CX 4 did not exist, be unclassified benefits if provided to a person in their capacity as an employee.
Notice of election
(5)
The company or trustee must give notice to the Commissioner of the election referred to in subsection (2) within the time allowed for filing a fringe benefit tax return for the period in which the benefit was provided.
Defined in this Act: Commissioner , company , dividend , employee , employment , FBT rules , fringe benefit fringe benefit tax group investment fund , investor , non-executive director , notice , return , share , shareholder , trustee , unclassified benefit
Compare: 1994 No 164 ss CI 2(2), (3), CI 2A
Section CX 16(4)(a): amended (with effect on 21 December 2004), on 7 September 2010, by section 198(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Subsection (4)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Exclusions and limitations
CX 17 Benefits provided instead of allowances
When not fringe benefit
(1)
A benefit that an employer provides to an employee in connection with their employment is not a fringe benefit to the extent to which it removes the need that would otherwise exist for the employer to pay the employee an allowance of 1 of the following kinds:
(a)
an allowance that, if it had been paid,—
(i)
would have been exempt income under section CW 13 (Expenditure on account, and reimbursement, of employees); and
(ii)
would have been paid for reasons other than to enable the employee to provide a benefit to another person; or
(b)
an allowance that reimburses the employee for transport costs that—
(i)
would have been incurred both in connection with their employment and for the benefit of the employer in travelling between home and work; and
(ii)
would have been attributable to any 1 or more of the factors set out in section CW 14(3) (Allowance for additional transport costs); or
(c)
an amount that, if it had been paid, would have been exempt income under section CW 13B (Relocation payments).
Temporary change in workplace
(2)
A benefit that an employer provides to an employee is not a fringe benefit if it—
(a)
is in substitution for an allowance described in subsection (1)(b); and
(b)
is brought about because the employee has a temporary change in their place of work while in the same employment; and
(c)
reimburses the employee for transport costs that would have been incurred relating to travel by one or more of the employee’s spouse, civil union partner, or de facto partner, and relatives for the purpose of visiting the employee in the temporary place of work; and
(d)
has a value that is no more than the amount that would be provided under the allowance described in subsection (1)(b).
Defined in this Act: employee, employer, employment, exempt income, fringe benefit, relative
Compare: 1994 No 164 s CI 1(o)(iv), (v)
The heading to subsection (1) was inserted, as from 1 April 2006, by section 31(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3). See section 31(3) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
Section CX 17(1)(b)(ii): amended (with effect on 1 April 2005), on 6 October 2009, by section 749 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CX 17(1)(c): added (with effect on 1 April 2005), on 6 October 2009, by section 749 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Subsection (2) was inserted, as from 1 April 2006, by section 31(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3). See section 31(3) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
The list of defined terms was amended, as from 1 April 2006, by section 31(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by adding the expression “, relative”
. See section 31(3) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
CX 17B Transport in vehicle other than motor vehicle
A benefit that an employer provides to an employee in the form of transport of the employee in a vehicle is not a fringe benefit if the vehicle—
(a)
is not a motor vehicle; and
(b)
is not designed principally for the carriage of passengers.
Defined in this Act: employer, employee, fringe benefit, motor vehicle
Section CX 17B: inserted (with effect on 1 April 2005), on 30 March 2017 (applying for the 2005–06 and later income years), by section 388(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
CX 18 Benefits to enable performance of duties
The taxable value of a benefit that an employer provides to an employee by way of subsidised transport, or in the form of expenditure that an employer incurs on accommodation or transport provided to an employee, is zero if the expenditure—
(a)
relates to travel by the employee in order for them to perform their employment duties; and
(b)
does not relate to the providing or taking of leave or a vacation; and
(c)
is not increased as a result of the benefit.
Defined in this Act: employee, employer, subsidised transport
Compare: 1994 No 164 s CI 4(4)
CX 18B Business tools
When use of business tool not fringe benefit
(1)
The private use of a business tool that an employer provides to an employee, and the availability for private use of such a business tool, is not a fringe benefit if—
(a)
the business tool is provided mainly for business use; and
(b)
the cost of the business tool to the employer, including the amount of any deduction for the cost of the business tool that the employer may make under section 20(3) of the Goods and Services Tax Act 1985, is not more than $5,000.
Use away from employer’s premises
(2)
For the purposes of subsection (1), a business tool that is not taken to and used on the employer’s premises may nevertheless be provided mainly for business use if the employee performs a significant part of the employee’s employment duties away from the premises.
Defined in this Act: business tool, business use, employee, employer, fringe benefit
Section CX 18B was inserted, as from 1 April 2006, by section 32(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3). See section 32(2) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
CX 19 Benefits to non-executive directors
A transfer of value to a non-executive director that is a dividend under section CD 12(2) (Benefits of shareholderemployees or directors) is not a fringe benefit if it is made solely because of their capacity as a non-executive director.
Defined in this Act: dividend, fringe benefit, non-executive director, transfer of value
Compare: 1994 No 164 s CI 1(na)
CX 20 Benefits provided on premises
When not fringe benefit
(1)
A benefit, other than free, discounted, or subsidised travel, accommodation, or clothing, is not a fringe benefit if the benefit is—
(a)
provided to the employee by the employer of the employee and received or used by the employee on the premises of—
(i)
the employer:
(ii)
a company that is in the same group of companies as the employer:
(b)
provided to the employee by a company that is in the same group of companies as the employer of the employee and received or used by the employee on the premises of—
(i)
the employer:
(ii)
the company that provides the benefit.
Premises of person
(2)
In this section, the premises of a person—
(a)
include premises that the person owns or leases:
(b)
include premises, other than those referred to in paragraph (a), on which an employee of the person is required to perform duties for the person:
(c)
do not include premises occupied by an employee of the person for residential purposes.
Defined in this Act: company, employee, employer, employer’s premises, fringe benefit, group of companies, lease
Compare: 1994 No 164 s CI 1(q)
Subsection (1) (excluding the heading) was substituted, as from 1 April 2006, by section 33(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3). See section 33(4) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
Subsection (2) was substituted, as from 1 April 2006, by section 33(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3). See section 33(4) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
The list of defined terms was amended, as from 1 April 2006, by section 33(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “company”
and “group of companies”
. See section 33(4) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
CX 20B Benefits related to health or safety
A benefit that an employer provides to an employee is not a fringe benefit to the extent to which it—
(a)
is related to the employee’s health or safety; and
(b)
is aimed at hazard management in the workplace as contemplated in the Health and Safety in Employment Act 1992; and
(c)
would be excluded by section CX 20 from being a fringe benefit if provided on the employer’s premises.
Defined in this Act: employee, employer, employment, fringe benefit
Section CX 20B was inserted, as from 1 April 2006, by section 34(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3). See section 34(2) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
CX 21 Benefits provided by charitable organisations
When not fringe benefit
(1)
A charitable organisation that provides a benefit to an employee does not provide a fringe benefit except to the extent to which—
(a)
the employee receives the benefit mainly in connection with their employment; and
(b)
the employment consists of the carrying on by the organisation of a business whose activity is outside its benevolent, charitable, cultural, or philanthropic purposes.
When employer provides charge facilities
(2)
Subsection (1) does not apply, and the benefit provided is a fringe benefit, if a charitable organisation provides a benefit to an employee by way of short-term charge facilities and the value of the benefit from the short-term charge facilities for the employee in a tax year exceeds 5% of the employee’s salary or wages for the tax year.
Meaning of short-term charge facilities
(3)
For the purposes of the FBT rules, a short-term charge facility means an arrangement that—
(a)
enables an employee of a charitable organisation to obtain goods or services that have no connection with the organisation or its operations by buying or hiring the goods or services or charging the cost of the goods or services to an account; and
(b)
places the liability for some or all of the payment for the goods or services on the organisation; and
(c)
is not a fringe benefit under section CX 9.
Defined in this Act: business, charitable organisation, employee, employment, fringe benefit
Compare: 1994 No 164 s CI 1(m)
The heading to subsection (1) was inserted, as from 1 April 2006, by section 35(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3). See section 35(2) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
Subsections (2) and (3) were inserted, as from 1 April 2006, by section 35(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3). See section 35(2) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
CX 22 Non-liable payments
A benefit received by an employee is not a fringe benefit to the extent to which it is received in a quarter or in an income year in which they derive 1 or more source deduction payments, all of which are not liable for income tax.
Defined in this Act: employee, fringe benefit, income tax, income year, quarter, source deduction payment
Compare: 1994 No 164 s CI 1(n)
CX 23 Assistance with tax returns
An employer’s assistance with the preparation of an employee’s income statement or return of income is not a fringe benefit when the expenditure incurred in providing the assistance is expenditure for which the employee would have been allowed a deduction, if it had been incurred by the employee, under section DB 3 (Determining tax liabilities).
Defined in this Act: deduction employee , employer , fringe benefit , income statement , return of income
Compare: 1994 No 164 s CI 1(la)
CX 24 Accommodation
The value of accommodation that an employer provides to an employee in connection with the employment or services is not a fringe benefit.
Defined in this Act: accommodation, employee, employer, employment, fringe benefit
Compare: 1994 No 164 s CI 1(p)
Section CX 24: substituted (with effect on 1 April 2005), on 6 October 2009, by section 750(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
CX 25 Entertainment
When not fringe benefit
(1)
A benefit in a form of entertainment described in section DD 2 (Limitation rule) that an employer provides to an employee is not a fringe benefit. This subsection is overridden by subsection (2).
When is fringe benefit
(2)
A benefit in a form of entertainment described in section DD 2 (Limitation rule) that an employer provides to an employee is a fringe benefit if—
(a)
the employee does not receive or use it in the course of employment; and
(b)
the employee does not receive or use it as a necessary consequence of their employment duties; and
(c)
either—
(i)
the employee may choose when to receive or use the benefit; or
(ii)
the entertainment is of a kind described in section DD 7 (Entertainment outside New Zealand).
Defined in this Act: employee, employer, employment, fringe benefit
Compare: 1994 No 164 s CI 1(r)
CX 26 Distinctive work clothing
When not fringe benefit
(1)
Distinctive work clothing that an employer provides to an employee is not a fringe benefit, whether provided by sale or otherwise.
Meaning of distinctive work clothing
(2)
In this section, distinctive work clothing means clothing (including a single item of clothing) that—
(a)
is worn by an employee as, or as part of, a uniform that can be identified with the employer—
(i)
through the permanent and prominent display of a name, logo, or other identification that the employer regularly uses in carrying on their activity or undertaking; or
(ii)
because the colour scheme, pattern, or style is readily associated with the employer; and
(b)
is worn in the course, or as an incident, of employment; and
(c)
is not clothing that employees would normally wear for private purposes.
Defined in this Act: distinctive work clothing, employee, employer, employment, fringe benefit
Compare: 1994 No 164 ss CI 1(s), OB 1distinctive work clothing
CX 26B Contributions to income protection insurance
An employer who satisfies a liability to pay, or contribute to the payment of, a premium for income protection insurance for the benefit of an employee does not provide a fringe benefit to the employee if a payment of the insurance to the employee would be assessable income of the employee.
Defined in this Act: contribution employee , employer , fringe benefit
Section CX 26B was inserted, as from 1 April 2006, by section 36(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3). See section 36(2) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
CX 27 Services provided to superannuation fund
A fringe benefit does not arise if services are provided to a superannuation fund to the extent to which the superannuation fund would have been allowed a deduction for the expenditure incurred in providing the services if the expenditure had been incurred by the superannuation fund.
Defined in this Act: deduction, fringe benefit, superannuation fund
Compare: 1994 No 164 s CI 1(l)
CX 27B Goods provided at discount by third parties
When this section applies
(1)
This section applies if an employer and a person who is not associated with the employer have an arrangement through which goods are provided by the person at a discount.
When not fringe benefit
(2)
A discount provided by the person to an employee in a group of employees is not a fringe benefit if—
(a)
the person offers a discount to a group of persons that—
(i)
negotiates the discount on an arm’s-length basis; and
(ii)
does not include the group of employees; and
(iii)
is comparable in number to the group of employees; and
(b)
the discount offered to the group of employees is the same or less than the discount offered to the group described in paragraph (a).
Defined in this Act: arrangement, associated person, employee, employer, fringe benefit
Section CX 26B was inserted, as from 1 April 2006, by section 37(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3). See section 37(2) of that Act as to the application of this amendment for a person and a period beginning as from 1 April 2006 for which the person or the person’s employer is required to forward a return to the Commissioner under subpart ND (Fringe benefit tax).
Definitions
CX 28 Meaning of emergency call
Emergency call means a visit that an employee is required to make, to which all the following apply:
(a)
the employee makes the visit from their home in the course of their employment; and
(b)
the purpose of the visit is to provide—
(i)
essential services relating to the operation of the plant or machinery of the employer, or of their client or customer; or
(ii)
essential services relating to the maintenance of services provided by a local authority or a public authority; or
(iii)
essential services relating to the carrying on of a business for the supply of energy or fuel to the public; or
(iv)
emergency services relating to the health or safety of any person; and
(c)
the employer, their client or customer, or a member of the public requests the services; and
(d)
except when paragraph (b)(iv) applies, the services are required to be performed between the hours of 6.00 pm and 6.00 am on days other than a Saturday, Sunday, or statutory public holiday, and at any time on other days.
Defined in this Act: business, emergency call, employee, employer, employment, local authority, public authority
Compare: 1994 No 164 s OB 1emergency call
CX 29 Meaning of employee share loan
Meaning
(1)
Employee share loan means a loan made to an employee if—
(a)
the loan is made for the sole purpose of enabling the employee to acquire, under a scheme of acquisition,—
(i)
shares, rights, or options in the company that is their employer:
(ii)
shares, rights, or options in a company that is associated with their employer; and
(b)
the employee uses the loan only for the purpose of the acquisition; and
(c)
the employee beneficially owns the shares, rights, or options throughout the term of the loan; and
(d)
the employee must immediately repay the loan in full if they stop being the beneficial owner of any of the shares, rights, or options; and
(e)
the company issuing the shares, rights, or options must maintain a dividend-paying policy throughout the term of the loan.
Exclusions
(2)
This section does not apply—
(a)
to shares, rights, or options in a qualifying company:
(b)
to a loan made under a share purchase scheme:
(c)
to an employer and an employee who are associated persons.
Defined in this Act: associated person, company, dividend, employee, employee share loan, employer, qualifying company, share
Compare: 1994 No 164 s OB 1employee share loan benefit
Subsections (1)(a)(i), and (2)(a) and (b) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
CX 30 Meaning of private use
Private use, for a motor vehicle, includes—
(a)
the employee’s use of the vehicle for travel between home and work; and
(b)
any other travel that confers a private benefit on the employee.
Defined in this Act: employee, motor vehicle, private use
Compare: 1994 No 164 s OB 1private use or enjoyment
CX 31 Meaning of unclassified benefit
Unclassified benefit means a fringe benefit that arises if an employer provides an employee with a benefit in connection with their employment that is—
(a)
not a benefit referred to in any of sections CX 6 to CX 15; and
(b)
not a benefit excluded under this subpart.
Defined in this Act: employee, employer, employment, fringe benefit, unclassified benefit
Compare: 1994 No 164 s CI 1(h)
CX 32 Meaning of work-related vehicle
Meaning
(1)
Work-related vehicle, for an employer, means a motor vehicle that prominently and permanently displays on its exterior,—
(a)
if the employer owns the vehicle, the form of identification that the employer regularly uses in carrying on their undertaking or activity; or
(b)
if the employer rents the vehicle, the form of identification—
(i)
that the employer regularly uses in carrying on their undertaking or activity; or
(ii)
that the person from whom it is rented regularly uses in carrying on their undertaking or activity.
Exclusion: motorcar
(2)
Subsection (1) does not apply to a motorcar.
Exclusion: private use
(3)
A motor vehicle is not a work-related vehicle on any day on which the vehicle is available for the employee’s private use, except for private use that is—
(a)
travel to and from their home that is necessary in, and a condition of, their employment; or
(b)
other travel in the course of their employment during which the travel arises incidentally to the business use.
Defined in this Act: business use, employee, employer, employment, motor vehicle, motorcar, work-related vehicle
Compare: 1994 No 164 s OB 1work related vehicle
Insurance
CX 33 Life insurers and fully reinsured persons
Persons to whom this section applies
(1)
The amounts described in subsection (2) are excluded income of—
(a)
a life insurer:
(b)
a person who is carrying on a business of providing life insurance but who is treated as not carrying on a business of providing life insurance because they have full reinsurance.
Excluded income
(2)
The amounts are—
(a)
a premium derived by the life insurer or the person under a life insurance policy; or
(b)
a claim receivable by the life insurer or the person under a life reinsurance policy.
Defined in this Act: amount, business, claim, excluded income, full reinsurance, life insurance, life insurance policy, life insurer, life reinsurance policy, premium
Compare: 1994 No 164 ss CM 3, CM 12(c), (d)
Subsection (1)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CX 34 Superannuation fund deriving amount from life insurance policy
When this section applies
(1)
This section applies when a superannuation fund invests funds in a life insurance policy offered or entered into in New Zealand.
Excluded income
(2)
An amount that the superannuation fund derives from the policy is excluded income.
Defined in this Act: amount, excluded income, life insurance policy, offered or entered into in New Zealand, superannuation fund
Compare: 1994 No 164 s CL 2
CX 35 Resident insurance underwriters
When this section applies
(1)
This section applies when a natural person or an unincorporated body of natural persons—
(a)
is resident in New Zealand; and
(b)
carries on a business of providing general insurance or guarantees against loss, damage, or risk; and
(c)
as part of the business, is liable under an insurance contract, whether or not named in it, to pay, or to contribute towards the payment of, some or all of an amount claimable by the person insured under the contract.
Excluded income
(2)
Income that the natural person or persons derive from carrying on the business outside New Zealand is excluded income to the extent to which it is income not referred to in section OE 4(1)(e) or (f) or (g) or (h) or (l) or (m) or (n) (Classes of income treated as having source in New Zealand).
Defined in this Act: amount, business, excluded income, general insurance, income, insurance contract, New Zealand, payment, resident in New Zealand
Compare: 1994 No 164 s CN 5
Petroleum mining
CX 36 Disposal of ownership interests in controlled petroleum mining entities
Excluded income
(1)
The consideration that a person derives from disposing of shares or trust interests in a controlled petroleum mining entity is excluded income of the person.
Application of Tax Administration Act 1994
(2)
Section 65 of the Tax Administration Act 1994 applies when this section applies.
Defined in this Act: consideration, controlled petroleum mining entity, dispose, exempt income, share
Compare: 1994 No 164 s CJ 6
CX 37 Farm-out arrangements for petroleum mining
Farm-in expenditure under a farm-out arrangement is excluded income of a petroleum miner who is the farm-out party in the farm-out arrangement.
Defined in this Act: excluded income , farm-in expenditure , farm-out arrangement farm-out party , petroleum miner
Compare: 1994 No 164 s CJ 4(1)
Mineral mining
CX 38 Disposal of mining shares
When subsection (2) applies
(1)
Subsection (2) applies when—
(a)
a mining company derives an amount from disposing of a mining share; and
(b)
the disposal is to a person other than a mining company or a mining holding company; and
(c)
the company has an excess amount because the amount derived from disposing of the share is more than the cost of the share calculated under section DU 11(2) (Disposal of mining shares by company); and
(d)
the excess amount would, if this section did not exist, be income of the company under any of sections CB 1 to CB 4 (which relate to income from business or tradelike activities).
Excluded income
(2)
The excess amount is excluded income of the company to the extent to which it is, or is to be, used for mining purposes within the prescribed period.
When subsection (4) applies
(3)
Subsection (4) applies when—
(a)
a mining company (seller) derives an amount from disposing of a mining share; and
(b)
the disposal is to a mining company or to a mining holding company (buyer); and
(c)
the seller has an excess amount because the amount derived from disposing of the share is more than the cost of the share calculated under section DU 11(2) (Disposal of mining shares by company); and
(d)
the excess amount would, if this section did not exist, be income of the seller under any of sections CB 1 to CB 4 (which relate to income from business or trade-like activities).
Excluded income
(4)
The excess amount is excluded income of the seller to the extent to which it consists of mining shares issued to it in the buyer.
Defined in this Act: amount, excluded income, income, mining company, mining holding company, mining purposes, mining share, prescribed period
Compare: 1994 No 164 s DN 2(2)
CX 39 Disposal of mining shares acquired with reinvestment profit
When subsection (2) applies
(1)
Subsection (2) applies when—
(a)
a company derives an amount from disposing of a mining share; and
(b)
an amount of the reinvestment profit of the company is used in calculating the deduction for the cost of the mining share under section DU 11(2) (Disposal of mining shares by company); and
(c)
some or all of the amount derived from the disposal would, if this section did not exist, be income of the company under section CU 14 (Recovery of reinvestment profit on disposal of mining shares).
Excluded income
(2)
The amount that would be income is excluded income of the company to the extent to which it is, or is to be, used for mining purposes within the prescribed period.
When subsection (4) applies
(3)
Subsection (4) applies when—
(a)
a company (seller) derives an amount from disposing of a mining share; and
(b)
the disposal is to a mining company or to a mining holding company (buyer); and
(c)
an amount of the reinvestment profit of the seller is used in calculating the deduction for the cost of the mining share under section DU 11(2) (Disposal of mining shares by company); and
(d)
some or all of the amount derived from the disposal would, if this section did not exist, be income of the seller under section CU 14 (Recovery of reinvestment profit on disposal of mining shares).
Excluded income
(4)
The amount that would be income is excluded income of the seller to the extent to which it consists of mining shares issued to it in the buyer.
When subsection (6) applies
(5)
Subsection (6) applies when—
(a)
a company derives an amount from disposing of a mining share; and
(b)
the disposal is of the kind described in section CU 20 (Mining company or mining holding company liquidated); and
(c)
an amount of the reinvestment profit of the company is used in calculating the deduction for the cost of the mining share under section DU 11(2) (Disposal of mining shares by company); and
(d)
some or all of the amount derived from the disposal would, if this section did not exist, be income of the company under section CU 14 (Recovery of reinvestment profit on disposal of mining shares).
Excluded income
(6)
The amount that would be income is excluded income of the company to the extent to which it consists of mining shares.
Defined in this Act: amount, company, deduction, excluded income, income, mining company, mining holding company, mining purposes, mining share, prescribed period, reinvestment profit
Compare: 1994 No 164 s DN 2(9)
CX 40 Repayment of loans made from reinvestment profit
When this section applies
(1)
This section applies when an amount would, if this section did not exist, be income of a company under section CU 16 (Recovery of reinvestment profit on repayment of loans).
Excluded income
(2)
The amount is excluded income of the company to the extent to which it is, or is to be, used for mining purposes within the prescribed period.
Defined in this Act: amount, company, excluded income, income, mining purposes, prescribed period
Compare: 1994 No 164 s DN 2(6)
Government grants
CX 41 Government grants to businesses
When this section applies
(1)
This section applies when—
(a)
a local authority or a public authority makes a payment to a person for a business that the person carries on; and
(b)
the payment—
(i)
is in the nature of a grant or subsidy; or
(ii)
is a grant-related suspensory loan; and
(c)
the payment is not in the nature of an advance or loan; and
(d)
the payment is made to the person in relation to—
(i)
expenditure that they incur and for which they would be allowed a deduction in the absence of section DF 1 (Government grants to businesses); or
(ii)
expenditure that they incur in acquiring, constructing, installing, or extending an asset for which they have an amount of depreciation loss.
Excluded income
(2)
The payment is excluded income of the person.
Exclusions
(3)
This section does not apply to—
(a)
a large budget screen production grant:
(b)
a grant made under the Agriculture Recovery Programme for the Lower North Island and Eastern Bay of Plenty, to the extent that the grant relates to expenditure—
(i)
incurred by the recipient before the grant; and
(ii)
for which the recipient would be allowed a deduction in the absence of section DF 1.
Defined in this Act: amount, business, deduction, depreciation loss, excluded income, grant-related suspensory loan, large budget screen production grant, local authority, public authority
Compare: 1994 No 164 ss DC 1, DC 3(1)
Section CX 41(1)(d)(i): amended (with effect on 1 April 2005), on 6 October 2009, by section 751(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Subsection (3) was substituted, as from 3 April 2006, by section 38(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
Section CX 41(3)(b)(ii): amended (with effect on 1 April 2005), on 6 October 2009, by section 751(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
CX 41B Amounts remitted as condition of new start grant
When this section applies
(1)
This section applies if in an income year of a person—
(a)
the person carries on a business of—
(i)
animal husbandry:
(ii)
poultry-keeping:
(iii)
beekeeping:
(iv)
breeding horses other than bloodstock:
(v)
horticulture:
(vi)
cropping; and
(b)
the person is paid a new start grant for the business for an event that is a qualifying event; and
(c)
the person in carrying on the business—
(i)
incurs a liability for expenditure or loss before the declaration of the state of emergency that relates to the qualifying event; and
(ii)
before the date that is 3 months after the end of the state of emergency, takes the liability into account in calculating the person’s taxable income for an income year; and
(d)
the liability referred to in paragraph (c)(i) is forgiven or otherwise remitted—
(i)
as a prerequisite for the payment of the new start grant; and
(ii)
before the date that is 18 months after the end of the state of emergency; and
(e)
the amount of the remitted liability is income of the person under section CG 2 (Remitted amounts).
Excluded income
(2)
The remitted liability is excluded income of the person to the extent that is the greater of zero and the amount calculated under the formula—
remitted amount -- current loss -- available loss -- other loss
Definition of items in formula
(3)
In the formula—
(a)
remitted amount is the amount of the remitted liability:
(b)
current loss is the net loss that the person would have for the income year in which the liability is remitted in the absence of this section:
(c)
available loss is the available net losses that are available to the person for offset against net income for the income year in which the liability is remitted:
(d)
other loss is a loss that—
(i)
is incurred by a person associated with the person who receives the new start grant; and
(ii)
satisfies subsection (4).
Loss incurred by associated person from business or land
(4)
The loss referred to in subsection (3)(d)—
(a)
is incurred by a person who—
(i)
carries on or has carried on the business for which the new start grant is paid or owns or has owned an estate in fee simple or leasehold estate in land used in the business; and
(ii)
in the opinion of the Commissioner, is under a substantial degree of control by the person; and
(iii)
in the opinion of the Commissioner, has a substantial identity of interests with the person; and
(b)
is incurred from—
(i)
the business referred to in paragraph (a)(i):
(ii)
land that is used in the business; and
(c)
is, for the income year in which the liability is remitted,—
(i)
a net loss of the associated person:
(ii)
an available net loss for the associated person; and
(d)
is included in the calculation in subsection (3) to an extent that the Commissioner determines, having regard to the interests of the associated person that are separate from those of the person.
Notice to associated person
(5)
The Commissioner must give to the associated person written notice of a determination under subsection (4)(d).
Defined in this Act: business, capital limitation, deduction, diminished value, general limitation, general permission, income, income year, qualifying event
Section CX 41B was inserted, as from 1 October 2005, by section 176 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Contributions to superannuation scheme or retirement savings scheme
Heading: substituted (with effect from 1 April 2007), on 19 December 2007, by section 26 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CX 42 Employer’s superannuation contributions
An employer’s superannuation contribution is excluded income of—
(a)
the employee for whose benefit the contribution is provided; and
(b)
the trustees of the superannuation scheme to whom the contribution is made.
Defined in this Act: employee, employer’s superannuation contribution, excluded income, superannuation scheme, trustee
Compare: 1994 No 164 ss CL 1, OB 1monetary remuneration
CX 42B Contributions to retirement savings scheme
Excluded income
(1)
A retirement scheme contribution is excluded income of—
(a)
the person for whose benefit the retirement scheme contribution is provided, to the extent to which the retirement scheme contribution is—
(i)
money:
(ii)
an amount of imputation credit or Maori authority credit that is used to meet the liability of the retirement scheme contributor for retirement scheme contribution withholding tax on the retirement scheme contribution:
(b)
the retirement savings scheme.
Exclusion
(2)
Subsection (1)(a) does not apply if the person for whose benefit the retirement scheme contribution is provided—
(a)
supplies to the retirement scheme contributor, or to the retirement savings scheme, a retirement scheme withholding rate that is less than the retirement scheme prescribed rate for the person:
(b)
includes the retirement scheme contribution in a return of income for the income year in which the retirement scheme contribution is provided:
(c)
is a non-resident and the retirement scheme contribution is non-resident withholding income.
Defined in this Act: excluded income, income year, non-resident, non-resident withholding income, retirement savings scheme, retirement scheme contribution, retirement scheme contributor, retirement scheme prescribed rate, retirement scheme withholding rate, return of income
Section CX 42B: inserted (with effect from 1 April 2007), on 19 December 2007, by section 27 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Farming, forestry, or fishing
CX 43 Income equalisation schemes
Defined in this Act: excluded income
Compare: 1994 No 164 ss EI 1(4), EI 11(4), EI 17(2)
Environmental restoration
This heading was inserted, as from 1 October 2005, by section 12(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application for a refund made to a person in an income year starting on or after 10 June 2005.
CX 43B Refund from environmental restoration account
A refund to a person under section EK 9 (Refund of payment if excess, lacking details) is excluded income of the person.
Defined in this Act: excluded income
Section CX 43B was inserted, as from 1 October 2005, by section 12(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application for a refund made to a person in an income year starting on or after 10 June 2005.
Section CX 43B was amended, as from 1 October 2005, by section 14(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by omitting “, or after earlier payment or request for refund”
with application for expenditure incurred by a person in an income year starting on or after 10 June 2005.
Inflation-indexed instruments
CX 44 Credits for inflation-indexed instruments
When this section applies
(1)
This section applies when—
(a)
an amount payable to a person who is a lender for money lent is determined by a fixed relationship to 1 or more indices of general price inflation in New Zealand; and
(b)
an amount on account of an increase in the amount payable is credited to the lender’s account by the borrower; and
(c)
the credit represents a recovery of a decrease, previously debited in account, in the amount payable over a previous period.
Excluded income
(2)
The credit is excluded income of the lender.
Defined in this Act: amount, excluded income, money lent, New Zealand, pay
Compare: 1994 No 164 s EB 5(1)
Share-lending arrangements
This heading was inserted, as from 1 July 2006, by section 39 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
CX 44B Share-lending collateral under share-lending arrangements
An amount of share-lending collateral derived by a person under a share-lending arrangement is excluded income of the person.
Defined in this Act: amount, excluded income, share-lending arrangement, share-lending collateral
Section CX 44B was inserted, as from 1 July 2006, by section 39 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Portfolio investment entities
Heading: inserted, on 1 October 2007, by section 15 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
CX 44C Proceeds from disposal of certain shares by portfolio investment entities or New Zealand Superannuation Fund
When this section applies
(1)
This section applies to income derived by a portfolio investment entity or by a life insurer, in relation to that part of the life insurer that is a portfolio investment-linked life fund,or the New Zealand Superannuation Fund from the disposal of a share if—
(a)
the share is issued by a company resident in New Zealand and not treated under a double tax agreement as not being resident in New Zealand or by a company—
(i)
resident in Australia and not treated as being resident in a country other than Australia in an agreement between Australia and another country that would be a double tax agreement if the agreement were negotiated between New Zealand and the other country; and
(ii)
included in an index that is an approved index under the ASX Market Rules, made under Chapter 7 of the Corporations Act 2001 (Aust); and
(iii)
required under the Income Tax Assessment Act 1997 (Aust) and Income Tax Assessment Act 1936 (Aust) to maintain a franking account; and
(b)
the share is not a non-participating redeemable share; and
(c)
the entity disposing of the share is not assured, under an arrangement entered with another person when the share is acquired, of having a gain on the disposal.
Excluded income
(2)
The income is excluded income of the portfolio investment entity or the New Zealand Superannuation Fund.
Defined in this Act: amount, arrangement, company, dividend, double tax agreement, excluded income, income, non-participating redeemable share, portfolio investment entity, portfolio investment-linked life fund, resident, resident in Australia, resident in New Zealand, share
Section CX 44C: inserted, on 1 October 2007, by section 15 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section CX 44C heading: amended, on 1 October 2007, by section 7(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section CX 44C(1): amended (with effect from 1 October 2007), on 19 December 2007, by section 28(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CX 44C(1): amended, on 1 October 2007, by section 7(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section CX 44C(1)(a)(i): substituted (with effect from 1 October 2007), on 19 December 2007, by section 28(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CX 44C(1)(b): amended (with effect from 1 October 2007), on 19 December 2007, by section 28(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CX 44C(1)(c): added (with effect from 1 October 2007), on 19 December 2007, by section 28(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CX 44C(2): amended, on 1 October 2007, by section 7(3) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section CX 44C list of defined terms portfolio investment-linked life fund: inserted (with effect from 1 October 2007), on 19 December 2007, by section 28(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
CX 44D Portfolio investor allocated income and distributions of income by portfolio investment entities
Portfolio investor allocated income
(1)
Portfolio investor allocated income derived under section CP 1 (Portfolio investor allocated income) in a portfolio calculation period in an income year by an investor in a portfolio tax rate entity is excluded income of the investor if—
(a)
the prescribed investor rate for the investor and the portfolio calculation period is more than zero; and
(b)
the prescribed investor rate for the investor and the portfolio calculation period is not more than the portfolio investor rate for the investor and the portfolio calculation period when the entity calculates in relation to the portfolio investor allocated income—
(i)
the portfolio entity tax liability of the entity; or
(ii)
the amount of a payment under section HL 23B (Optional payments of tax by portfolio tax rate entities) that the entity intends to be a final payment of the portfolio entity tax liability of the entity in relation to the portfolio investor allocated income; and
(c)
for a portfolio tax rate entity making payments of tax under section HL 21 (Payments of tax by portfolio tax rate entity making no election), the portfolio investor allocated income is not allocated to a portfolio allocation period that includes part of a portfolio investor exit period for the investor.
Distribution of income by portfolio tax rate entity
(2)
An amount of income derived by an investor as a distribution or dividend of a portfolio tax rate entity is excluded income of the investor.
Distribution by portfolio investment entity that is not portfolio tax rate entity
(3)
An amount of income derived in an income year by an investor as a distribution or dividend of a portfolio listed company is—
(a)
excluded income of the investor, if the investor is a resident who—
(i)
is a natural person or a trustee; and
(ii)
does not include the distribution as income in a return of income for the income year:
(b)
excluded income of the investor, if paragraph (a) does not apply, to the extent to which the amount of the distribution exceeds the total of the following:
(i)
the amount of the distribution that is fully imputed, as that term is defined in section NG 2(3) (Non-resident withholding tax imposed):
(ii)
the amount of the distribution that is fully dividend withholding payment credited, as that term is defined in section NG 2(4).
Defined in this Act: amount, distribution, excluded income, income, income year, investor, New Zealand resident, portfolio investment entity, portfolio investor allocated income, portfolio investor exit period, portfolio investor rate, portfolio listed company, portfolio tax rate entity, prescribed investor rate, return of income, zero-rated portfolio investor
Section CX 44D: inserted, on 1 October 2007, by section 15 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section CX 44D heading: amended, on 1 October 2007, by section 8(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section CX 44D(1) heading: substituted (with effect from 1 October 2007), on 19 December 2007, by section 29(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CX 44D(1): substituted (with effect from 1 October 2007), on 19 December 2007, by section 29(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CX 44D(2): amended (with effect from 1 October 2007), on 19 December 2007, by section 29(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CX 44D(3): amended (with effect from 1 October 2007), on 19 December 2007, by section 29(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CX 44D(3)(a)(i): substituted (with effect from 1 October 2007), on 19 December 2007, by section 29(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CX 44D(3)(a)(i): substituted, on 1 October 2007, by section 8(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section CX 44D(3)(b): substituted, on 1 October 2007, by section 8(3) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
CX 44E Rebates of certain fees by portfolio tax rate entities
A rebate of fees allocated to an investor as a member of a portfolio investor class by a portfolio tax rate entity is excluded income of the investor if the rebate is included in the calculation of the entity’s portfolio entity tax liability under section HL 20 (Portfolio entity tax liability and rebates of portfolio tax rate entity for period) for the investor, the portfolio investor class, and a portfolio calculation period.
Defined in this Act: excluded income, investor, portfolio calculation period, portfolio entity tax liability, portfolio investor class, portfolio tax rate entity
CX 44E: inserted, on 1 October 2007, by section 9 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Emissions units under Climate Change Response Act 2002
Heading: inserted (with effect on 26 September 2008), on 6 October 2009, by section 752 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
CX 44F Issue of post-1989 forest land units
When this section applies
(1)
This section applies when a person is issued a post-1989 forest land unit.
Excluded income
(2)
An amount of income derived by the person from the issue is excluded income, if the person is treated as deriving an amount of income from the issue.
Defined in this Act: amount, excluded income, income, post-1989 forest land unit
Section CX 44F: inserted, on 26 September 2008, by section 60 of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).
CX 44G Disposal of pre-1990 forest land units
Who this section applies to
(1)
This section applies to a person who disposes of a pre-1990 forest land unit other than by surrender.
Excluded income: disposal
(2)
An amount of income that the person derives from the disposal is excluded income if, at the time of the disposal, the person would not derive income, other than exempt income or excluded income, from a disposal without timber of the pre-1990 forest land to which the unit relates.
Defined in this Act: amount, excluded income, income, pre-1990 forest land, pre-1990 forest land unit, surrender
Section CX 44G: inserted (with effect on 26 September 2008), on 6 October 2009, by section 753 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Income excluded under Parts F to I
CX 45 Exclusion under Parts to be rewritten
An amount of income is excluded income if it is excluded under a provision in any of Parts F to I.
Defined in this Act: amount, excluded income, income
Compare: 1994 No 164 s BD 1(2)(b)
Subpart CY—Income under Parts F to I
Subpart CZ—Terminating provisions
Contents
CZ 1 Share purchase agreement income before 19 July 1968
In sections CE 1 to CE 4 (which relate to employment income), share purchase agreement does not include any agreement entered into before 19 July 1968.
Defined in this Act: share purchase agreement
Compare: 1994 No 164 s CH 2(1)
CZ 2 Mining company’s 1970-71 tax year
When this section applies
(1)
This section applies when—
(a)
section 152 or 153 of the Land and Income Tax Act 1954 (as in force before the commencement of section 153F of the Act) applied to a mining company for the 1970-71 tax year; and
(b)
the company acquires an asset by incurring the exploration expenditure or development expenditure referred to in section 27(3)(a) of the Land and Income Tax Amendment Act 1971.
Application of subpart CU
(2)
The provisions of subpart CU (Income from mineral mining) apply, with any necessary modifications, as follows:
(a)
section CU 3 (Disposal of assets) applies to the company as if every reference in the section to an asset included a reference to an asset of the kind described in subsection (1)(b) that the company disposes of in the 1971-72 tax year or a later tax year:
(b)
section CU 3 (Disposal of assets) applies to a person who acquires an asset of the kind described in subsection (1)(b) from the company as if every reference in the section to an asset included a reference to such an asset that the person acquires in the 1971-72 tax year or a later tax year:
(c)
section CU 10 (Mining asset used to derive income other than income from mining) applies to the company as if every reference in the section to an asset included a reference to an asset of the kind described in subsection (1)(b) that the company uses, wholly or mainly, to derive income other than income from mining in the 1971-72 tax year or a later tax year.
Resident and non-resident mining operators
(3)
This section applies, with any necessary modifications, to an asset of the kind referred to in paragraph (i) of item “a”
of the formula in section 31(3) of the Land and Income Tax Amendment Act (No 2) 1972 that a resident mining operator acquires or that a non-resident mining operator acquires.
Defined in this Act: income, income from mining, mining company, non-resident mining operator, resident mining operator, tax year
Compare: 1994 No 164 ss DN 1(15)(b), DN 4(6), DN 5(2)(b)
Subsection (2)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CZ 3 Exchange variations on 8 August 1975
When this section applies
(1)
This section applies when—
(a)
a person carrying on a business in New Zealand—
(i)
receives a loan in 2 or more instalments for the purposes of the business; or
(ii)
makes a loan in 2 or more instalments in the course of carrying on the business; and
(b)
an exchange variation arises in relation to the whole or partial repayment of the loan; and
(c)
the person derives an amount or incurs a loss through the exchange variation.
Income or deduction
(2)
The amount derived is income of the person and the loss incurred is a deduction that they are allowed.
Instalments and repayments
(3)
For the purposes of this section, unless the terms of the loan expressly provide otherwise,—
(a)
each instalment is treated as a separate loan; and
(b)
repayments are applied so that the separate loans are repaid in the order in which they were received.
Exclusion
(4)
This section does not apply to a financial arrangement to which the financial arrangements rules apply.
Some definitions
(5)
In this section,—
exchange variation, for the repayment of some or all of the loan, excluding interest, means a variation by virtue of a fluctuation in the value of the currency or currencies of 1 or more countries other than New Zealand in relation to New Zealand currency, that occurs between—
(a)
the amount of the repayment expressed in New Zealand currency at the time at which the repayment was made; and
(b)
the amount expressed in New Zealand currency that would have been required to make that repayment on or at the later of 8 August 1975 and the time at which the loan was first made
loan means,—
(a)
for money lent, to a person, on or after 1 January 1974 and on or before 22 January 1985, money that—
(i)
was lent with the consent of the Minister under the Capital Issues (Overseas) Regulations 1965 or the Overseas Investment Regulations 1974 or with the consent of the Reserve Bank under the Exchange Control Regulations 1978, as applicable; and
(ii)
was lent in a currency other than New Zealand currency; and
(iii)
was expressed to be repayable in a currency other than New Zealand currency:
(b)
for money lent, by a person, on or after 1 January 1974 and on or before 22 January 1985, money that—
(i)
was lent with the consent of the Reserve Bank under the Exchange Control Regulations 1978 if required; and
(ii)
was expressed to be repayable in a currency other than New Zealand currency:
(c)
for money lent, to a person, on or after 23 January 1985, money that—
(i)
is lent in a currency other than New Zealand currency; and
(ii)
is expressed to be repayable in a currency other than New Zealand currency:
(d)
in relation to money lent, by a person, on or after 23 January 1985, money that is expressed to be repayable in a currency other than New Zealand currency.
Defined in this Act: amount, business, deduction, exchange variation, financial arrangement, financial arrangements rules, loan, income, money lent, New Zealand
Compare: 1994 No 164 s CZ 1(1), (2), (4), (5)
Subsection (5)(a)(iii), (b)(ii) and (c)(ii) relating to the definition loan was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CZ 4 Mineral mining: company making loan before 1 April 1979
Application of this section
(1)
This section applies if sections CU 17 to CU 19 (which relate to the repayment by a mining company of an amount written off) would have applied to a loan by a company to another company made on or before 31 March 1979 if the Income Tax Amendment Act 1979 had not been enacted.
Application of sections CU 17 to CU 19
(2)
The sections apply, as far as applicable, to such a loan as if section 45 of the Income Tax Amendment Act 1979 were the only provision of it that had been enacted.
Defined in this Act: company, mineral
Compare: 1994 No 164 s DN 3(11)
CZ 5 Exempt interest: overseas money lent to government or local or public authority before 29 July 1983
Exempt income
(1)
Amounts that a non-resident derives are exempt income if they are derived from—
(a)
stock or debentures issued before 29 July 1983 by the government of New Zealand or by a local authority or a public authority, the interest on which is payable out of New Zealand; or
(b)
loans entered into before 29 July 1983, the interest on which was to be exempt from income tax in New Zealand under an agreement or arrangement made with the government of New Zealand.
Application posted or received before 29 July 1983
(2)
For the purposes of subsection (1)(b), a loan entered into on or after 29 July 1983 is treated as having been entered into before that date if an exemption of a kind referred to in that provision was authorised as a result of an application received by or posted to the government of New Zealand before 29 July 1983.
Defined in this Act: amount, arrangement, debentures, exempt income, income tax, interest, local authority, money lent, New Zealand, non-resident, pay, public authority
Compare: 1994 No 164 ss CB 2(5), CZ 2
CZ 6 Commercial bills before 31 July 1986
Income: redemption
(1)
The amount that a person receives on the redemption of a commercial bill owned by the person is income of the person.
Income: disposal
(2)
The value of a commercial bill on the day its owner disposes of it is income of the owner. This subsection does not apply if the disposal is a transfer under a relationship agreement.
(3)
[Repealed]Defined in this Act: amount, commercial bill , income, matrimonial agreement
Compare: 1994 No 164 s CE 3
Subsection (2) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “relationship agreement”
for “matrimonial agreement”
.
Subsection (3) was repealed, as from 1 October 2005, by section 13 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application as from the 2005–06 income year.
CZ 7 Primary producer co-operative companies: 1987-88 income year
Income: sale of asset
(1)
If a primary producer co-operative company disposes of an asset for which the company was allowed a deduction under section 200 of the Income Tax Act 1976 for the 1987-88 or a previous income year, the company is treated as deriving income in the income year of disposal of an amount equal to the lesser of—
(a)
the total of all deductions relating to the asset that were allowed under section 200; and
(b)
the amount that the company derived from the disposal of the asset.
Income: payments to shareholders
(2)
If a primary producer co-operative company has been allowed a deduction under section 200 for the 1987-88 or a previous income year, and a payment has been made to a shareholder of the company either on the surrender of any of their shares or on the liquidation of the company, part of the payment is treated as income of the shareholder. The part that is income is determined under subsection (3).
Amounts attributable to deductions
(3)
The part of the payment that is treated as income is only such part as—
(a)
is more than the available subscribed capital per share calculated under the slice rule of the shares surrendered or held on liquidation by the shareholder; and
(b)
is attributable to an increase in the value of the company’s assets that was caused by the company applying or appropriating a deduction allowed under section 200.
Some definitions
(4)
In this section,—
primary producer co-operative company means a company that, at the end of the 1987-88 income year,—
(a)
was a primary producer co-operative company, as defined in section 200(1) and (9); and
(b)
could qualify for a deduction under section 200(4)
section 200 means section 200 of the Income Tax Act 1976 as it was in force before it was repealed by section 41(1) of the Income Tax Amendment Act (No 5) 1988 (which, in general, allowed primary producer co-operative companies to claim a deduction for profits that were reinvested in certain defined primary produce activities and assets).
Defined in this Act: amount, available subscribed capital, income, income year, liquidation, primary producer co-operative company, section 200, share, shareholder, slice rule
Compare: 1994 No 164 s CK 3
CZ 8 Farm-out arrangements for petroleum mining before 16 December 1991
Excluded income
(1)
Excess expenditure under a farm-out arrangement entered into before 16 December 1991 is excluded income of the transferor.
Some definitions
(2)
In subsection (1), excess expenditure, farm-out arrangement, and transferor have the same meanings as in section 214D of the Income Tax Act 1976 immediately before its repeal by section 15 of the Income Tax Amendment Act (No 5) 1992.
Defined in this Act: excess expenditure, excluded income, transferor
Compare: 1994 No 164 s CJ 4(2)
CZ 9 Available capital distribution amount: 1965 and 1985 to 1992
Section CD 33(7)(e)
(1)
For the purposes of section CD 33(7)(e) (Available capital distribution amount), a company derives a capital gain amount if—
(a)
before 1 April 1988, a net profit or gain was derived by the company to which section 4(5) of the Income Tax Act 1976, and not section 4(5A) of the Income Tax Act 1976, applied immediately before those provisions were repealed by section 31(1) of the Income Tax Amendment Act (No 5) 1988; or
(b)
an amount is derived by the company that is attributable to—
(i)
a deduction allowed in the 1985-86 or 1986-87 tax year for livestock under section 86E of the Income Tax Act 1976; or
(ii)
a revaluation of livestock in any of the 1986-87 to 1991-92 tax years under section 86A of the Income Tax Act 1976; or
(iii)
a deduction allowed in the 1988-89 tax year for the revaluation of trading stock of wine, brandy, and whisky under section 87A of the Income Tax Act 1976 or section EZ 2 of the Income Tax Act 1994.
Section CD 33(14)(b)
(2)
For the purposes of section CD 33(14)(b) (Available capital distribution amount),—
(a)
the amount has been excluded by section 4(3) of the Land and Income Tax Act 1954 from treatment as a dividend; or
(b)
the issue has been excluded by section 3(3) of the Income Tax Act 1976 from treatment as a bonus issue.
Defined in this Act: amount, bonus issue, company, dividend, trading stock
Compare: 1994 No 164 ss CF 3(6), OB 1capital gain amount
CZ 10 Transitional relief for calculation of attributed repatriation dividends: 2 July 1992
Loans made by CFC to intermediary before 2 July 1992
(1)
Subsection (2) applies for the purposes of calculating attributed repatriation from a CFC to the extent to which—
(a)
the CFC made a loan before 8.00 pm New Zealand standard time on 2 July 1992; and
(b)
the loan enabled another person (intermediary) to make a loan to a New Zealand resident associated with the CFC; and
(c)
the loan is not a loan that is an arrangement subject to section GC 8 (Arrangement to defeat application of CFC attributed repatriation provisions); and
(d)
the New Zealand resident associated person repays the intermediary and the intermediary repays the CFC; and
(e)
the CFC uses the proceeds to make a loan directly to the New Zealand resident associated person.
Loan to associate: treated as existing for whole accounting period
(2)
The loan to the New Zealand resident associated person is treated as if it were in existence at the start of the accounting period of the CFC in which it is in fact made.
Property acquired under contract binding before 2 July 1992
(3)
Subsection (4) applies for the purposes of calculating attributed repatriation from a CFC if the CFC—
(a)
acquires any property (including an amount accruing on a financial arrangement) under a binding contract entered into before 8.00 pm New Zealand standard time on 2 July 1992; and
(b)
the acquisition is not as a result of any voluntary action taken by the CFC after that time.
Acquired property: treated as existing for whole accounting period
(4)
The property is treated as if it were held by the CFC at the start of the accounting period of the CFC in which it is in fact acquired.
Defined in this Act: accounting period, arrangement, associated person, attributed repatriation, CFC, financial arrangement, New Zealand, New Zealand resident
Compare: 1994 No 164 s CG 8(9), (12)
CZ 11 Recovery of deductions for software acquired before 1 April 1993
What this section applies to
(1)
This section applies to any of the following items for the acquisition of which a person was allowed a deduction before 1 April 1993:
(a)
the copyright in software:
(b)
the right to use the copyright in software:
(c)
the right to use software.
Income
(2)
An amount derived from the disposal of the item is income.
Relationship with sections EE 37 to EE 44 and EZ 19
(3)
Sections EE 37 to EE 44 (which relate to disposals and similar events) apply to the item. Section EZ 19 (Adjusted tax value for software acquired before 1 April 1993) deals with the adjusted tax value of the item.
Defined in this Act: adjusted tax value, amount, income
Compare: 1994 No 164 s EG 19(1)(a)(ii)
Subsection (1)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
CZ 12 General insurance with risk period straddling1 July 1993
When this section applies
(1)
This section applies when—
(a)
a company carries on a business of providing general insurance or guarantees against loss, damage, or risk, immediately before and on 1 July 1993; and
(b)
the company holds a reinsurance contract for the general insurance that covers a period of risk starting before 1 July 1993 and ending after 1 July 1993; and
(c)
the company pays the premiums under the contract outside New Zealand.
Income
(2)
An amount derived by the company from a claim under the reinsurance contract is income of the company if the event giving rise to the claim occurs on or after 1 July 1993.
Timing
(3)
The income is allocated to the income year in which the event giving rise to the claim occurs.
Defined in this Act: amount, business, company, general insurance, income, income year, New Zealand, pay, reinsurance contract
Compare: 1994 No 164 s CZ 6(d)(i)-(iii), (vi), (vii)
CZ 13 Treatment of units and interests in unit trusts and group investment funds on issue as at 1 April 1996
Units and interests in unit trusts and group investment funds
(1)
All units in a unit trust and interests in a group investment fund on issue on 1 April 1996 are treated, on and from that date, as not having been issued on terms that their redemption would be subject to the slice rule.
Election made for units or interests
(2)
All units or interests to which subsection (1) applies and for which an election has been made relying on paragraph (c) of the definition of the term shares of the same class in section OB 1 (Definitions) are treated on and from 1 April 1996 as if the election made in reliance upon paragraph (c) had never been made.
Exclusion
(3)
This section does not apply to a unit or interest if the manager or trustee of the unit trust or group investment fund so chooses, by giving notice to the Commissioner before 1 April 1996, in which case the relevant unit or interest is treated, on and from 1 April 1996, as having been issued on terms that its redemption would be subject to the slice rule.
Defined in this Act: Commissioner, group investment fund, notice, shares of the same class, slice rule, trustee, unit trust
Compare: 1994 No 164 s CZ 4(3)-(5)
CZ 14 Treatment of superannuation fund interests in group investment funds on 1 April 1999
When this section applies
(1)
This section applies when a superannuation fund has an interest in a group investment fund on 1 April 1999.
Exclusions from dividends
(2)
Section CD 14(4) (Returns of capital: off-market share cancellations) does not apply to the interest.
Trustee’s election
(3)
If a trustee of a group investment fund chose on or before 31 March 1999 to treat a superannuation fund interest in a group investment fund as subject to section CD 14(4) (Returns of capital: off-market share cancellations),—
(a)
subsection (2) does not apply to the interest; and
(b)
section CD 14(2) applies to the interest on and after 1 April 1999.
Defined in this Act: dividend, group investment fund, interest, superannuation fund, trustee
Compare: 1994 No 164 ss CZ 4A(1), (2), CZ 4B(1), (2)
Subsection (3)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
CZ 15 Accident insurance contracts before 1 July 2000
A premium or contribution referred to in section CX 15(2) (Contributions to life or health insurance) is—
(a)
a premium or contribution paid for an accident insurance contract, as defined in section 13 of the Accident Insurance Act 1998, that was in force before 1 July 2000; or
(b)
a premium or contribution paid for a contract to which section 188(1)(a) of the Act applied, to the extent to which it related to cover and entitlements for workrelated personal injury, that was in force before 1 July 2000.
Defined in this Act: contribution
Compare: 1994 No 164 s CI 1(ja)
CZ 16 Interest payable to exiting company: 2001
Interest payable under schedule 4, clause 12 of the Dairy Industry Restructuring Act 2001 to an exiting company (as defined in section 5 of the Act) as a result of a buy-out of the company’s interests in the New Zealand Dairy Board is exempt income.
Defined in this Act: exempt income, interest, pay
Compare: 1994 No 164 s CB 1(1)(d)
CZ 17 Dividend of exiting company: 2001
If an exiting company (as defined in section 5 of the Dairy Industry Restructuring Act 2001) derives a dividend as a result of a buy-out of the company’s interests in the New Zealand Dairy Board under schedule 4 of the Act, the dividend is exempt income.
Defined in this Act: dividend, exempt income
Compare: 1994 No 164 s CB 10(6)
CZ 18 Benefit provider approved within 6 months of 25 November 2003
When this section applies
(1)
This section applies when a person (provider)—
(a)
is—
(i)
an incorporated body; or
(ii)
a trustee; and
(b)
provides accident insurance, health insurance, life insurance, or other health and welfare benefits to natural persons (recipients); and
(c)
either—
(i)
was approved as a sickness, accident, or death benefit fund by the Commissioner on or before 24 November 2003; or
(ii)
administers a fund that was approved as a sickness, accident, or death benefit fund by the Commissioner on or before 24 November 2003; and
(d)
has been approved by the Commissioner as an organisation that the Commissioner considers operates on the principles of mutuality for recipients—
(i)
within the 6 months starting on 25 November 2003; or
(ii)
within a further period allowed by the Commissioner, if the provider satisfies the Commissioner that the provider was not aware of the requirement for the Commissioner’s approval in sufficient time to obtain the approval under subparagraph (i).
Exempt income
(2)
An amount derived by a provider is exempt income if—
(a)
the amount is not derived from a business carried on by the provider beyond the circle of the recipients; and
(b)
each of the recipients is—
(i)
a beneficiary of the trust for which the provider is the trustee; or
(ii)
a member of the provider; or
(iii)
a member of an organisation that directly or indirectly controls the provider; or
(iv)
a relative of a person described in any of subparagraphs (i) to (iii).
Defined in this Act: amount, business, Commissioner, exempt income, life insurance, relative, sickness, accident, or death benefit fund, trustee
Compare: 1994 No 164 s CB 4(1)(ab)
CZ 19 Community trust receipts in 2004-05 or 2005-06 tax year
An amount of income derived by a trustee or company is exempt income if—
(a)
the amount would be exempt income under section CW 34 (Charities: non-business income) or CW 35 (Charities: business income) but for the trustee or company making a dividend, distribution, or settlement to a community trust in the 2004-05 or 2005-06 tax year on the winding up of the trust or company; and
(b)
either—
(i)
the corpus of the trust was provided by the community trust; or
(ii)
the company is wholly owned by the community trust.
Defined in this Act: amount, community trust, company, corpus, dividend, exempt income, income, tax year, trustee
Compare: 1994 No 164 s CB 4(1)(n)
CZ 20 Geothermal wells between 31 March 2003 and 17 May 2006
When this section applies
(1)
This section applies to a person’s geothermal well, if—
(a)
the well is—
(i)
both started and completed between 31 March 2003 and 17 May 2006:
(ii)
acquired between 31 March 2003 and 17 May 2006; and
(b)
the person—
(i)
uses the well, or has the well available for use, after the end of the well’s geothermal energy proving period, in deriving assessable income or carrying on a business for the purpose of deriving assessable income:
(ii)
disposes of the well.
Income
(2)
The person has, for the first income year in which this section applies, income equal to,—
(a)
Defined in this Act: amount, business, deduction, dispose, geothermal energy proving period, geothermal well, income, income year
Section CZ 20 was inserted, as from 1 April 2005, by section 16(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2005–06 income year.
Part D Deductions
Contents
Subpart DA—General rules
Contents
DA 1 General Permission
Nexus with income
(1)
A person is allowed a deduction for an amount of expenditure or loss (including an amount of depreciation loss) to the extent to which the expenditure or loss is—
(a)
incurred by them in deriving—
(i)
their assessable income; or
(ii)
their excluded income; or
(iii)
a combination of their assessable income and excluded income; or
(b)
incurred by them in the course of carrying on a business for the purpose of deriving—
(i)
their assessable income; or
(ii)
their excluded income; or
(iii)
a combination of their assessable income and excluded income.
General permission
(2)
Subsection (1) is called the general permission.
Defined in this Act: amount, assessable income, business, deduction, depreciation loss, excluded income, general permission, loss
Compare: 1994 No 164 s BD 2(1)(b)(i), (ii)
DA 2 General limitations
Capital limitation
(1)
A person is denied a deduction for an amount of expenditure or loss to the extent to which it is of a capital nature. This rule is called the capital limitation.
Private limitation
(2)
A person is denied a deduction for an amount of expenditure or loss to the extent to which it is of a private or domestic nature. This rule is called the private limitation.
Exempt income limitation
(3)
A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving exempt income. This rule is called the exempt income limitation.
Employment limitation
(4)
A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving income from employment. This rule is called the employment limitation.
Withholding tax limitation
(5)
A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving schedular income subject to final withholding. This rule is called the withholding tax limitation.
Non-residents’ foreign-sourced income limitation
(6)
A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving non-residents’ foreign-sourced income. This rule is called the non-residents’ foreign-sourced income limitation.
Relationship of general limitations to general permission
(7)
Each of the general limitations in this section overrides the general permission.
Defined in this Act: amount, capital limitation, deduction, employment limitation, exempt income, exempt income limitation, general limitation, general permission, income from employment, loss, non-residents’ foreign-sourced income, non-residents’ foreign-sourced income limitation, private limitation, schedular income subject to final withholding, withholding tax limitation
Compare: 1994 No 164 s BD 2(2)
DA 3 Effect of specific rules on general rules
Supplements to general permission
(1)
Express reference needed to supplement
(2)
Relationship of general limitations to supplements to general permission
(3)
Relationship between other specific provisions and general permission or general limitations
(4)
A provision in any of subparts DB to DZ may override any 1 or more of the general permission and the general limitations.
Express reference needed to override
(5)
Part E
(6)
No provision in Part E (Timing and quantifying rules) supplements the general permission or overrides the general permission or a general limitation.
Defined in this Act: deduction, general limitation, general permission, supplement
Compare: 1994 No 164 s BD 2(1)(b)(iii), (2)(e)
DA 4 Treatment of amount of depreciation loss
The capital limitation does not apply to an amount of depreciation loss merely because the item of property is itself of a capital nature.
Defined in this Act: amount, capital limitation, depreciation loss
Compare: 1994 No 164 s BD 2(1)(a)
Subpart DB—Specific rules for expenditure types
Contents
Taxes and other amounts
Heading: substituted (with effect on 1 April 2005), on 29 August 2011, by section 193 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
DB 1 Taxes, other than GST, and penalties
No deduction
(1)
A person is denied a deduction for the following:
(a)
income tax; and
(b)
a civil penalty under Part 9 of the Tax Administration Act 1994; and
(c)
a tax, a penalty, or interest on unpaid tax that is—
(i)
payable under the laws of a country or territory outside New Zealand; and
Meaning of income tax
(2)
In this section, income tax—
(a)
includes—
(i)
further income tax:
(ii)
a tax imposed in a country or territory outside New Zealand that is substantially the same as income tax:
(iii)
imputation penalty tax:
(iv)
a dividend withholding payment, further dividend withholding payment, and dividend withholding payment penalty tax:
(v)
qualifying company election tax:
(b)
does not include—
(i)
fringe benefit tax:
(ii)
specified superannuation contribution withholding tax.
Link with subpart DA
(3)
This section overrides the general permission.
Defined in this Act: deduction, dividend withholding payment, dividend withholding payment penalty tax, fringe benefit tax, further dividend withholding payment, further income tax, general permission, GST, imputation penalty tax, income tax, New Zealand, qualifying company election tax, specified superannuation contribution, withholding tax, tax
Compare: 1994 No 164 s DB 1
Subsections (1)(a) and (b), and (2)(a)(i) to (v) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
Subsection (2)(b)(i) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
DB 2 GST
No deduction
(1)
A registered person is denied a deduction for the following:
(a)
input tax on a supply of goods or services to them:
(b)
GST payable by them to the Commissioner.
Deduction
(2)
A registered person is allowed a deduction for output tax on a supply of goods or services that section 5B, 21, or 21I(1) to (3) of the Goods and Services Tax Act 1985 treats them as making, but only to the extent to which—
(a)
they are allowed a deduction for expenditure that they incur in acquiring or producing the goods or services; or
(b)
they are allowed a deduction for an amount of depreciation loss for the goods or services.
Exclusion
(3)
Subsection (2) does not apply to an amount that relates to the application of a capital asset—
(a)
for the principal purpose of making taxable supplies, when the asset was acquired or produced other than for the principal purpose of making taxable supplies; or
(b)
other than for the principal purpose of making taxable supplies, when the asset was acquired or produced for the principal purpose of making taxable supplies; or
(c)
other than for the purpose of deriving income.
Depreciable property
(4)
The provisions that apply when an amount of depreciation loss is quantified by reference to the cost of an item of depreciable property to a person are in section EE 45 (Cost: GST).
Link with subpart DA
(5)
The link between this section and subpart DA (General rules) is as follows:
(a)
subsection (1) overrides the general permission:
(b)
subsection (2) supplements the general permission. The general limitations still apply.
Defined in this Act: amount, Commissioner, deduction, depreciable property, depreciation loss, general limitation, general permission, goods, GST, GST payable, income, input tax, output tax, registered person, services, supplement, taxable supply
Compare: 1994 No 164 s ED 4(2), (3), (7)
Section DB 2(2): amended (with effect on 1 April 2005), on 21 December 2010 (applying for the 2005–06 and later income years), by section 165 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Subsection (5)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
DB 3 Determining tax liabilities
Deduction
(1)
A person is allowed a deduction for expenditure that they incur in connection with the following matters:
(a)
calculating or determining their income tax liability for a tax year:
(b)
calculating or determining the GST payable by them in a taxable period:
(c)
preparing, instituting, or presenting an objection or challenge to, or an appeal following, a determination or assessment made under this Act or an earlier Act, the Tax Administration Act 1994, or the Goods and Services Tax Act 1985:
(d)
making a contribution towards the expenditure incurred by another person if—
(i)
the other person is allowed a deduction for that expenditure; and
(ii)
the expenditure relates to a matter affecting the determination of the first person’s liability for income tax or GST; and
(iii)
the first person has objected to, challenged, or appealed against an assessment or determination made in relation to the matter under this Act or an earlier Act, the Tax Administration Act 1994, or the Goods and Services Tax Act 1985.
Exclusions
(2)
This section does not apply to expenditure that a person incurs in connection with the following matters:
(a)
a matter arising from a return of income or a return under the Goods and Services Tax Act 1985 that was fraudulent or wilfully misleading:
(b)
an offence under any of the Inland Revenue Acts:
(c)
a shortfall penalty assessed under this Act or an earlier Act, the Tax Administration Act 1994, or the Goods and Services Tax Act 1985 (but not an assessment that is later cancelled):
(d)
an objection, challenge, or appeal that is inconsequential or frivolous:
(e)
a matter arising under the Goods and Services Tax Act 1985 to the extent to which it relates to a taxable activity that does not constitute a business for the purposes of this Act.
Some definitions
(3)
In this section,—
GST payable—
(a)
(b)
GST payable: paragraph (b)(ii) of this definition was substituted, as from 1 October 2005, by section 177 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
taxable activity is defined in section 6 of the Goods and Services Tax Act 1985
taxable period is defined in section 2 of the Goods and Services Tax Act 1985
Link with subpart DA
(4)
This section supplements the general permission and overrides the capital limitation, the private limitation, and the employment limitation. The other general limitations still apply.
Defined in this Act: amount, assessment, business, capital limitation, deduction, employment limitation, general limitation, general permission, GST, GST payable, income tax liability, Inland Revenue Acts, private limitation, return of income, supplement, tax year, taxable activity, taxable period
Compare: 1994 No 164 s DJ 5(1), (3), (4)
Subsection (1)(a) to (c) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
Subsection (2)(a) to (d) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
Section DB 3(4): substituted (with effect on 1 April 2005), on 6 October 2009, by section 754(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section DB 3 list of defined terms capital limitation: inserted (with effect on 1 April 2005), on 6 October 2009, by section 754(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
DB 3B Use of money interest
Deduction
(1)
A person is allowed a deduction for an amount of interest they are liable to pay under Part 7 of the Tax Administration Act 1994.
Timing of deduction
(2)
The deduction is allocated under section EF 5 (Use of money interest payable by person).
Link with subpart DA
(3)
This section supplements the general permission and overrides the capital limitation, the private limitation, and the employment limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, employment limitation, general limitation, general permission, private limitation
Section DB 3B: inserted (with effect on 1 April 2005), on 29 August 2011, by section 194(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
DB 4 Chatham Islands dues
Deduction
(1)
A person is allowed a deduction for expenditure incurred on dues levied under the Chatham Islands Council Act 1995 that relate to goods that the person uses in connection with carrying on a business.
Timing of deduction
(2)
The deduction is allocated to the income year in which the dues are paid.
Exclusion of expenditure: other deductions
(3)
Expenditure to which subsection (1) applies must not be taken into account in calculating the cost of the goods for the purpose of a deduction relating to the goods under any other provision of this Act.
Link with subpart DA
(4)
The link between this section and subpart DA (General rules) is as follows:
(a)
subsection (1) supplements the general permission and overrides the capital limitation. The other general limitations still apply:
(b)
subsection (3) overrides the general permission.
Defined in this Act: business, capital limitation, deduction, general limitation, general permission, income year, supplement
Compare: 1994 No 164 s DJ 3
Subsection (4)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
Financing costs
DB 5 Transaction costs: borrowing money for use as capital
Deduction
(1)
A person is allowed a deduction for expenditure incurred in borrowing money that is used as capital in deriving their income.
Link with subpart DA
(2)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income
Compare: 1994 No 164 s DJ 11
DB 6 Interest: not capital expenditure
Deduction
(1)
A person is allowed a deduction for interest incurred.
Exclusion
(2)
Subsection (1) does not apply to interest for which a person is denied a deduction under section DB 1.
Link with subpart DA
(3)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, interest
Compare: 1994 No 164 s DD 1(1)(b)(i), (ii)
DB 7 Interest: most companies need no nexus with income
Deduction
(1)
A company is allowed a deduction for interest incurred.
Exclusion: qualifying company
(2)
Subsection (1) does not apply to a qualifying company.
Exclusion: exempt income
(3)
If a company (company A) derives exempt income or another company (company B) in the same wholly-owned group of companies derives exempt income, subsection (1) applies to company A only if all the exempt income is 1 or more of the following:
(a)
dividends; or
(b)
income exempted under section CW 46 (Disposal of companies’ own shares); or
(c)
income exempted under section CW 48 (Stake money) and ancillary to the company’s business of breeding.
Exclusion: non-resident company
(4)
If a company is a non-resident company, subsection (1) applies only to the extent to which the company incurs interest in the course of carrying on a business through a fixed establishment in New Zealand.
Exclusion: interest related to tax
(5)
Subsection (1) does not apply to interest for which a person is denied a deduction under section DB 1.
Link with subpart DA
(6)
This section supplements the general permission and overrides the capital limitation, the exempt income limitation, and the withholding tax limitation. The other general limitations still apply.
Defined in this Act: business, capital limitation, company, deduction, dividend, exempt income, exempt income limitation, fixed establishment, general limitation, general permission, income, interest, New Zealand, non-resident company, qualifying company, supplement, wholly-owned group of companies, withholding tax limitation
Compare: 1994 No 164 ss BD 2A, DD 1(3), (4)
DB 8 Interest: money borrowed to acquire shares in group companies
Deduction: borrowing to acquire group company shares
(1)
A company is allowed a deduction for interest incurred on money borrowed to acquire shares in another company in the same group of companies.
Exclusion: group not in existence at tax year end
(2)
Subsection (1) does not apply if the 2 companies are not in the same group of companies at the end of the tax year for which the deduction is claimed.
Deduction: interest after qualifying amalgamation
(3)
A company is allowed a deduction for interest incurred on money borrowed to acquire shares in another company that has ceased to exist on a qualifying amalgamation.
Exclusion: group not in existence immediately before qualifying amalgamation
(4)
Subsection (3) does not apply if the 2 companies were not in the same group of companies immediately before the qualifying amalgamation.
Application from tax year of qualifying amalgamation
(5)
Subsection (3) applies in the tax year in which the qualifying amalgamation occurs and in later tax years.
Link with subpart DA
(6)
This section supplements the general permission and overrides the capital limitation, the exempt income limitation, and the withholding tax limitation. The other general limitations still apply.
Defined in this Act: company, deduction, exempt income limitation, general limitation, general permission, group of companies, interest, qualifying amalgamation, share, supplement, tax year, withholding tax limitation
Compare: 1994 No 164 ss DD 1(1)(b)(iii), (2), DD 3
DB 8B Interest or expenditure connected to stapled debt security
No deduction
(1)
A company that issues a stapled debt security is denied, while section FC 2B(2) (Stapled debt securities) applies to the security, a deduction for—
(a)
interest payable under the security:
(b)
expenditure or loss incurred in connection with the security:
(c)
expenditure or loss incurred in borrowing the money secured by or owing under the security.
Relationship with sections DB 5 to DB 8
(2)
This section overrides sections DB 5 to DB 8.
Link with subpart DA
(3)
This section overrides the general permission.
Defined in this Act: deduction, general permission, interest, pay, stapled debt security
Section DB 8B: inserted (with effect on 25 February 2008), on 6 October 2009, by section 755 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Financial arrangements adjustments
DB 9 Negative base price adjustment
Deduction
(1)
A person who has a negative base price adjustment under section EW 31(4) (Base price adjustment formula) is allowed a deduction for the expenditure to the extent to which it arises from assessable income, under section CC 3 (Financial arrangements), derived by the person under the financial arrangement in previous income years.
Link with subpart DA
(2)
This section supplements the general permission and overrides all the general limitations.
Defined in this Act: assessable income, deduction, financial arrangement, general limitation, general permission, income year, supplement
Compare: 1994 No 164 s EH 47(4)
DB 9B Base price adjustment under old financial arrangements rules
(1)
A person is allowed a deduction for an amount that is a deduction under section EZ 34(6) (Cash basis holder) or EZ 35(3) or (4) (Income and expenditure where financial arrangement redeemed or disposed of).
Link with subpart DA
(2)
This section supplements the general permission and overrides all the general limitations.
Defined in this Act: amount, deduction, general limitation, general permission, supplement
Section DB 9B was inserted, as from 1 April 2005, by section 40(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
Subsection (2) was inserted, as from 1 April 2005, by section 17(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2005–06 income year.
The list of defined terms was inserted, as from 1 April 2005, by section 17(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2005–06 income year.
DB 10 Repayment of debt sold at discount to associate of debtor
Deduction
(1)
When section EW 50(6)(b) (Income and deduction when debt sold at discount to associate of debtor) applies, the debtor is allowed a deduction for the amount quantified in that subsection.
Link with subpart DA
(2)
This section supplements the general permission and overrides all the general limitations.
Defined in this Act: amount, associated person, deduction, general limitation, general permission, supplement
Compare: 1994 No 164 s EH 53(1), (7)
DB 11 Security payment
When subsection (2) applies
(1)
Subsection (2) applies when—
(a)
a person receives a security payment for a loss; and
(b)
no other provision of this Act allows the person a deduction for the loss.
Deduction: loss
(2)
The person is allowed a deduction for the loss quantified in section EW 52(2) (Deduction for security payment).
When subsection (4) applies
(3)
Deduction: share loss
(4)
The person is allowed a deduction for the share loss quantified in section EW 52(4) (Deduction for security payment).
Link with subpart DA
(5)
This section supplements the general permission and overrides all the general limitations.
Defined in this Act: deduction, general limitation, general permission, loss, security payment, supplement
Compare: 1994 No 164 s EH 55
DB 12 Sureties
When this section applies
(1)
This section applies when a surety incurs expenditure or loss under a security arrangement.
No deduction (with exceptions)
(2)
Neither the surety nor a person with whom the surety was an associated person over the security arrangement’s term is allowed a deduction for the expenditure or loss to the extent to which the expenditure or loss is due to—
(a)
the actions of the surety or a person with whom the surety was an associated person over the arrangement’s term; or
(b)
the occurrence of an event, if the occurrence could have been influenced by the surety or a person with whom the surety was an associated person over the arrangement’s term; or
(c)
the non-occurrence of an event, if the non-occurrence could have been influenced by the surety or a person with whom the surety was an associated person over the arrangement’s term.
Link with subpart DA
(3)
This section overrides the general permission.
Defined in this Act: associated person, deduction, general permission, loss, security arrangement
Compare: 1994 No 164 s EH 56
Share-lending arrangements
This heading was inserted, as from 1 July 2006, by section 41 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
DB 12B Share-lending collateral under share-lending arrangements
No deduction
(1)
A person is denied a deduction for the amount of expenditure incurred as share-lending collateral under a share-lending arrangement.
Link with subpart DA and other subject matter
(2)
Defined in this Act: amount, deduction, general permission, share-lending arrangement, share-lending collateral
Sections DB 12B and DB 12C were inserted, as from 1 July 2006, by section 41 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
DB 12C Replacement payments and imputation credits under share-lending arrangements
A person is allowed a deduction for—
(a)
the amount of expenditure incurred as a replacement payment under a share-lending arrangement:
(b)
the amount of imputation credit attached under sections ME 6B and NF 8B (which relate to imputation credits) to the replacement payment.
Defined in this Act: amount, deduction, imputation credit, replacement payment, share-lending arrangement
Sections DB 12B and DB 12C were inserted, as from 1 July 2006, by section 41 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Premises or land costs
DB 13 Transaction costs: leases
Deduction
(1)
A person is allowed a deduction for expenditure that they incur for the preparation and registration, or the renewal, of a lease of property.
Link with subpart DA
(2)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, lease
Compare: 1994 No 164 s DJ 11
DB 13B Expenses of failed or withdrawn application for resource consent
Deduction
(1)
A person who applies for the grant of a resource consent under the Resource Management Act 1991 and is refused the grant or withdraws the application is allowed a deduction for expenditure—
(a)
that the person incurs in relation to the application; and
(b)
that would have been part of the cost of depreciable property, or otherwise a deduction, if the application had been granted; and
(c)
for which the person is not allowed a deduction under another provision.
Timing of deduction
(2)
The deduction is allocated to the income year in which the grant is refused or the application is withdrawn.
Link with subpart DA
(3)
This section overrides the capital limitation. The general permission and other general limitations still apply.
Defined in this Act: accounting year, capital limitation, deduction, general limitation, general permission, income year
Section DB 13B was inserted, as from 1 October 2005, by section 178 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Subsection (1)(b) was amended, as from 1 October 2005, by section 14 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “depreciable property, or otherwise a deduction,”
for “a resource consent that is depreciable property”
with application as from the 2005–06 income year.
DB 14 Destruction of temporary building
Deduction
(1)
A person is allowed a deduction for a loss that they incur through the destruction of a temporary building.
Link with subpart DA
(2)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, loss, supplement, temporary building
Compare: 1994 No 164 s DD 1(c)
DB 15 Amounts paid for non-compliance with covenant for repair
When this section applies
(1)
This section applies when—
(a)
a person who is a lessee of land uses it to derive income; and
(b)
the lease contains a covenant requiring the lessee to maintain the land or to make repairs to improvements on the land; and
(c)
the lessee does not comply with the covenant; and
(d)
the lessee is, consequently, liable to pay an amount to the lessor; and
(e)
either—
(i)
the lessee, during the term of the lease or after it ends, pays the amount to the lessor; or
(ii)
the lessor recovers the amount from the lessee during the term of the lease or after it ends.
Deduction
(2)
The lessee is allowed a deduction for the amount paid to the extent to which it relates to maintenance or repairs and to the extent to which the lessee would have been allowed a deduction for the expenditure had the lessee incurred it during the term of the lease.
Timing of deduction
(3)
The deduction is allocated to the income year in which the lessee pays the amount or the lessor recovers the amount.
Relationship with section EJ 10
(4)
This section is overridden by section EJ 10 (Amount paid by lessee for non-compliance with covenant for repair).
Link with subpart DA
(5)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income, income year, lease, repairs, supplement, term of the lease
Compare: 1994 No 164 s EO 5
DB 16 Amounts paid for non-compliance and change in use
When this section applies
(1)
This section applies when—
(a)
a person who is a lessor receives an amount for non-compliance with a covenant for repair that is assessable income under section CC 2 (Non-compliance with covenant for repair); and
(b)
in the tax year in which the lessor receives the amount or in any of the following 4 tax years,—
(i)
the lessor does not use the land to which the amount relates to derive assessable income, but continues to own the land; and
(ii)
the lessor incurs expenditure in maintaining the land or in making repairs to improvements on the land, including painting and general maintenance; and
(iii)
the lessor would have been allowed a deduction if the land had been used for the purpose of deriving assessable income; and
(iv)
in the absence of section DB 37 (Avoiding, remedying, or mitigating effects of discharge of contaminant), no other provision of this Act would allow the lessor a deduction for the expenditure.
Deduction
(2)
The lessor is allowed a deduction for the expenditure.
Amount of deduction
(3)
The amount of the deduction is the lesser of—
(a)
the amount of the expenditure; and
(b)
the part of the amount that is assessable income derived by the lessor in the tax year in which the expenditure is incurred through the operation of—
(i)
section CC 2 (Non-compliance with covenant for repair); or
(ii)
section EI 4 (Amount paid to lessor for non-compliance with covenant for repair); or
(iii)
section EI 5 (Amount paid for non-compliance: when lessor ceases to own land).
Link with subpart DA
(4)
This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, assessable income, deduction, general limitation, general permission, own, supplement, tax year
Compare: 1994 No 164 s EN 1(6), (8)
Subsection (1)(b)(iv) was substituted, as from 1 October 2005, by section 15(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) with application for expenditure incurred by a person in an income year starting on or after 10 June 2005.
Revenue account property
DB 17 Cost of revenue account property
When this section applies
(1)
This section applies if a person incurs expenditure as the cost of revenue account property.
Deduction
(2)
The person is allowed a deduction for the expenditure.
Exclusion for portfolio investment entities
(3)
Subsection (2) does not apply to the expenditure if—
(a)
[Repealed](b)
section CX 44C (Proceeds from disposal of certain shares by portfolio investment entities or New Zealand Superannuation Fund) applies to income derived by the person from the disposal of the revenue account property.
Link with subpart DA
(4)
The link between this section and subpart DA (General rules) is—
(a)
subsection (2) overrides the capital limitation but the general permission must still be satisfied; and
(b)
subsection (3) overrides the general permission; and
(c)
the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, portfolio investment entity, revenue account property
Compare: 1994 No 164 s DJ 13
Section DB 17(1): substituted, on 1 October 2007, by section 18(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section DB 17(1): amended, on 1 October 2007, by section 10(1) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section DB 17(2): substituted, on 1 October 2007, by section 18(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section DB 17(3): added, on 1 October 2007, by section 18(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section DB 17(3)(a): repealed (with effect on 1 October 2007), on 6 October 2009, by section 756 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section DB 17(3)(a): substituted (with effect from 1 October 2007), on 19 December 2007, by section 30(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DB 17(3)(b): amended, on 1 October 2007, by section 10(2) of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section DB 17(4): added, on 1 October 2007, by section 18(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section DB 17 list of defined terms portfolio investment entity: inserted, on 1 October 2007, by section 18(2) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section DB 17 list of defined terms portfolio investment-linked life fund: repealed (with effect on 1 April 2005), on 7 December 2009, by section 163 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section DB 17 list of defined terms portfolio investment-linked life fund: inserted (with effect from 1 October 2007), on 19 December 2007, by section 30(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
DB 18 Share losses
When this section applies
(1)
This section applies when—
(a)
a company (company A) acquires a share in another company (company B); and
(b)
the share declines in value; and
(c)
because of the decline in value, company A incurs a loss (share loss), whether on a disposal of the share or a valuation of it under subpart ED (Valuation of excepted financial arrangements) or in any other way; and
(d)
company B—
(i)
itself uses the amount subscribed for the share; or
(ii)
uses it to fund directly or indirectly another company (company C); and
(e)
company B or company C has a net loss, in the calculation of which the amount used is taken into account; and
(f)
company A, or a company that is in the same group of companies as company A at any time in the income year in which company B or company C has the net loss, offsets an amount for the net loss under section IG 2 (Net loss offset between group companies); and
(g)
the offset is in a tax year before the tax year that corresponds to the income year in which company A incurs the share loss.
No deduction (with exception)
(2)
Company A is denied a deduction for the share loss, except to the extent to which the share loss, as adjusted under subsection (3), is more than the amount offset under section IG 2 (Net loss offset between group companies), as adjusted under subsection (4).
Other denied deductions added
(3)
When subsection (2) applies, the share loss is adjusted by adding every loss to which all the following apply:
(a)
company A incurs it as a result of the share’s decline in value or the decline in value of another share if the use of the amount subscribed for the other share is taken into account in calculating the net loss; and
(b)
company A incurs it in a tax year before the tax year in which company A incurs the share loss; and
(c)
company A has been denied a deduction for it by the operation of subsection (2).
Other offsets added
(4)
The amount offset under section IG 2 (Net loss offset between group companies) includes every amount that company A, or a company that is in the same group of companies as company A at any time in the income year in which company A has the net loss, has offset for the net loss under that section in a tax year before the tax year that corresponds to the income year in which the share loss is incurred.
Link with subpart DA
(5)
This section overrides the general permission.
Defined in this Act: amount, company, deduction, general permission, group of companies, loss, net loss, share, tax year
Compare: 1994 No 164 s DJ 1(b)
DB 19 Amount from profit-making undertaking or scheme and not already in income
When this section applies
(1)
This section applies when a person derives income under section CB 2 (Profit-making undertaking or scheme) that is not their income under any other provision of this Act.
Deduction
(2)
The person is allowed a deduction for the value of the property, as determined under subsection (3).
Determining amount of deduction
(3)
For the purpose of determining the amount of the deduction, the person is treated as—
(a)
having disposed of the property to an unrelated third party immediately before the start of the undertaking or scheme; and
(b)
having reacquired the property immediately after the start of the undertaking or scheme at the market value of the property at the time.
Link with subpart DA
(4)
This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, income, supplement
Compare: 1994 No 164 s DJ 15
DB 20 Amount from major development or division and not already in income
When this section applies
(1)
This section applies when a person derives income under section CB 11 (Disposal: amount from major development or division and not already in income) that is not their income under any other provision of this Act.
Deduction
(2)
The person is allowed a deduction for the value of the land, as determined under subsection (3).
Determining amount of deduction
(3)
For the purpose of determining the amount of the deduction, the person is treated as—
(a)
having disposed of the land to an unrelated third party immediately before the start of the undertaking or scheme; and
(b)
having reacquired it immediately after the start of the undertaking or scheme at the market value of the land at the time.
Link with subpart DA
(4)
This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, income, land, supplement
Compare: 1994 No 164 s DJ 14(3)
DB 21 Amount from land affected by change and not already in income
When this section applies
(1)
This section applies when a person derives income under section CB 12 (Disposal: amount from land affected by change and not already in income) that is not their income under any other provision of this Act.
Deduction
(2)
The person is allowed—
(a)
a deduction allowed under any other provision of this Act; and
(b)
a deduction to the extent described in subsection (3).
Calculation of deduction
(3)
The maximum amount of the deduction is the greater of $1,000 and an amount calculated using the formula in subsection (4). However, the amount must not be more than the profit obtained from the disposal of the land.
Formula
(4)
The formula is—
percentage of profit x years
Definition of items in formula
(5)
In the formula,—
(a)
percentage of profit is 10% of the profit on the disposal of the land:
(b)
years is the number, up to and including 10, of consecutive years between the date on which the person acquired the land and the date on which they disposed of it, with the first year starting on the date on which the person acquired the land.
Meaning of profit
(6)
In this section, profit means the excess of the amount derived over the cost of the land.
Link with subpart DA
(7)
This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, income, land, profit, supplement, year
Compare: 1994 No 164 s DJ 14(1), (2)
DB 22 Cost of non-specified mineral
When this section applies
(1)
This section applies when—
(a)
an amount of cost of a mineral is treated by a person under generally accepted accounting practice as a cost of the mineral for the person and reported accordingly for financial reporting purposes; and
(b)
the mineral is not a specified mineral; and
(c)
no other provision of this Act allows the person a deduction for the amount; and
(d)
an amount derived by the person from disposing of the mineral would be income of the person under section CB 25 (Disposal of minerals).
Deduction
(2)
The person is allowed a deduction for the amount.
Timing of deduction: trading stock
(3)
If the amount is a cost of trading stock, the deduction is allocated to the income year in which the mineral first becomes trading stock of the person.
Timing of deduction: not trading stock
(4)
If the amount is not a cost of trading stock, the deduction is allocated by section EA 2 (Other revenue account property).
Link with subpart DA
(5)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, dispose, general limitation, general permission, generally accepted accounting practice, income, income year, mineral, specified mineral, trading stock
Compare: 1994 No 164 s DJ 13A
Bad debts
DB 23 Bad debts
No deduction (with exception)
(1)
A person is denied a deduction in an income year for a bad debt, except to the extent to which—
(a)
the debt is written off as bad in the income year; and
(b)
in the case of the bad debts described in subsections (2) to (5), the requirements of the relevant subsection are satisfied.
Deduction: financial arrangement debt: amount of income
(2)
A person who derives assessable income from a financial arrangement to which the financial arrangements rules apply is allowed a deduction for an amount owing under the financial arrangement, but only to the extent to which—
(a)
the amount is a bad debt and subsection (1)(a) is satisfied; and
(b)
the amount is attributable to the income; and
(c)
subsection (5) does not limit the deduction.
Deduction: financial arrangement debt: dealers in arrangements
(3)
A person is allowed a deduction for an amount owing under a financial arrangement to which the financial arrangements rules apply, but only to the extent to which—
(a)
the amount is a bad debt and subsection (1)(a) is satisfied; and
(b)
the person carries on a business for the purpose of deriving assessable income that includes dealing in or holding financial arrangements that are the same as, or similar to, the financial arrangement; and
(c)
the person is not associated with the person owing the amount written off; and
(d)
subsection (5) does not limit the deduction.
Deduction: financial arrangement debt: dealers in property or services sold
(4)
A person is allowed a deduction for an amount owing under a financial arrangement to which the financial arrangements rules apply, but only to the extent to which—
(a)
the amount is a bad debt and subsection (1)(a) is satisfied; and
(b)
the financial arrangement is an agreement for the sale and purchase of property or services; and
(c)
the person carries on a business of dealing in the property or services that are the subject of the agreement; and
(d)
the person carries on the business for the purpose of deriving assessable income; and
(e)
subsection (5) does not limit the deduction.
Deduction: bad debt representing loss already offset
(5)
A person is allowed a deduction for a bad debt only to the extent to which it is more than the total of the amounts offset under section IG 2 (Net loss offset between group companies) that are described in paragraphs (e) and (f) if—
(a)
the person writing off the amount of debt is a company (company A); and
(b)
the debt is owed to it by another company (company B); and
(c)
company B—
(i)
itself uses the amount giving rise to the debt; or
(ii)
uses it to fund directly or indirectly another company (company C) that uses the amount; and
(d)
company B or company C has a net loss, in the calculation of which the amount used is taken into account; and
(e)
company A, or a company that is in the same group of companies as company A at any time in the income year in which company B or company C has the net loss, offsets an amount for the net loss under section IG 2 (Net loss offset between group companies); and
(f)
the offset is in a tax year before the tax year that corresponds to the income year in which company A writes off the amount of debt (but not before the 1993-94 tax year).
Link with subpart DA
(6)
The link between this section and subpart DA (General rules) is as follows:
(a)
subsection (1) overrides the general permission; and
(b)
for subsections (2) to (5),—
(i)
they supplement the general permission, to the extent to which they allow a deduction that is denied under the general permission; and
(ii)
they override the general permission, to the extent to which they deny a deduction that is allowed under the general permission; and
(iii)
the general limitations still apply, except that subsection (3) overrides the capital limitation for a financial arrangement held as part of a business that includes dealing in or holding financial arrangements.
Defined in this Act: agreement for the sale and purchase of property or services, amount, assessable income, associated person, business, company, deduction, financial arrangement, financial arrangements rules, general limitation, general permission, group of companies, income year, net loss, supplement, tax year
Compare: 1994 No 164 ss DJ 1(a)(i), (iii), (iv), EH 54
Section DB 23(6)(b)(iii): replaced (with effect on 1 April 2005 and applying for the 2005–06 and later income years), on 24 February 2016, by section 285 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
DB 24 Bad debts owed to estates
When this section applies
(1)
This section applies when—
(a)
a debt owing to a person at the date of their death is, in a tax year,—
(i)
assessable income of the person; or
(ii)
assessable income of the trustee of their estate; and
(b)
the trustee writes off some or all of the debt as bad because it is not recoverable.
Deduction
(2)
The following persons, in the following order, are allowed a deduction for the amount of the debt written off:
(a)
first, the trustee, to the extent of assessable income derived as trustee income in the tax year; and
(b)
second, any beneficiary who has a vested interest in the capital of the estate, to the extent of assessable income derived in the tax year by or in trust for the beneficiary, and to the extent to which the amount is chargeable against the capital of the beneficiary; and
(c)
third, the trustee or a beneficiary denied a deduction for the balance in the tax year; each is allowed a deduction, as described in paragraph (a) or (b), in the next tax year, and so on.
Link with subpart DA
(3)
This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, assessable income, deduction, general limitation, general permission, supplement, tax year, trustee, trustee income
Compare: 1994 No 164 s DJ 2
Research and development
DB 25 Scientific research
Deduction: scientific research
(1)
A person is allowed a deduction for expenditure they incur in connection with scientific research that they carry on for the purpose of deriving their assessable income.
Exclusion
(2)
Subsection (1) does not apply to expenditure that the person incurs on an asset that—
(a)
is not created from the scientific research; and
(b)
is an asset for which they have an amount of depreciation loss for which—
(i)
they are allowed a deduction; or
(ii)
they would have been allowed a deduction but for the Commissioner’s considering that incomplete and unsatisfactory accounts were kept by or for them.
Link with subpart DA
(3)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, assessable income, capital limitation, Commissioner, deduction, depreciation loss, general limitation, general permission, supplement
Compare: 1994 No 164 s DJ 9
DB 26 Research or development
Deduction
(1)
A person is allowed a deduction for expenditure they incur on research or development. This subsection applies only to a person described in any of subsections (2) to (5) and does not apply to the expenditure described in subsection (6).
Person recognising expenditure as expense
(2)
Subsection (1) applies to a person who recognises the expenditure as an expense for financial reporting purposes,—
(a)
under paragraph 5.1 or 5.2 of the old reporting standard or because paragraph 5.4 of that standard applies; or
(b)
under paragraph 68(a) of the new reporting standard applying, for the purposes of that paragraph, paragraphs 54 to 67 of that standard.
Person not recognising expenditure as asset[Repealed]
(3)
[Repealed]Person recognising expenditure otherwise
(4)
Subsection (1) also applies to a person who—
(a)
recognises the expenditure as an expense for financial reporting purposes because it is an amount written off due to its being an immaterial amount for financial reporting purposes; and
(b)
would be required, if the expenditure were material, to recognise it for financial reporting purposes—
(i)
under paragraph 5.1 or 5.2 of the old reporting standard or because paragraph 5.4 of that standard applies; or
(ii)
under paragraph 68(a) of the new reporting standard applying, for the purposes of that paragraph, paragraphs 54 to 67 of that standard.
Person with minor expenditure
(5)
Subsection (1) also applies to a person who—
(a)
incurs expenditure of $10,000 or less, in total, on research and development in an income year; and
(b)
has written off the expenditure due to its being an immaterial amount for financial reporting purposes; and
(c)
has recognised the expenditure as an expense for financial reporting purposes.
Exclusion
(6)
Subsection (1) does not apply to expenditure that the person incurs on property to which all the following apply:
(a)
the property is used in carrying out research or development; and
(b)
it is not created from the research or development; and
(c)
it is 1 of the following kinds:
(i)
property for which the person is allowed a deduction for an amount of depreciation loss; or
(ii)
property the cost of which is allowed as a deduction by way of amortisation under a provision of this Act outside subpart EE (Depreciation); or
(iii)
land; or
(iv)
intangible property, other than depreciable intangible property; or
(v)
property that its owner chooses, under section EE 8 (Election that property not be depreciable) to treat as not depreciable.
Choice for allocation of deduction
(6B)
A person who is allowed a deduction under this section for expenditure that is not interest may choose to allocate all or part of the deduction—
(a)
to an income year after the income year in which the person incurs the expenditure; and
(b)
in the way required by section EJ 21 (Allocation of deductions for research, development, resulting market development).
Section need not be applied
(7)
A person may return income and expenditure in their return of income on the basis that this section does not apply to expenditure incurred on research or development in the income year to which the return relates.
Relationship with section EA 2
(8)
If expenditure to which this section applies is incurred in devising an invention that is patented, the expenditure is not treated as part of the cost of revenue account property for the purposes of section EA 2 (Other revenue account property).
Link with subpart DA
(9)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount , capital limitation , deduction , depreciable intangible property , depreciation loss development , general limitation , general permission , income , income year , new reporting standard , old reporting standard , research , return of income , revenue account property
Compare: 1994 No 164 s DJ 9A(1)-(5)
Section DB 26(2): substituted (with effect on 1 April 2005), on 7 December 2009, by section 152(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section DB 26(2): amended (with effect from 1 April 2007), on 19 December 2007, by section 31(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DB 26(3) heading: repealed (with effect from 1 April 2007), on 19 December 2007, by section 31(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DB 26(3): repealed (with effect from 1 April 2007), on 19 December 2007, by section 31(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DB 26(4)(a): amended (with effect from 1 April 2007), on 19 December 2007, by section 31(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DB 26(4)(b): substituted (with effect on 1 April 2005), on 7 December 2009, by section 152(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section DB 26(4)(b): substituted (with effect from 1 April 2007), on 19 December 2007, by section 31(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (5) was amended, as from 1 April 2005, by section 16(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “in an income year”
for “for a tax year”
with application as from the 2005–06 income year.
Section DB 26(5)(b): substituted (with effect from 1 April 2007), on 19 December 2007, by section 31(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (6B) was inserted, as from 1 October 2006, by section 42(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
Subsection (7) was amended, as from 1 April 2005, by section 16(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “income year”
for “tax year”
with application as from the 2005–06 income year.
The defined terms were amended, as from 1 April 2005, by section 16(3)(a) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by inserting the words “income year,”
with application as from the 2005–06 income year.
Section DB 26 list of defined terms new reporting standard: inserted (with effect on 1 April 2005), on 7 December 2009, by section 163 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section DB 26 list of defined terms old reporting standard: inserted (with effect on 1 April 2005), on 7 December 2009, by section 163 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section DB 26 list of defined terms reporting standard: repealed (with effect on 1 April 2005), on 7 December 2009, by section 163 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
The defined terms were amended, as from 1 April 2005, by section 16(3)(b) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by repealing the words “, tax year”
with application as from the 2005–06 income year.
DB 27 Some definitions
Definitions
(1)
In this section, and in section DB 26,—
development is defined in paragraph 8 of the reporting standard
new reporting standard means the New Zealand Equivalent to International Accounting Standard 38, approved by the Accounting Standards Review Board, and as amended from time to time or an equivalent standard issued in its place
old reporting standard means Financial Reporting Standard No 13 1995 (Accounting for Research and Development Activities) being the standard approved under the Financial Reporting Act 1993, or an equivalent standard issued in its place, that applies in the tax year in which the expenditure is incurred
research is defined in paragraph 8 of the reporting standard.
Meaning of research or development: modification by Order in Council
(2)
The Governor-General may make an Order in Council specifying—
(a)
a kind of expenditure that is not expenditure on research or development for the purposes of section DB 26:
(b)
an activity that is neither research nor development for the purposes of section DB 26:
(c)
the date from which the expenditure or the activity is excluded from being research or development.
Defined in this Act: development new reporting standard , old reporting standard , research , tax year
Compare: 1994 No 164 ss DJ 9A(6), (7), DJ 9B
Section DB 27(1) heading: substituted (with effect from 1 April 2007), on 19 December 2007, by section 32(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DB 27(1): substituted (with effect from 1 April 2007), on 19 December 2007, by section 32(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (1) was amended, as from 1 October 2006, by section 43(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “sections DB 26, EE 1 (What this subpart does), EJ 20 (Deductions for market development-product of research, development), and EJ 21 (Allocation of deductions for research, development, resulting market development)”
for the expression “section DB 26”
with application for income years corresponding to the 2005–06 and subsequent tax years.
Section DB 27(1) new reporting standard: inserted (with effect on 1 April 2005), on 7 December 2009, by section 153 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section DB 27(1) old reporting standard: inserted (with effect on 1 April 2005), on 7 December 2009, by section 153 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section DB 27(1) reporting standard: repealed (with effect on 1 April 2005), on 7 December 2009, by section 153 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section DB 27 list of defined terms Financial Reporting Standard No 13 1995 (Accounting for Research and Development Activities): omitted (with effect from 1 April 2007), on 19 December 2007, by section 32(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DB 27 list of defined terms new reporting standard: inserted (with effect on 1 April 2005), on 7 December 2009, by section 163 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section DB 27 list of defined terms old reporting standard: inserted (with effect on 1 April 2005), on 7 December 2009, by section 163 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section DB 27 list of defined terms reporting standard: repealed (with effect on 1 April 2005), on 7 December 2009, by section 163 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
DB 28 Patent expenses
Deduction
(1)
A person is allowed a deduction for expenditure that they incur in connection with the grant, maintenance, or extension of a patent if they—
(a)
acquired the patent before 23 September 1997; and
(b)
use the patent in deriving income in the tax year in which they incur the expenditure.
Link with subpart DA
(2)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income, tax year
Compare: 1994 No 164 s DJ 6(1)
DB 28B Expenses of failed or withdrawn patent application
Deduction
(1)
A person who applies for the grant of a patent and is refused the grant or withdraws the application is allowed a deduction for expenditure—
(a)
that the person incurs in relation to the application; and
(b)
that would have been part of the cost of fixed life intangible property if the application had been granted; and
(c)
for which the person is not allowed a deduction under another provision.
Timing of deduction
(2)
The deduction is allocated to the income year in which the grant is refused or the application is withdrawn.
Link with subpart DA
(3)
This section overrides the capital limitation. The general permission and other general limitations still apply.
Defined in this Act: capital limitation, deduction, fixed life intangible property, general limitation, general permission, income year
Section DB 28B was inserted, as from 1 October 2005, by section 179 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
DB 29 Patent rights: devising patented inventions
When this section applies
(1)
This section applies when a person incurs expenditure in devising an invention for which a patent has been granted. The section applies whether the person devised the invention alone or in conjunction with another person.
Deduction: expenditure before 1 April 1993
(2)
When the person uses the patent in deriving income in a tax year, they are allowed a deduction for expenditure incurred before 1 April 1993, but not if a deduction has been allowed for the expenditure under any other provision of this Act or an earlier Act.
Deduction: devising invention
(3)
If the person sells all the patent rights relating to the invention, they are allowed a deduction for the expenditure that they have incurred (whenever it is incurred) in connection with devising the invention to the extent to which a deduction has not already been allowed under subsection (2).
Deduction: devising invention: proportion of expenditure
(4)
If the person sells some of the patent rights relating to the invention, they are allowed a deduction for part of the expenditure described in subsection (3). The part is calculated by dividing the amount derived from the sale by the market value of the whole of the patent rights on the date of the sale.
Link with subpart DA
(5)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, general limitation, general permission, income, patent rights, tax year
Compare: 1994 No 164 ss DJ 6(2), EN 2(3)(a)
DB 30 Patent rights acquired before 1 April 1993
When this section applies
(1)
This section applies when a person sells patent rights that they acquired before 1 April 1993.
Deduction
(2)
The person is allowed a deduction on the sale of the patent rights.
Amount of deduction
(3)
The amount is calculated using the formula—
Link with subpart DA
(4)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, capital limitation, general limitation, general permission, patent rights
Compare: 1994 No 164 s EN 2(3)(b)
DB 31 Patent applications or patent rights acquired on or after 1 April 1993
When this section applies
(1)
This section applies when a person sells a patent application with a complete specification or patent rights that they acquired on or after 1 April 1993.
Deduction
(2)
The person is allowed a deduction on the sale of the patent application with a complete specification or patent rights.
Amount of deduction
(3)
The amount is calculated using the formula—
total cost – total amounts of depreciation loss
Definition of items in formula
(4)
In the formula,—
(a)
total cost is the total cost to the person of the patent application with a complete specification or of the patent rights, excluding any expenditure for which the person has been allowed a deduction under section DZ 14 (Patent applications before 1 April 2005):
(b)
total amounts of depreciation loss is the total of the amounts, for which the person is allowed a deduction, of depreciation loss for the patent application with a complete specification or for the patent rights and the patent application relating to the patent rights.
Link with subpart DA
(5)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, depreciation loss, general limitation, general permission, patent rights
Compare: 1994 No 164 s EN 2(3)(c)
The heading to section DB 31 was amended, as from 21 June 2005, by section 17(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by substituting “Patent applications or patent rights”
for “Patent rights”
with application for patent applications lodged for the first time on or after 21 June 2005.
Subsection (1) was amended, as from 21 June 2005, by section 17(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by inserting the words “a patent application with a complete specification or”
before the words “patent rights”
with application for patent applications lodged for the first time on or after 21 June 2005.
Subsection (2) was amended, as from 21 June 2005, by section 17(3) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by inserting the words “patent application with a complete specification or”
before the words “patent rights”
with application for patent applications lodged for the first time on or after 21 June 2005.
Subsection (4)(a) and (b) were amended, as from 21 June 2005, by section 17(4) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 (2005 No 79) by inserting the words “patent application with a complete specification or”
before the words “patent rights”
in both places it appears with application for patent applications lodged for the first time on or after 21 June 2005.
Subsection (4)(a) and (b) was substituted, as from 21 June 2005, by section 19(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application to a patent application that is lodged for the first time on or after 21 June 2005.
Unsuccessful software development
Heading: inserted (with effect on 1 April 2006), on 2 November 2012 (applying for the 2006–07 and later income years), by section 243(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
DB 31B Expenditure in unsuccessful development of software
When this section applies
(1)
This section applies when a person incurs expenditure in the development of software for use in the person’s business if—
(a)
the development of the software is abandoned before the software is fit to be used in the person’s business; and
(b)
the person would have been entitled to a deduction for an amount of depreciation loss for the software if the software had been made fit to be used in the person’s business.
Deduction
(2)
The person is allowed a deduction for the expenditure incurred in the development of the software to the extent to which no deduction has been allowed for the expenditure under another provision of this Act or under another Act.
Timing of deduction
(3)
The deduction is allocated to the income year in which the development of the software is abandoned.
Link with subpart DA
(4)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income year
Section DB 31B: inserted (with effect on 1 April 2006), on 2 November 2012 (applying for the 2006–07 and later income years), by section 243(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Marketing
DB 32 Gifts of money by company
Who this section applies to
(1)
This section applies to—
(a)
a company that is not a close company:
(b)
a close company that has its shares quoted on the official list of a recognised exchange.
Deduction
(2)
The company is allowed a deduction for a gift of money that it makes to a society, institution, association, organisation, trust, or fund of any of the kinds described in section KC 5(1) (Rebate in respect of gifts of money).
Amount of deduction
(3)
The deduction for the total of all gifts made in an income year is limited to 5% of the amount that would be the company’s net income in the corresponding tax year in the absence of this section.
Link with subpart DA
(4)
This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, close company, company, deduction, general limitation, general permission, net income, recognised exchange, share, supplement, tax year
Compare: 1994 No 164 s DJ 4
Subsection (1)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
Section DB 32(3) heading: substituted (with effect on 19 December 2007), on 6 October 2009, by section 757(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section DB 32(3): substituted (with effect on 19 December 2007), on 7 December 2009, by section 154 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section DB 32(3): substituted (with effect on 19 December 2007), on 6 October 2009, by section 757(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section DB 32(3): amended, on 19 December 2007, by section 33 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Theft and bribery
DB 33 Property misappropriated by employees or service providers
When this section applies
(1)
This section applies when—
(a)
a person carries on a business; and
(b)
an employee of the business, or a person who provides services to the business, misappropriates property; and
(c)
no other provision of this Act allows the person who carries on the business a deduction for the loss resulting from the misappropriation.
Exclusions
(2)
This section does not apply when—
(a)
the person who misappropriates the property is a relative of the person who carries on the business; or
(b)
the business is carried on by a company, and—
(i)
the company and the person who misappropriates the property are associated persons; or
(ii)
the company and a relative of the person who misappropriates the property are associated persons; or
(c)
the person who carries on the business is a trustee of a trust, and the person who misappropriates the property either created the trust, settled property on the trust, or is a beneficiary of the trust.
Deduction
(3)
The person is allowed a deduction for the loss that they incur in the course of the business as a result of the misappropriation of the property.
Timing of deduction
(4)
The deduction is allocated to the income year in which the loss is ascertained, or in 1 or more earlier years if, in the circumstances, the Commissioner considers it would be fair.
Link with subpart DA
(5)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: associated person, business, capital limitation, Commissioner, company, deduction, employee, general limitation, general permission, income year, relative, supplement, trustee
Compare: 1994 No 164 s DJ 8
DB 34 Making good loss from misappropriation by partners
When this section applies
(1)
This section applies when a person carrying on a business in partnership pays an amount to make good a loss that arises from a partner, other than the person or the person’s spouse, civil union partner or de facto partner, misappropriating property that—
(a)
belongs to another person who is neither a partner in the partnership nor the spouse, civil union partner or de facto partner of a partner; and
(b)
is received in the course of the business either by the partnership or 1 or more of its partners.
Deduction
(2)
The person is allowed a deduction for the amount if the person is under a legal liability to make good the loss.
Timing of deduction
(3)
The deduction is allocated to the income year in which the amount is paid.
Link with subpart DA
(4)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, general limitation, general permission, income year, supplement
Compare: 1994 No 164 s DJ 7
Subsection (1) before paragraph (a) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (1) before paragraph (a) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (1)(a) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (1)(a) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
DB 35 Restitution of stolen property
Deduction
(1)
Timing of deduction
(2)
The deduction is allocated to the income year in which the person makes restitution.
Meaning of restitution
(3)
In this section, restitution includes restitution made to a person claiming through the person beneficially entitled to the property.
Link with subpart DA
(4)
This section supplements the general permission and overrides the capital limitation and the private limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, general limitation, general permission, income, income year, private limitation, property, restitution, supplement
Compare: 1994 No 164 s DJ 18
DB 36 Bribes paid to public officials
When this section applies
(1)
Subsection (2) applies when—
(a)
a person (person A) corruptly gives a bribe to another person; and
(b)
person A gives the bribe intending to influence a public official to act, or to fail to act, in their official capacity in order to—
(i)
obtain or retain business for person A; or
(ii)
obtain an improper advantage for person A in the conduct of business; and
(c)
the official either has or does not have the authority to act or to fail to act.
No deduction
(2)
Person A is denied a deduction for the amount of the bribe.
Exclusions
(3)
This section does not apply if—
(a)
the bribe is given outside New Zealand and, at the time it is given by person A, the bribe is not an offence under the laws of the foreign country in which is situated the principal office of the person, organisation or other body by whom the foreign public official is employed or for whom they provide services:
(b)
the bribe is paid wholly or mainly to ensure or expedite the performance by a foreign public official of a routine government action when the value of the benefit is small.
No deduction (with exception)
(4)
[Repealed]Some definitions
(5)
In this section,—
benefit, foreign country, and foreign public official are defined in section 105C of the Crimes Act 1961
bribe is defined in section 99 of the Crimes Act 1961
public official means—
(a)
a member of Parliament or a Minister of the Crown; and
(b)
a judicial officer, a law enforcement officer, or an official, as those terms are defined in section 99 of the Crimes Act 1961; and
(c)
a foreign public official routine government action is defined in section 105C of the Crimes Act 1961.
Link with subpart DA
(6)
This section overrides the general permission.
Defined in this Act: amount, benefit, bribe, business, deduction, foreign country, foreign public official, general permission, New Zealand, public official, routine government action
Compare: 1994 No 164 s DJ 22
The heading to subsection (1) was substituted, as from 1 April 2005, by section 20(1)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2005–06 income year.
Subsection (1)(b) was amended, as from 18 December 2006, by section 20(1)(b) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by omitting “New Zealand”
with application as from the 2005–06 income year.
Subsection (3) was substituted, as from 18 December 2006, by section 20(1)(c) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2005–06 income year.
Subsection (4) was repealed, as from 18 December 2006, by section 20(1)(c) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2005–06 income year.
Pollution control
DB 37 Avoiding, remedying, or mitigating effects of discharge of contaminant
When this section applies
(1)
This section applies if a person—
(a)
carries on a business in New Zealand; and
(b)
the person incurs, in the business or in ending the operations of the business, expenditure that is—
(i)
of a type listed in schedule 6B (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant) and not in schedule 6B, part C; and
(ii)
not incurred in relation to revenue account property other than land that is subject to section CB 6B (Disposal: land used for landfill, if notice of election); and
(c)
no other provision allows a deduction for the expenditure.
Amount and timing of deduction
(2)
The person is allowed for an income year a deduction for the expenditure of,—
(a)
if paragraphs (b) and (c) do not apply, an amount that is calculated using the formula—
rate × value:
(b)
if the operations of the business for which the expenditure was incurred come to an end in the income year, the diminished value or adjusted value of the expenditure for the income year:
(c)
if an improvement to land described in schedule 6B on which the expenditure was incurred is destroyed, or is rendered useless for the purposes for which the expenditure was incurred, and paragraph (b) does not apply, the diminished value or adjusted value of the expenditure for the income year.
Definition of items in formula
(3)
The items in the formula in subsection (2)(a) are defined in subsections (4) and (6).
Rate
(4)
Rate is—
(a)
100% if the expenditure is of a type listed in schedule 6B, part A, item 1, or part B and neither paragraph (b) nor (c) applies:
(b)
the appropriate rate under subsection (5) if—
(i)
the expenditure is of a type listed in schedule 6B, part A, items 2 to 5; and
(ii)
paragraph (c) does not apply:
(c)
the rate for the type of expenditure, the income year, the valuation method adopted under subsection (6), and the person determined by the Commissioner under section 91AAN of the Tax Administration Act 1994 if such a rate is determined.
Schedule 11 rates
(5)
The rate for expenditure if the requirements of subsection (4)(b) are met is—
(a)
the rate set out in schedule 11, column 2 (Banded rates of depreciation) that is nearest to the rate calculated for the expenditure using the formula in subsection (7) if the person chooses to use the straight-line equivalent method:
(b)
the rate set out in schedule 11, column 1 that corresponds to the rate under paragraph (a) if the person chooses to use the diminishing value equivalent method.
Value
(6)
Value is—
(a)
the amount of the expenditure incurred if the person chooses to use the straight-line equivalent method:
(b)
the diminished value of the expenditure for the income year if the person chooses to use the diminishing value equivalent method.
Formula for rate for expenditure with assumed life
(7)
The formula for the rate referred to in subsection (5)(a) for a kind of expenditure to which subsection (4)(b) applies is—
100% ÷ assumed life.
Definition of item in formula
(8)
In the formula in subsection (7), assumed life for expenditure and an income year is,—
(a)
for expenditure associated with a business activity that does not require a resource consent, 35:
(b)
for expenditure associated with a business activity that requires a resource consent, the lesser of 35 and the number of years in the period of the resource consent that include or follow the time at which the expenditure is incurred.
Adjusted value
(9)
In this section, adjusted value means, where the person chooses to use the straight-line equivalent method, the amount calculated using the formula—
amount of expenditure − deductions allowed + income derived.
Definition of items in formula
(10)
In the formula in subsection (9),—
(a)
amount of expenditure is the total amount of the expenditure incurred:
(b)
deductions allowed is the total amount of the expenditure allowed as a deduction in previous income years:
(c)
income derived is the total amount of income derived under section CB 24B(8) (Environmental restoration accounts) in relation to the expenditure.
Diminishing value equivalent method
(11)
In this section, diminishing value equivalent method means the method of calculating an amount of deduction under this section by subtracting, in each income year, a constant percentage of the diminished value of the expenditure from the diminished value of the expenditure.
Straight-line equivalent method
(12)
In this section, straight-line equivalent method means the method of calculating an amount of deduction under this section by subtracting, in each income year, a constant percentage of the amount of the expenditure incurred from the adjusted value of the expenditure.
Link with subpart DA
(13)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: adjusted value, amount, business, capital limitation, deduction, diminished value, diminishing value equivalent method, general limitation, general permission, income, income year, New Zealand, revenue account property, straight-line equivalent method
Section DB 37: replaced (with effect on 1 October 2005), on 28 March 2024, by section 176 (and see section 176(2) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
Repayments
DB 38 Payments for remitted amounts
When this section applies
(1)
This section applies when—
(a)
a person is allowed a deduction in an income year of an amount that the person is liable to pay; and
(b)
the person’s liability for the amount is later remitted or cancelled, wholly or partly; and
(c)
the remission or cancellation is not a dividend; and
(d)
the person is not required to calculate a base price adjustment by section EW 29 (When calculation of base price adjustment required); and
(e)
the amount to which the remission or cancellation applies is assessable income of the person under section CG 2 (Remitted amounts); and
(f)
the person makes a payment for the amount to which the remission or cancellation applies.
Amount, and timing, of deduction
(2)
The person is allowed a deduction for the amount of the payment in the income year in which it is made.
Link with subpart DA
(3)
This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, assessable income, deduction, dividend, general limitation, general permission, income year, supplement
Compare: 1994 No 164 s IE 1(4)(g)
DB 39 Restrictive covenant breached
When this section applies
(1)
This section applies when an employee (person A) makes a payment to another person (person B) in the following circumstances:
(a)
person A derives assessable income under section CE 9 (Restrictive covenants); and
(b)
person A breaches a term of the undertaking they gave to person B; and
(c)
person A is, consequently, required to make the payment to person B.
Deduction
(2)
Person A is allowed a deduction for the payment.
Amount of deduction
(3)
The amount of the deduction is the lesser of the following:
(a)
the assessable income that person A derives under section CE 9 (Restrictive covenants); and
(b)
the payment that person A makes to person B, excluding interest, punitive damages, exemplary damages, and person B’s legal costs and other expenses.
Timing of deduction
(4)
The deduction is allocated to the income year in which person A makes the payment to person B.
Link with subpart DA
(5)
This section supplements the general permission and overrides the employment limitation. The other general limitations still apply.
Defined in this Act: amount, assessable income, deduction, employee, employment limitation, general limitation, general permission, income year, interest, supplement
Compare: 1994 No 164 ss DJ 21, EO 7
Matching rules: revenue account property, prepayments, and deferred payments
DB 40 Adjustment for opening values of trading stock, livestock, and excepted financial arrangements
When this section applies
(1)
This section applies when a person has some or all of the following at the start of an income year:
(a)
trading stock valued under subpart EB (Valuation of trading stock (including dealer’s livestock)):
(b)
livestock valued under subpart EC (Valuation of livestock):
(c)
excepted financial arrangements that are revenue account property valued under subpart ED (Valuation of excepted financial arrangements):
(d)
a share supplier’s share-lending right, if the original shares that relate to the right are excepted financial arrangements described in paragraph (c).
Deduction: opening value of trading stock
(2)
The person is allowed a deduction in the income year for the value that the trading stock had at the end of the previous income year, as calculated under section EB 3 (Valuation of trading stock).
Deduction: opening value of livestock
(3)
The person is allowed a deduction in the income year for the value that the livestock had at the end of the previous income year, as calculated under section EC 2 (Valuation of livestock).
Deduction: opening value of excepted financial arrangements
(4)
The person is allowed a deduction in the income year for the value that the excepted financial arrangements or share-lending right had at the end of the previous income year, as calculated under section ED 1 (Valuation of excepted financial arrangements).
Link with subpart DA
(5)
This section supplements the general permission. The general limitations still apply.
Defined in this Act: deduction, excepted financial arrangement, general limitation, general permission, income year, original share, revenue account property, share-lending right, share supplier, supplement, trading stock
Compare: 1994 No 164 s EE 2(4)
Subsection (1)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
Subsection (1)(c) was amended, as from 1 July 2006, by section 44(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting the expression “arrangements):”
for the expression “arrangements).”
.
Subsection (1)(d) was inserted, as from 1 July 2006, by section 44(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
Subsection (4) was amended, as from 1 July 2006, by section 44(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “arrangements or share-lending right had”
for “arrangements had”
.
The list of defined terms was amended, as from 1 July 2006, by section 44(3)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting the words “original share”
..
The list of defined terms was amended, as from 1 July 2006, by section 44(3)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting the words “share-lending right”
..
The list of defined terms was amended, as from 1 July 2006, by section 44(3)(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting the words “share supplier”
..
DB 41 Adjustment for prepayments
When this section applies
(1)
This section applies when a person has, under section EA 3 (Prepayments), an unexpired amount of expenditure at the end of an income year.
Deduction
(2)
The person is allowed a deduction for the unexpired amount for the following income year.
Link with subpart DA
(3)
This section supplements the general permission. The general limitations still apply, but not to the extent to which any relevant general limitation was overridden by a provision that initially allowed a deduction for the expenditure, whether in this Act or an earlier Act.
Defined in this Act: amount, deduction, general limitation, general permission, income year, supplement
Compare: 1994 No 164 s EF 1(1)(b)
DB 42 Adjustment for deferred payment of employment income
When this section applies
(1)
This section applies when a person has, under section EA 4 (Deferred payment of employment income), an unpaid amount of expenditure on employment income in an income year for which the person is to be allowed a deduction in the following income year.
Deduction
(2)
The person is allowed a deduction for the unpaid amount for the following income year.
Link with subpart DA
(3)
This section supplements the general permission. The general limitations still apply, but not to the extent to which any relevant general limitation was overridden by a provision that initially allowed a deduction for the expenditure, whether in this Act or an earlier Act.
Defined in this Act: amount, deduction, employment income, general limitation, general permission, income year, supplement
Compare: 1994 No 164 s EF 1(1)(b)
Change to accounting practice
DB 43 Adjustment for change to accounting practice
When this section applies
(1)
This section applies when a person has, under section EG 2(2) or (3) (Adjustment for changes to accounting practice), an amount owed by them or an amount owing to them as quantified in those subsections.
Amount, and timing, of deduction
(2)
The person is allowed a deduction of the amount as quantified and allocated under section EG 2 (Adjustment for changes to accounting practice).
Link with subpart DA
(3)
This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, supplement
Compare: 1994 No 164 s EC 1
Portfolio investment entities
Heading: inserted, on 1 October 2007, by section 21 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
DB 43B Certain investors have deduction for portfolio investor allocated loss
When this section applies
(1)
This section applies to an investor in a portfolio investor class of a portfolio tax rate entity for a portfolio calculation period of the entity when—
(a)
the investor—
(i)
is a zero-rated portfolio investor for the portfolio calculation period:
(ii)
has all or part of a portfolio investor exit period included in the portfolio calculation period and the entity makes payments of tax under section HL 21 (Payments of tax by portfolio tax rate entity making no election); and
(b)
the portfolio calculation period includes a portfolio allocation period for which the person is allocated an amount of portfolio investor allocated loss under subpart HL (Portfolio investment entities).
Deduction
(2)
The investor has a deduction for an income year for the amount of portfolio investor allocated loss if—
(a)
the portfolio tax rate entity makes payments of tax under section HL 21 (Payments of tax by portfolio tax rate entity making no election) and the investor’s income year includes the end of the portfolio tax rate entity’s income year:
(b)
the portfolio tax rate entity makes payments of tax under section HL 23 (Payments of tax by portfolio tax rate entity choosing to make payments when investor leaves) and the investor’s income year includes the end of the tax year in which the portfolio calculation period occurs.
Defined in this Act: deduction, income year, investor, portfolio allocation period, portfolio calculation period, portfolio investor allocated loss, portfolio investor class, portfolio tax rate entity, tax, tax year, zero-rated portfolio entity
Section DB 43B: substituted, on 1 October 2007, by section 11 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Section DB 43B: inserted, on 1 October 2007, by section 21 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Section DB 43B(2)(a): substituted (with effect from 1 October 2007), on 19 December 2007, by section 34 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
DB 43C Certain fees charged by portfolio tax rate entities to investors not allowed as deductions
When this section applies
(1)
This section applies to an investor in a portfolio investor class of a portfolio tax rate entity when—
(a)
the investor incurs fees in relation to the investor’s portfolio investor interest; and
(b)
the amount of the fees is included in the calculation of the entity’s portfolio entity tax liability under section HL 20 (Portfolio entity tax liability and rebates of portfolio tax rate entity for period) for the investor, the portfolio investor class, and a portfolio calculation period.
No deduction
(2)
The investor is denied a deduction for the amount of the fees.
Link with subpart DA
(3)
This section overrides the general permission.
Defined in this Act: deduction, general permission, investor, portfolio calculation period, portfolio entity tax liability, portfolio investment entity, portfolio investor class
Section DB 43C: inserted, on 1 October 2007, by section 12 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).
Exempt income
This heading was inserted, as from 1 October 2005, by section 180 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
DB 44 Expenditure incurred in deriving exempt dividend
Deduction
(1)
A company that derives a dividend that is exempt income of the company under section CW 9 is allowed a deduction of—
(a)
the amount of the expenditure incurred by the company in deriving the dividend, if the company is not a conduit tax relief company:
(b)
the amount calculated using the following formula, if the company is a conduit tax relief company:
expenditure x (1 -- non-resident shareholding)
Definition of items in formula
(2)
In the formula,—
(a)
expenditure is the amount of the expenditure incurred by the company in deriving the dividend:
(b)
non-resident shareholding is the fraction of the company’s shareholders that are non-residents, calculated under section NH 7(2) and NH 7(4).
Link with subpart DA
(3)
This section supplements the general permission and overrides the exempt income limitation. The other general limitations still apply.
Defined in this Act: company, conduit tax relief company, deduction, dividend, exempt income, exempt income limitation, general limitation, general permission, non-resident, shareholder
Section DB 44 was inserted, as from 1 October 2005, by section 180 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
Section DB 44(3): replaced (with effect on 1 October 2005 and applying for expenditure incurred on and after 1 October 2005), on 30 June 2014, by section 198(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Use of motor vehicle under certain arrangements
This heading was inserted, as from 1 April 2006, by section 45(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for expenditure incurred as from 1 April 2006.
DB 45 Expenditure incurred in operating motor vehicle under agreement or arrangement affected by section CX 6B
Deduction
(1)
A party to an agreement or arrangement referred to in section CX 6B (Employer or associated person treated as having right to use vehicle under arrangement) is allowed a deduction for expenditure or depreciation loss incurred in operating a motor vehicle during a period for which an employer or associated person is treated under that section as having a right to use the vehicle.
Link with subpart DA
(2)
This section overrides the private limitation and exempt income limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: arrangement, deduction, depreciation loss, exempt income limitation, FBT rules, general limitation, general permission, lease, loss, motor vehicle
Section DB 45 was inserted, as from 1 April 2006, by section 45(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for expenditure incurred as from 1 April 2006.
Section DB 45 was substituted, as from 1 April 2006, by section 22(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application for expenditure or depreciation loss incurred on or after 1 April 2006.
Emissions trading scheme
Heading: added, on 26 September 2008, by section 61 of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).
DB 46 Acquisition of ETS units
When this section applies
(1)
This section applies when a person acquires an ETS unit.
No expenditure or loss on issue of forest land units
(2)
The person is treated as incurring no expenditure or loss on the acquisition, if the acquisition is on issue of a forest land unit.
Deduction: acquisition from another person
(3)
The person is allowed a deduction for expenditure or loss incurred on acquiring the ETS unit from another person, if it is not the issue of a forest land unit.
Deduction: acquisition of Kyoto unit on conversion of New Zealand unit
(4)
Despite subsection (3), if a person converts a New Zealand unit to a Kyoto unit under the Climate Change Response Act 2002, the person is allowed a deduction for an amount of expenditure on the acquisition of the Kyoto unit that is—
(a)
not more than the cost, if any, to the person of the New Zealand unit; and
(b)
not less than the cost, if any, to the person of the New Zealand unit.
Link with subpart DA
(5)
The link between this section and subpart DA (General rules) is as follows:
(a)
subsections (2) and (4)(a) override the general permission:
(b)
subsection (3) overrides the capital limitation. The other general limitations still apply:
(c)
subsection (4)(b) supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, convert, ETS unit, forest land unit, general limitation, general permission, Kyoto unit, loss, New Zealand unit
Section DB 46: added, on 26 September 2008, by section 61 of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).
DB 46B Liabilities for emissions
When this section applies
(1)
This section applies when a person incurs a liability under the Climate Change Response Act 2002 for emissions relating to post-1989 forest land or pre-1990 forest land.
No deduction
(2)
The person is denied a deduction for the liability.
Link with subpart DA
(3)
Subsection (2) overrides the general permission.
Defined in this Act: amount, deduction, general permission, post-1989 forest land, pre-1990 forest land
Section DB 46B: inserted (with effect on 1 January 2008), on 6 October 2009, by section 758 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
DB 47 Surrender of pre-1990 forest land units for post-1989 forest land deforestation
When this section applies
(1)
This section applies when a person surrenders a pre-1990 forest land unit under the Climate Change Response Act 2002 to meet a liability to surrender units in relation to post-1989 forest land.
Treated as disposal and reacquisition
(2)
The person is treated as having disposed of the pre-1990 forest land unit to an unrelated person and as having then reacquired it, in each case, immediately before the surrender and for an amount equal to the unit’s market value at the time.
Defined in this Act: amount, post-1989 forest land, pre-1990 forest land unit, surrender
Section DB 47: added, on 26 September 2008, by section 61 of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).
Subpart DC—Employee or contractor expenditure
Contents
DC 1 Lump sum payments on retirement
Deduction
(1)
A person who carries on a business is allowed a deduction for a lump sum paid as a bonus, gratuity, or retiring allowance to an employee on retirement.
Inclusions
(2)
For the purposes of subsection (1), a lump sum paid on retirement includes a lump sum paid to—
(a)
an employee when they end their employment or service through redundancy, loss of office, or similar circumstances:
(b)
a former employee when they are unable to be reemployed in seasonal work in circumstances that would be considered the loss of employment or service through redundancy if they resulted in ending the seasonal work.
Exclusion
(3)
This section does not apply to the extent to which the person has accepted a liability, as described in section DC 9(1)(c), to pay an amount of employment income.
Timing of deduction
(4)
The deduction is allocated to the income year in which the lump sum is paid.
Link with subpart DA
(5)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, employee, employment income, general limitation, general permission, income year, supplement
Compare: 1994 No 164 s DF 5
Subsection (2)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
DC 2 Pension payments to former employees
When subsection (2) applies
(1)
Subsection (2) applies when—
(a)
a person, other than a close company, carries on a business; and
(b)
a former employee has retired from their employment in the business or their employment has ended through redundancy or similar circumstances; and
(c)
they are paid a pension in consideration of their past services in the business; and
(d)
they or their spouse, civil union partner or de facto partner has a right to receive the pension under a deed for a fixed period or for life or, in the case of the spouse, civil union partner or de facto partner, until the spouse, civil union partner or de facto partnerenters a new marriage, civil union partner or de facto relationship.
Deduction: not close company
(2)
The person is allowed a deduction for a reasonable amount paid as the pension to the former employee or their surviving spouse, civil union partner or de facto partner.
When subsection (4) applies
(3)
Subsection (4) applies when—
(a)
a close company carries on a business; and
(b)
a former employee of the company is or has been a shareholder in it or has a relative who is or has been a shareholder in it; and
(c)
the former employee’s employment in the company was genuine; and
(d)
they have retired from the employment or their employment has ended through redundancy or similar circumstances; and
(e)
they are paid a pension in consideration of their past services in the business; and
(f)
they or their spouse, civil union partner or de facto partner has a right to receive the pension under a deed for a fixed period or for life or, in the case of the spouse, civil union partner or de facto partner, until the spouse, civil union partner or de facto partnerenters a new marriage, civil union or de facto relationship.
Deduction: close company
(4)
The close company is allowed a deduction for the amount paid as the pension to the former employee or their surviving spouse, civil union partner or de facto partner.
Amount of deduction under subsection (4)
(5)
The amount of the deduction allowed under subsection (4) is the amount that the company would have paid if the former employee or their relative were not, or had not been, a shareholder in the company.
Timing of deductions
(6)
A deduction under this section is allocated to the income year in which the amount is paid.
Relationship with section FF 17(1)
(7)
Section FF 17(1) (Pensions) expands on this section.
Link with subpart DA
(8)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, business, capital limitation, close company, deduction, employee, general limitation, general permission, income year, relative, shareholder, supplement
Compare: 1994 No 164 s DF 4
Subsection (1)(d) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
in each place it occurs.
Subsection (1)(d) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “enters a new marriage or civil union”
for “remarries”
.
Subsection (1)(d) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
in each place it occurs.
Subsection (1)(d) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “enters a new marriage, civil union partner or de facto relationship”
for “enters a new marriage or civil union”
.
Subsection (2) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (2) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (3)(f) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
in each place it occurs.
Subsection (3)(f) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “enters a new marriage or civil union”
for “remarries”
.
Subsection (3)(f) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
in each place it occurs.
Subsection (3)(f) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “enters a new marriage, civil union or de facto relationship”
for “enters a new marriage or civil union”
.
Subsection (4) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (4) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
DC 3 Pension payments to former partners
When this section applies
(1)
This section applies when—
(a)
a person is a partner in a partnership; or
(b)
a person who was a partner in a partnership is in business on their own account.
Exclusion
(2)
This section does not apply to a partnership or a business that is engaged wholly or mainly in investing money or in holding, or dealing in, shares, securities, investments, or estates or interests in land.
Deduction
(3)
The person is allowed a deduction for their share of an amount, to the extent to which the amount is reasonable, paid as a pension to a former partner, or to the spouse, civil union partner or de facto partner of a deceased former partner, if—
(a)
the partnership in which the former partner was a partner (old partnership) carried on the same business as that now carried on either by the partnership that is paying the pension or by the person in business who is paying the pension; and
(b)
the former partner retired from the old partnership or their employment ended through retirement; and
(c)
the former partner or their spouse, civil union partner or de facto partner has a right to receive the pension under a deed for a fixed period or for life or, in the case of the spouse, civil union partner or de facto partner, until the spouse, civil union partner or de facto partnerenters a new marriage, civil union or de facto relationship; and
(d)
the pension is paid for the former partner’s services in the old partnership.
Link with subpart DA
(4)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, estate, general limitation, general permission, interest, land, share, supplement
Compare: 1994 No 164 ss DF 8A, DF 8B
Subsection (3) before paragraph (a) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
.
Subsection (3) before paragraph (a) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
.
Subsection (3)(c) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse or civil union partner”
for “spouse”
in each place it occurs.
Subsection (3)(c) was amended, as from 26 April 2005, by section 3(1) Income Tax Amendment Act 2005 (2005 No 11) by substituting “enters a new marriage or civil union”
for “remarries”
.
Subsection (3)(c) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “spouse, civil union partner or de facto partner”
for “spouse or civil union partner”
in each place it occurs.
Subsection (3)(c) was amended, as from 1 April 2007, by section 3(2) Income Tax Amendment Act 2005 (2005 No 11) by substituting “enters a new marriage, civil union or de facto relationship”
for “enters a new marriage or civil union”
.
DC 4 Payments to working partners
Deduction
(1)
A person who is a partner in a partnership is allowed a deduction for their share of a payment made under a contract of service to a partner who personally and actively performs duties that—
(a)
are required to be performed in carrying on the business of the partnership; and
(b)
are performed by the partner during the currency of the contract of service.
Exclusion
(2)
This section does not apply to a partnership that is engaged wholly or mainly in investing money or in holding, or dealing in, shares, securities, investments, or estates or interests in land.
Amount of deduction
(3)
The amount of the deduction is limited to the amount of the payment authorised by the contract of service and any bonus, whether or not the payment of a bonus is authorised by the contract.
Relationship with section GD 3
(4)
This section is overridden by section GD 3 (Payment of excessive salary or wages, or allocation of excessive share of profits or losses, to relative employed by or in partnership with taxpayer).
Meaning of contract of service
(5)
In this section, contract of service, for a partner and a partnership, means an agreement that—
(a)
specifies the terms and conditions of the services to be performed by the partner; and
(b)
specifies the amount payable to the partner for the performance of the services; and
(c)
is entered into by all the partners in the partnership; and
(d)
is in writing.
Link with subpart DA
(6)
This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, business, contract of service, deduction, estate, general limitation, general permission, interest, land, share, supplement
Compare: 1994 No 164 s DF 8
DC 5 Contributions to employees’ benefit funds
Deduction
(1)
An employer is allowed a deduction for an amount that they pay to, or set aside as, a fund to provide individual personal benefits to their employees if—
(a)
the fund is not a superannuation scheme; and
(b)
the employees’ rights to receive benefits from the fund are fully secured.
Link with subpart DA
(2)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, employee, employer, general limitation, general permission, superannuation scheme, supplement
Compare: 1994 No 164 s DF 2
DC 6 Contributions to employees’ superannuation schemes
Deduction
(1)
An employer is allowed a deduction for a contribution to an employees’ superannuation scheme.
Exclusion
(1B)
The employer is denied a deduction for a contribution, to the extent of the amount of the tax credit under section KJ 6 (Tax credits relating to employers contributing to KiwiSaver schemes and complying superannuation funds) for the PAYE period to which the contribution relates.
Timing of deduction
(2)
The deduction is allocated to the income year in which the employer makes the contribution.
Relationship with section EJ 19
(3)
Subsection (2) is overridden by section EJ 19 (Contributions to employees’ superannuation schemes).
Link with subpart DA
(4)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, employee, employer, general limitation, general permission, income year, superannuation scheme
Compare: 1994 No 164 s DF 3(1)
DC 7 Attribution of personal services
When this section applies
(1)
This section applies when, under sections GC 14B to GC 14E (which relate to the attribution rule), a person is required to attribute an amount to another person.
Deduction
(2)
The person required to attribute the amount is allowed a deduction for the amount attributed.
Timing of deduction
(3)
The deduction is allocated to the income year in which the amount is attributed to the other person.
Link with subpart DA
(4)
This section supplements the general permission and overrides all the general limitations.
Defined in this Act: amount, deduction, general limitation, general permission, income year, supplement
Compare: 1994 No 164 ss DJ 19, EO 6
DC 8 Restrictive covenants or exit inducements
Deduction
(1)
A person is allowed a deduction for expenditure that they incur that is income of another person under section CE 9 (Restrictive covenants) or CE 10 (Exit inducements).
Exclusion
(2)
This section does not apply if—
(a)
the other person performs services for the person; and
(b)
expenditure that the person would have incurred for the services, if the other person had not derived an amount that is income under section CE 9 (Restrictive covenants) or CE 10 (Exit inducements), would have been of a capital nature.
Link with subpart DA
(3)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, capital limitation, general limitation, general permission, income
Compare: 1994 No 164 s DJ 20
DC 9 Sale of business: transferred employment income obligations
When this section applies
(1)
This section applies when—
(a)
a person (seller) sells a business, or a part of a business, to another person (buyer); and
(b)
an employee of the seller working in the business, or the part of the business, becomes an employee of the buyer under the sale arrangements; and
(c)
the seller and the buyer agree in writing, under the sale arrangements, that the buyer assumes the obligation to pay an amount of employment income to the employee.
Deduction: parties not associated
(2)
If the seller and the buyer are not associated persons at the time of the sale,—
(a)
the seller is allowed a deduction, in the income year of the sale, for the provision made by the seller for a part of the amount that remains contingent on the employee continuing in employment or any similar factor; and
(b)
the seller is treated under section EA 4(4) (Deferred payment of employment income) as having paid the amount of the provision at the time of sale.
Deduction: parties associated
(3)
If the seller and the buyer are associated persons at the time of the sale,—
(a)
the buyer is allowed a deduction for the provision made by the seller for the amount of employment income if the seller would have been allowed a deduction for the amount if the business, or the part of the business, had not been sold; and
(b)
section EA 4(5) (Deferred payment of employment income) applies.
Deduction: Buyer’s payment exceeding provision
(3B)
The buyer is allowed a deduction for any part of the amount of employment income that the buyer pays and that exceeds the provision made by the seller for that amount.
Link with subpart DA
(4)
The link between this section and subpart DA (General rules) is as follows:
(a)
subsection (2)(a) supplements the general permission. The general limitations still apply:
(b)
subsections (3) and (3B) override the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, arrangement, associated person, business, capital limitation, deduction, employee, employment income, general limitation, general permission, income year, supplement, time of the sale
Compare: 1994 No 164 s DF 10
Section DC 9(2)(a): amended (with effect from 1 April 2005), on 19 December 2007, by section 35(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DC 9(2)(b): amended (with effect from 1 April 2005), on 19 December 2007, by section 35(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DC 9(3): substituted (with effect from 1 April 2005), on 19 December 2007, by section 35(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DC 9(3B) heading: inserted (with effect from 1 April 2005), on 19 December 2007, by section 35(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DC 9(3B): inserted (with effect from 1 April 2005), on 19 December 2007, by section 35(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (4)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
Section DC 9(4)(b): amended (with effect from 1 April 2005), on 19 December 2007, by section 35(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
DC 10 Transfers of employment income obligations to associates
When this section applies
(1)
This section applies when—
(a)
an employee of a person (person A) becomes an employee of another person (person B); and
(b)
person A and person B are associated persons at the time; and
(c)
person B assumes person A’s obligation to pay an amount of employment income to the employee; and
(d)
the employee’s becoming an employee of person B does not result from the sale by person A of a business, or a part of a business, to person B.
Deduction
(2)
Person B is allowed a deduction for the amount of employment income if person A would have been allowed a deduction for the amount if the transfer had not occurred.
Link with subpart DA
(3)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, associated person, business, capital limitation, deduction, employee, employment income, general limitation, general permission
Compare: 1994 No 164 s DF 11
DC 11 Loans to employees under share purchase schemes
Deduction
(1)
An employing company that provides financial assistance to an employee by way of an interest-free loan under a share purchase scheme is allowed a deduction for providing the assistance, under the following conditions:
(a)
(b)
the deduction is allowed only for the 5 years after the date of the loan.
Amount, and timing, of deduction
(2)
The amount of the deduction in each income year is equal to the interest that would have been payable by the employing company for the income year if the amount of the loan had been borrowed by the company at an interest rate of 10% annually with interest calculated with monthly rests, and as if repayments by the employee under the scheme were repayments of the notional loan by the company.
Group of companies
(3)
If the employing company is part of a group of companies, and the share purchase scheme involves shares issued by another company in the group, the shares are treated as if they were issued by the employing company.
Link with subpart DA
(4)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, Commissioner, company, deduction, employee, employing company, general limitation, general permission, group of companies, income year, interest, share, share purchase scheme, supplement, year
Compare: 1994 No 164 s DF 7(1)
DC 12 Criteria for approval of share purchase schemes: before period of restriction ends
What this section does
(1)
This section sets out the criteria, relating to the provisions of a share purchase scheme on the period of restriction, that the Commissioner applies in determining whether or not to approve the scheme.
Purchase of shares
(2)
The scheme must provide for—
(a)
the shares to be available for no more than their market value at the date of purchase or subscription; and
(b)
the amount that an employee spends on buying shares under the scheme or any similar scheme to be $2,340 or less in a 3 year period.
Eligibility
(3)
The scheme must provide for—
(a)
employees to be eligible to participate equally in the scheme, that is,—
(i)
every full-time permanent employee on an equal basis with every other full-time permanent employee; and
(ii)
if the scheme applies to part-time employees and seasonal employees, every part-time employee on an equal basis with every other part-time employee and every seasonal employee on an equal basis with every other seasonal employee; and
(b)
any minimum period of employment or service before employees are eligible to participate,—
(i)
for full-time employees, to be no more than 3 years’ full-time work; and
(ii)
for other employees, an accumulated period that is the equivalent of 3 years’ full-time work.
Loans to employees
(4)
The scheme must provide for—
(a)
a loan to an employee to buy shares to be free of interest and other charges; and
(b)
any minimum amount of loan to be $624 or less; and
(c)
employees to be able to repay the loan by regular equal instalments at intervals of 1 month or less over a period of between 3 years and 5 years from the date of the loan; and
(d)
employees to be able to choose to repay some or all of the loan before the due date for repayment.
Shares held on trust
(5)
The scheme must provide for—
(a)
the trustee of the scheme to hold the shares in trust for the employee; and
(b)
the trustee to pay any dividends directly to the employee; and
(c)
the dividends to be treated as having been derived by the employee; and
(d)
the trustee to be prohibited from applying a dividend to the repayment of any sum owing to the company or to the trustee; and
(e)
the employee to be prohibited from charging or disposing of their rights or interests in the shares.
Hardship
(6)
The scheme must provide for a trustee who is satisfied that the employee’s continued participation in the scheme has resulted or would result in serious hardship,—
(a)
with the employee’s agreement, to vary the terms of the repayment of a loan under the scheme; or
(b)
with the employee’s agreement, to allow the employee to withdraw from the scheme as if they had ended their employment in the circumstances described in section DC 13(4).
Withdrawal from scheme
(7)
The scheme must provide for—
(a)
an employee to be able to withdraw from the scheme on giving 3 months’ notice to the trustee; and
(b)
the employee to be treated for the purposes of the scheme as if they ended their employment with the company on the date the notice takes effect, with the effect that section DC 13(4) and (5) then apply.
Defined in this Act: amount, Commissioner, company, dividend, employee, interest, notice, period of restriction, share, share purchase scheme, trustee, year
Compare: 1994 No 164 s DF 7(2)(a)-(h), (j), (k)
Section DC 12(5)(d): substituted (with effect on 1 April 2005), on 6 October 2009, by section 759(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
DC 13 Criteria for approval of share purchase schemes: when period of restriction ends
What this section does
(1)
This section sets out the criteria, relating to the provisions of a share purchase scheme on the period when the period of restriction ends, that the Commissioner applies in determining whether or not to approve the scheme.
General rule
(2)
The scheme must provide for—
(a)
the trustee—
(i)
to transfer the shares to the employee if the employee is still employed by the company; or
(ii)
at the option of the employee, to buy the shares at their market value on the date of purchase; or
(b)
the trustee to apply subsection (3) or (4), if either applies, in priority to paragraph (a).
Death, accident, sickness, redundancy, or retirement at normal retiring age
(3)
If the period of restriction ends because the employee ends their employment through death, accident, sickness, redundancy, or retirement at normal retiring age, the scheme must provide for—
(a)
the trustee to transfer the shares to the legal representative of the employee’s estate or to the former employee; or
(b)
at the option of the legal representative or former employee, the trustee to buy the shares at their market value on the date of purchase, subject to the repayment of any outstanding loan under the scheme for the shares.
Employment ends for other reason
(4)
If the period of restriction ends because the employee ends their employment for any reason other than one described in subsection (3), the scheme must provide for the trustee to buy the shares at their market value on the date on which the employee ends their employment, subject to the repayment of any outstanding loan under the scheme for the shares.
Purchase price when trustee buys shares
(5)
If the trustee buys the shares when the period of restriction ends, the scheme must provide for the purchase price to be no more than the price paid for the shares by the employee.
Defined in this Act: Commissioner, company, employee, normal retiring age, period of restriction, share, share purchase scheme, trustee
Compare: 1994 No 164 s DF 7(2)(i)
DC 14 Some definitions
Definitions
(1)
In this section, and in sections DC 11 to DC 13,—
employee —
(a)
means a person that—
(i)
is employed by a company:
(ii)
is not a corporation sole, a body corporate, or an unincorporated body:
(b)
does not include—
(i)
a director of the company; or
(ii)
a person who, with any associated person, holds 10% or more of the issued capital of the company
(iii)
[Repealed]employing company, for an employee, means the company that employs the employee
normal retiring age means,—
(a)
for an employee other than one to whom paragraph (b) applies, no less than 60 years of age:
(b)
for a female employee who is entitled under a contract of employment entered into before 1 April 1978 with the employing company to retire before 60 years of age, no less than 55 years of age:
(c)
for any employee, an age that is earlier than the age referred to in paragraph (a) or (b) and that the Commissioner considers reasonable given the nature of the employment or the general terms of employment in the business or occupation of the employee
normal retiring age: paragraphs (a) and (b) of this definition were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
share, for a company whose shares are made available under a share purchase scheme, means a fully paid ordinary share that ranks equally with, and has the same designation as, an existing ordinary voting share in the company
trustee means a person or group of persons appointed to administer a share purchase scheme of an employing company, and to hold shares under that scheme on trust for an employee during the period of restriction.
Meaning of period of restriction
(2)
In this section, and in sections DC 12 and DC 13,—
(a)
period of restriction is defined in subsections (3) and (4); and
(b)
for the purposes of this definition, if an employing company is part of a group of companies, and an employee is transferred to another company in the group, the employee is treated as continuing in their employment.
Shorter of 2 periods
(3)
Period of restriction means the shorter of—
(a)
a period of 3 years starting on the date the employee buys or subscribes for the shares, or the period of repayment of a loan made to them under the scheme for this purpose, whichever is longer; and
(b)
a period starting on the date the employee buys or subscribes for the shares and ending on the date the employee ends their employment with the employing company.
This subsection is overridden by subsection (4).
Different period
(4)
If the employee buys or subscribes for the shares at market value, and the rules of the scheme provide a period of restriction, that period applies, but it must be no shorter than the period of repayment of a loan made under the scheme for the purpose, and must be no longer than the period described in subsection (3) that would apply if this subsection did not exist.
Defined in this Act: associated person, company, director, employee, employing company, group of companies, group of persons, local authority, normal retiring age, period of restriction, public authority, share, share purchase scheme, trustee, year
Compare: 1994 No 164 s DF 7(3)
Section DC 14(1) employee paragraph (a): replaced (with effect on 1 April 2005), on 2 November 2012 (applying for the 2005–06 and later income years), by section 244(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section DC 14(1) employee paragraph (b)(ii): amended (with effect on 1 April 2005), on 2 November 2012 (applying for the 2005–06 and later income years), by section 244(2)(a) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section DC 14(1) employee paragraph (b)(iii): repealed (with effect on 1 April 2005), on 2 November 2012 (applying for the 2005–06 and later income years), by section 244(2)(b) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Subpart DD—Entertainment expenditure
Contents
DD 1 Entertainment expenditure generally
When this subpart applies
(1)
This subpart applies when, in deriving income, a person incurs expenditure on entertainment that provides both a private and a business benefit.
No deduction (with exception)
(2)
The person is denied a deduction for expenditure that they incur on the forms of entertainment specified in section DD 2, except for 50% of the amount that they would have been allowed if this subsection had not existed.
Meaning of limitation rule
(3)
Limitation rule means the rule described in subsection (2).
Link with subpart DA
(4)
This section overrides the general permission.
Defined in this Act: amount, business, deduction, general permission, income, limitation rule
Compare: 1994 No 164 s DG 1
DD 2 Limitation rule
What rule applies to
(1)
The expenditure to which the limitation rule applies is expenditure on the forms of entertainment described in subsections (2) to (6).
Corporate boxes
(2)
The limitation rule—
(a)
applies to deductions for expenditure on corporate boxes, corporate marquees or tents, or other exclusive areas, whether temporary or permanent, at—
(i)
cultural, sporting, or other recreational events:
(ii)
activities taking place off the person’s business premises; and
(b)
applies to the cost of tickets or other rights of entry to the areas; and
(c)
applies to the cost of food and drink incidental to this form of entertainment.
Holiday accommodation
(3)
The limitation rule—
(a)
applies to deductions for expenditure on accommodation in a holiday home, time-share apartment, or similar leisure venue; and
(b)
does not apply to accommodation that is merely incidental to business activities or employment duties; and
(c)
applies to the cost of food and drink incidental to this form of entertainment.
Pleasure craft
(4)
The limitation rule—
(a)
applies to deductions for expenditure on yachts or other pleasure craft; and
(b)
applies to the cost of food and drink incidental to this form of entertainment.
Entertainment off premises
(5)
The limitation rule applies to deductions for expenditure on food and drink that a person provides off their business premises.
Entertainment on premises
(6)
The limitation rule applies to deductions for expenditure on food and drink that a person provides, other than light refreshments such as a morning tea and whether or not guests are present,—
(a)
on their business premises at a celebration meal, party, reception, or other similar social function:
(b)
in an area of the premises that at the time is reserved for senior employees to use and is not open to all the person’s employees working in the premises.
Meaning of expenditure
(7)
Expenditure includes,—
(a)
in subsections (2) to (4),—
(i)
an amount of depreciation loss; and
(ii)
expenditure or loss on running costs and maintenance and similar matters; and
(iii)
a deduction for a lease premium under section DZ 9 (Premium paid on land leased before 1 April 1993); and
(b)
in subsections (2) to (6), any incidental expenditure on matters such as hireage of crockery, glassware, or utensils, waiting staff, and music or other entertainment provided in association with the specified kind of entertainment.
Defined in this Act: amount, business, business premises, deduction, depreciation loss, expenditure, limitation rule
Compare: 1994 No 164 s DG 1(1), (3), schedule 6A, part A, cls 1-4, part B, cl 4(a)
Subsection (2)(a)(i) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
Subsection (6)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
DD 3 When limitation rule does not apply
The limitation rule is either restricted in its application or does not apply to deductions for the expenditure described in sections DD 4 to DD 8.
Defined in this Act: deduction, limitation rule
Compare: 1994 No 164 s DG 1(2)
DD 4 Employment-related activities
Business travel expenditure
(1)
The limitation rule does not apply to a deduction for expenditure on food or drink consumed by a person while travelling in the course of business or for their employment duties. However, the limitation rule applies if—
(a)
the travel is mainly for the purpose of enjoying entertainment; or
(b)
the food or drink is consumed at a meal or function involving an existing or potential business contact as a guest; or
(c)
the food or drink is consumed at a celebration meal, party, reception, or other similar social function.
Conference expenditure
(2)
The limitation rule does not apply to a deduction for expenditure on light refreshments at a conference or educational course or similar event, nor to food or drink consumed at such an event lasting for at least 4 consecutive hours (excluding meal times). However, the limitation rule applies if the event is mainly for the purpose of entertainment.
Relocation expenses, employees’ meals, and sustenance allowances
(3)
The limitation rule does not apply to a deduction for expenditure on—
(a)
an amount that is exempt income of an employee under sections CW 13B and CW 13C (which relate to relocation expenses, expenditure on overtime meals, and sustenance allowances):
(b)
a light meal consumed as part of the employee’s employment duties in an area of the person’s business premises that at the time is reserved for senior employees and their guests to use and is not open to all the person’s employees working in the premises.
Defined in this Act: amount, business, business contacts, business premises, deduction, employee, exempt income, limitation rule
Compare: 1994 No 164 schedule 6A, part B, cls 1-5
Section DD 4(3) heading: substituted (with effect on 1 April 2005), on 6 October 2009, by section 760(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section DD 4(3)(a): substituted (with effect on 1 April 2005), on 6 October 2009, by section 760(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Subsection (3)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
Section DD 4 list of defined terms amount: inserted (with effect on 1 April 2005), on 6 October 2009, by section 760(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No34).
DD 5 Promoting businesses, goods, or services
Sponsored promotions
(1)
The limitation rule does not apply to a deduction for expenditure on entertainment if—
(a)
the entertainment is sponsored mainly to advertise or promote a person’s business, goods, or services to the public; and
(b)
none of the following has a greater opportunity to enjoy the entertainment than the public generally:
(i)
existing business contacts of the person or the person whose business, goods, or services are being advertised or promoted:
(ii)
employees of the person or the person whose business, goods, or services are being advertised or promoted:
(iii)
anyone associated with the person or the person whose business, goods, or services are being advertised or promoted.
Incidental costs of promotion
(2)
The limitation rule does not apply to a deduction for expenditure on entertainment that is merely an incidental part of—
(a)
a trade display mainly held to advertise or promote a business, goods, or services:
(b)
a function open to the public and mainly held to advertise or promote a business, goods, or services.
Samples
(3)
The limitation rule does not apply to a deduction for expenditure on samples that a person provides for promotion or advertising purposes to anyone who is not an employee of or associated with the person.
Entertainment for review
(4)
The limitation rule does not apply to a deduction for expenditure on entertainment that a person provides to a person who is reviewing the entertainment for a book, magazine, paper, or other medium of communication.
Defined in this Act: associated person, business, business contacts, deduction, employee, limitation rule
Compare: 1994 No 164 schedule 6A, part B, cls 6, 8, 10, 12
Subsections (1)(b)(i) and (ii), (2)(a) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
DD 6 Entertainment as business or for charitable purpose
Entertainment as business
(1)
The limitation rule does not apply to a deduction for expenditure on entertainment that a person provides for market value or in an arm’s length transaction in the ordinary course of their business, if that business is to provide 1 or more of the forms of entertainment referred to in section DD 2.
Entertainment for charitable purposes
(2)
The limitation rule does not apply to a deduction for expenditure on entertainment that a person provides to members of the public for charitable purposes.
Defined in this Act: business, charitable purpose, deduction, limitation rule
Compare: 1994 No 164 schedule 6A, part B, cls 9, 11
DD 7 Entertainment outside New Zealand
The limitation rule does not apply to a deduction for expenditure on entertainment that is enjoyed or consumed outside New Zealand.
Defined in this Act: deduction, limitation rule, New Zealand
Compare: 1994 No 164 schedule 6A, part B, cl 7
DD 8 Entertainment that is income or fringe benefit
The limitation rule does not apply to a deduction for expenditure on entertainment that is—
(a)
income of the person who consumes it; or
(b)
a fringe benefit to which fringe benefit tax applies.
Defined in this Act: deduction, fringe benefit, fringe benefit tax, income, limitation rule
Compare: 1994 No 164 schedule 6A, part B, cls 13, 14
DD 9 Relationship with FBT rules
Sections DD 2 to DD 8 override the FBT rules. However, the FBT rules, as applied by section CX 25 (Entertainment), override sections DD 2 to DD 8 if an employee of the person providing the benefit—
(a)
may choose when to receive or use the benefit:
(b)
does not receive or use the benefit in the course of their employment duties.
Defined in this Act: employee, FBT rules
Compare: 1994 No 164 s CI 1(r)
Paragraph (a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
DD 10 Interpretation: reimbursement and apportionment
In sections DD 2 to DD 8,—
(a)
a person is treated as having incurred expenditure on entertainment described in section DD 2 if they pay an allowance for, or reimburse an employee’s expenditure on, the entertainment, and the allowance or reimbursement is exempt income under sections CW 13, CW 13B, and CW 13C (which relate to expenditure and reimbursement of employees):
(b)
if a person incurs expenditure that relates only partly to the entertainment, the expenditure must be apportioned appropriately.
Defined in this Act: employee, exempt income
Compare: 1994 No 164 s DG 1(3), (4)
Section DD 10(a): amended (with effect on 1 April 2005), on 6 October 2009, by section 761 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Paragraph (a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
DD 11 Some definitions
In this subpart,—
business includes any recurring income-earning activity
business contacts —
(a)
includes, for a person,—
(i)
their clients, customers, shareholders, other financiers, and suppliers:
(ii)
the clients, customers, shareholders, other financiers, and suppliers of an associated person:
(b)
if the person is in partnership, does not include other partners in the partnership
business contacts: paragraph (a)(i) and (ii) of this definition was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
business premises —
(a)
means the normal business premises or a temporary workplace of the person (or an associate):
(b)
does not include premises or a workplace established mainly for the purpose of enjoying entertainment.
business premises: paragraph (a) of this definition was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; and”
.
Defined in this Act: associated person, business, business contacts, business premises, shareholder
Compare: 1994 No 164 schedule 6A business, business contacts, business premises
Subpart DE—Motor vehicle expenditure
Contents
Introductory provisions
DE 1 What this subpart does
Apportions motor vehicle expenditure
(1)
This subpart sets out the rules for determining the proportion of business use of a motor vehicle to its total use when a person uses a motor vehicle partly for business purposes and partly for other purposes.
Exclusions
(2)
This subpart does not apply—
(a)
to a company:
(b)
to a person whose only income is income from employment:
(c)
to a motor vehicle that is used only—
(i)
for the purpose of deriving income; or
(ii)
for a purpose that constitutes a fringe benefit.
Defined in this Act: business purposes, business use, company, fringe benefit, income, income from employment, motor vehicle
Compare: 1994 No 164 s DH 1
Subsection (2)(a) and (b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
DE 2 Deductions for business use
Deduction
(1)
A person is allowed a deduction for—
(a)
expenditure that they incur for the business use of a motor vehicle:
(b)
an amount of depreciation loss for the business use of a motor vehicle.
Amount, and timing, of deduction: expenditure
(2)
The amount of the deduction allowed in an income year for the expenditure for the business use of the vehicle is calculated using the formula—
expenditure x business proportion
Definition of item in formula
(3)
In the formula, business proportion is the proportion of business use of the motor vehicle for the income year (expressed as a decimal) calculated under sections DE 3 to DE 12.
Amount, and timing, of deduction: depreciation loss
(4)
The amount of the deduction allowed in an income year for the amount of depreciation loss for the business use of the vehicle is calculated—
(a)
using the formula in subsection (5), except in a case to which paragraph (b) or (c) applies; or
(b)
using the formula in subsection (7), if that subsection applies to the depreciation loss; or
(c)
using the formula in subsection (8C), if that subsection applies to the depreciation loss.
Calculation of deduction: depreciation loss generally
(5)
The formula referred to in subsection (4)(a) is—
standard calculation x business proportion
Definition of items in formula
(6)
In the formula,—
(a)
standard calculation is the amount resulting from a calculation made for the motor vehicle under section EE 16 (Amount resulting from standard calculation):
(b)
business proportion is the proportion of business use of the motor vehicle for the income year (expressed as a decimal) calculated under sections DE 3 to DE 12.
When subsection (7) applies
(6B)
Subsection (7) applies when—
(a)
the depreciation loss results from a calculation made for the motor vehicle under section EE 41(2) (Effect of disposal or event); and
(b)
the motor vehicle was, at any time during the period the person owned it, dealt with in subsection (5).
Calculation of deduction: depreciation loss on disposal
(7)
The formula referred to in subsection (4)(b) is—
Definition of items in formula
(8)
In the formula,—
(a)
disposal depreciation loss is the amount resulting from a calculation made for the vehicle under section EE 41(2) (Effect of disposal or event):
(b)
all deductions is all amounts of depreciation loss relating to the vehicle for which the person has been allowed a deduction in each of the income years in which the person has owned the vehicle:
(c)
base value has the applicable one of the meanings in sections EE 48 to EE 50 (which relate to base value):
(d)
adjusted tax value is the vehicle’s adjusted tax value on the date on which the disposal or event occurs.
When subsection (8C) applies
(8B)
Subsection (8C) applies when—
(a)
the depreciation loss results from a calculation made for the motor vehicle under section EE 41(2) (Effect of disposal or event); and
(b)
the motor vehicle starts to have a business use in the same income year as the year in which the depreciation loss arose.
Calculation of deduction: depreciation loss on disposal in certain circumstances
(8C)
The formula referred to in subsection (4)(c) is—
disposal depreciation loss × business proportion.
Definition of items in formula
(8D)
In the formula,—
(a)
disposal depreciation loss is the amount resulting from a calculation made for the motor vehicle under section EE 41(2):
(b)
business proportion is the proportion of business use of the motor vehicle for the income year (expressed as a decimal) calculated under sections DE 3 to DE 12.
Link with subpart DA
(9)
This section supplements the general permission and overrides the private limitation. The other general limitations still apply.
Defined in this Act: adjusted tax value, amount, business use, deduction, depreciation loss, general limitation, general permission, income year, motor vehicle, own, private limitation, supplement
Compare: 1994 No 164 ss DH 1(3), EG 2(1)(d), EG 19(4)
Subsection (1)(a) was amended, as from 3 April 2006, by section 46 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “:”
for “; or”
.
Subsection (4)(a) was amended, as from 18 December 2006, by section 23(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “paragraph (b) or (c)”
for “paragraph (b)”
with application as from the 2006-07 income year.
Subsection (4)(b) was substituted, as from 18 December 2006, by section 23(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2006-07 income year.
Subsection (4)(c) was inserted, as from 18 December 2006, by section 23(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2006-07 income year.
Subsection (6B) was inserted, as from 18 December 2006, by section 23(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2006-07 income year.
Subsections (8B) to (8D) were inserted, as from 18 December 2006, by section 23(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) with application as from the 2006-07 income year.
DE 3 Methods for calculating proportion of business use
The 3 methods that may be used to calculate the proportion of business use of a motor vehicle are—
(a)
actual records (section DE 5):
(b)
a logbook (sections DE 6 to DE 11):
(c)
mileage rates (section DE 12).
Defined in this Act: business use, motor vehicle
Compare: 1994 No 164 s DH 2
Paragraphs (a) and (b) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
DE 4 Default method for calculating proportion of business use
When this section applies
(1)
This section applies when—
(a)
a person has not maintained actual records to show the proportion of business use of a motor vehicle; or
(b)
a period is not a term to which a proportion of business use of a motor vehicle established by a logbook applies; or
(c)
a person cannot use the mileage rate method.
Amount of deduction
(2)
The deduction under section DE 2 for expenditure or loss incurred is limited to the lesser of—
(a)
the proportion of actual business use of the vehicle; and
(b)
25% of the total use of the vehicle.
Defined in this Act: amount, business use, deduction, motor vehicle
Compare: 1994 No 164 s DH 4
Actual records
DE 5 Actual records
To determine the proportion of business use of a motor vehicle, a person may use actual records showing the reasons for and the distance of journeys by a motor vehicle for business purposes. However, when the period covered falls within a logbook term, actual records may be used only if the person and the Commissioner agree.
Defined in this Act: business purposes, business use, Commissioner, logbook term, motor vehicle
Compare: 1994 No 164 s DH 2
Logbook
DE 6 Using logbook for test period
A person may keep a logbook for a test period for the purpose of establishing the proportion of the business use of a motor vehicle for an income year (or part of an income year) that falls within a logbook term. If a person uses a logbook as a method of establishing the proportion of business use, they must also record the total distance travelled in each income year (or part of an income year) that falls within a logbook term.
Defined in this Act: business use, income year, logbook term, motor vehicle
Compare: 1994 No 164 s DH 3(1)
DE 7 Logbook requirements
Test period
(1)
When a logbook is used to establish the proportion of business use of a motor vehicle, a person must select a start date, and keep the logbook for at least 90 consecutive days at a time that represents (or is likely to represent) the average proportion of travel by the vehicle for business purposes during the logbook term.
Record of reasons for, and distance of, journeys
(2)
The logbook must record—
(a)
the start and end of the 90 day test period; and
(b)
the vehicle’s odometer readings at the start and end of the test period; and
(c)
the distance of each business journey; and
(d)
the date of each business journey; and
(e)
the reason for each business journey; and
(f)
any other detail that the Commissioner may require.
Defined in this Act: business, business purposes, business use, Commissioner, logbook term, motor vehicle
Compare: 1994 No 164 s DH 3(2)
DE 8 Logbook term
Meaning of logbook term
(1)
A logbook term is a period to which the proportion of business use of a motor vehicle established by the logbook applies. The term lasts up to 3 years and starts and ends as described in subsections (2) and (3).
Start of term
(2)
A logbook term starts on the date that is the latest of the following days:
(a)
the first day of the income year in which a person starts to keep a logbook:
(b)
the day that a person acquires the motor vehicle (unless the vehicle is a replacement vehicle, which is dealt with in section DE 11):
(c)
the day immediately after the last day of the previous logbook term:
(d)
a day that a person specifies.
End of term
(3)
The logbook term ends on the date that is the earliest of the following days:
(a)
the day that a person disposes of the motor vehicle without replacing it:
(b)
the day that is 3 years after the first day of the income year in which the logbook term started:
(c)
a day that the Commissioner specifies under section DE 9:
(d)
a day that a person specifies.
Defined in this Act: business use, Commissioner, income year, logbook term, motor vehicle, year
Compare: 1994 No 164 s DH 3(3)
Subsections (2)(a) to (c) and (3)(a) to (c) were amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
DE 9 Inadequate logbook
Non-representative logbook proportion
(1)
If the Commissioner considers that the proportion of business use recorded in a logbook does not, or does no longer, represent the average use of a motor vehicle for business purposes during an income year that falls within a logbook term, the Commissioner may,—
(a)
within the logbook term, direct a person to keep a further logbook and specify another 90 day period in the logbook term for keeping the logbook; or
(b)
treat a person as not having kept a logbook that applies to the logbook term.
Further logbook
(2)
If the Commissioner directs a person to keep a further logbook, and the proportion of business use calculated under that logbook is less by at least 20% than the proportion under the first logbook, the Commissioner may find that the first logbook—
(a)
represented the average use of the motor vehicle for business purposes for only part of the logbook term; or
(b)
did not represent that use at all.
Partly representative logbook
(3)
If subsection (2)(a) applies, the Commissioner may determine a date on which the application of the first logbook ended, and the further logbook applies to a new logbook term that starts on the day after that date.
Non-representative logbook
(4)
If subsection (2)(b) applies, the Commissioner may direct that the further logbook applies for the logbook term to which the first logbook applied.
Defined in this Act: business purposes, business use, Commissioner, income year, logbook term, motor vehicle
Compare: 1994 No 164 s DH 3(6), (7)
DE 10 Variance during logbook term
If, in any month during a logbook term, the proportion of business use in that month is less by at least 20% than the proportion established by the logbook, and the proportion of business use recorded in the logbook no longer represents the average use of the motor vehicle for business purposes, the logbook term must end on the last day of that month.
Defined in this Act: business purposes, business use, logbook term, motor vehicle
Compare: 1994 No 164 s DH 3(4)
DE 11 Replacement vehicles
For the purpose of establishing the proportion of business use of a motor vehicle, a replacement vehicle is treated in the same way as the vehicle it replaces if—
(a)
the logbook is likely to be representative of the average travel for business purposes for the remainder of the logbook term; and
(b)
from the date of replacement, a person keeps a record of the total distance travelled by the replacement vehicle for each income year (or part of an income year) of the remaining logbook term.
Defined in this Act: business purposes, business use, income year, logbook term, motor vehicle
Compare: 1994 No 164 s DH 3(5)
Mileage rates
DE 12 Mileage rate method
Using mileage rates
(1)
If a person’s business travel is 5,000 kilometres or less in an income year, they may use the mileage rate method to calculate the expenditure or loss on a motor vehicle that represents the proportion of business use of the vehicle.
Amount of deduction
(2)
Under the mileage rate method, the person must keep details of the business use of the motor vehicle and calculate the mileage travelled for business purposes for the income year. The amount of the deduction under this method is found by multiplying the mileage rate by the distance that reflects the proportion of business use of the vehicle for the income year.
Setting mileage rates
(3)
For the purposes of this section, the Commissioner must from time to time set and publish a mileage rate.
Defined in this Act: amount, business, business purposes, business use, Commissioner, deduction, income year, motor vehicle
Subpart DF—Government grants and compensation
Heading: amended, on 1 July 2008, by section 36 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Contents
DF 1 Government grants to businesses
When subsection (2) applies
(1)
Subsection (2) applies when—
(a)
a payment is granted by a local authority or a public authority to a person for a business carried on by the person; and
(b)
the payment is in the nature of a grant or subsidy, or is a grant-related suspensory loan, but is not otherwise a payment in the nature of an advance or loan; and
(c)
the payment is made to the person for expenditure that they incur, other than in a way described in subsection (3); and
(d)
the person would be allowed a deduction for the expenditure if this section did not exist; and
(e)
the payment is excluded income under section CX 41 (Government grants to businesses).
No deduction (with exception)
(2)
The person is denied, to the extent of the amount of the payment, the deduction that they would have been allowed if this section did not exist.
When subsection (4) applies
(3)
Subsection (4) applies when—
(a)
a payment is granted by a local authority or a public authority to a person for a business carried on by the person; and
(b)
the payment is in the nature of a grant or subsidy, or is a grant-related suspensory loan, but is not otherwise a payment in the nature of an advance or loan; and
(c)
the payment is made to the person for expenditure that they incur in acquiring, constructing, installing, or extending an item of depreciable property; and
(d)
the person owns the item; and
(e)
the person is allowed a deduction for an amount of depreciation loss for the item.
Amount of depreciation loss
(4)
For the purpose of quantifying the amount of depreciation loss, the amount of the expenditure is reduced by the amount of the payment.
Amendment of assessment
(5)
Despite the time bar, the Commissioner may amend an assessment at any time in order to give effect to this section.
Exclusion
(6)
This section does not apply to a large budget screen production grant.
Link with subpart DA
(7)
This section overrides the general permission.
Defined in this Act: amount, assessment, business, Commissioner, deduction, depreciable property, depreciation loss, general permission, grant-related suspensory loan, large budget screen production grant, local authority, public authority, time bar
Compare: 1994 No 164 s DC 1
Subsection (1)(d) was amended, as from 3 April 2006, by section 48(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting “exist; and”
for the expression “exist.”
with application as from the income year corresponding to the 2005–06 tax year.
Subsection (1)(e) was inserted, as from 3 April 2006, by section 48(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
DF 2 Repayment of grant-related suspensory loans
Deduction
(1)
A person is allowed a deduction for the amount of a repayment that they are required to make of some or all of a grant-related suspensory loan to the extent to which the amount relates to a payment to which section DF 1(2) applies.
Timing of deduction
(2)
The deduction is allocated to the income year in which repayment is first required.
Amount of depreciation loss
(3)
If a person is required to repay some or all of a grant-related suspensory loan, then, to the extent to which section DF 1(3) and (4) apply to the loan,—
(a)
the person is allowed a deduction for an amount of depreciation loss for the item; and
(b)
the amount of depreciation loss is the total of the amounts of depreciation loss for the item for which the person would have been allowed a deduction if section DF 1(3) and (4) had not applied.
Quantifying amount of depreciation loss
(4)
For the purpose of quantifying the amount of depreciation loss for the item in the income year and in later income years, the following matters must be taken into account:
(a)
the amount of the deduction under subsection (3); and
(b)
the total of the amounts of depreciation loss for the item for which the person has been allowed a deduction; and
(c)
the person’s expenditure on acquiring, constructing, installing, or extending the item.
Link with subpart DA
(5)
This section supplements the general permission and overrides the capital limitation for the amount described in subsection (1). The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, depreciation loss, general limitation, general permission, grant-related suspensory loan, income year, supplement
Compare: 1994 No 164 s DC 3(1)-(3)
DF 3 Identifying expenditure for purposes of sections DF 1 and DF 2
Defined in this Act: grant-related suspensory loan
Compare: 1994 No 164 s DC 3(4)
DF 4 Payment by claimant receiving personal service rehabilitation payment
When this section applies
(1)
This section applies when a person (the claimant) is paid a personal service rehabilitation payment for the claimant under the Injury Prevention, Rehabilitation, and Compensation Act 2001 for an income year, and the amount of the payment is assessable income.
Deduction
(2)
The claimant is allowed a deduction for the income year of the amount given by subsection (3).
Formula
(3)
The amount of the deduction allowed under subsection (2) is calculated using the following formula:
| amount paid |
| 1 – tax rate. |
Definition of items in formula
(4)
In the formula,—
(a)
amount paid is the amount paid by the claimant for an income year for a key aspect of social rehabilitation referred to in the definition of personal service rehabilitation payment in section OB 1, to the extent to which the amount is less than the amount of personal service rehabilitation payments, after any deduction of tax under this Act, paid to the claimant for the income year:
(b)
tax rate is the rate at which tax is deducted under this Act from personal service rehabilitation payments for the income year.
Link with subpart DA
(5)
This section supplements the general permission and overrides the capital limitation and private limitation for the amount described in subsection (2). The other general limitations still apply.
Defined in this Act: assessable income, capital limitation, general limitation, general permission, income year, payment, personal service rehabilitation payment, private limitation
Section DF 4: added, on 1 July 2008, by section 37 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subpart DN—Attributed losses from foreign equity
Contents
Attributed controlled foreign company loss
DN 1 Attributed controlled foreign company loss
Deduction
(1)
A person is allowed a deduction for an attributed CFC loss, subject to the jurisdictional ring-fencing rule in section DN 4.
Link with subpart DA
(2)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: attributed CFC loss, capital limitation, deduction, general limitation, general permission, supplement
Compare: 1994 No 164 s CG 1(a)
DN 2 When attributed CFC loss arises
A person has an attributed CFC loss from a foreign company in an income year if—
(a)
the foreign company is a CFC at any time during 1 of its accounting periods, under sections EX 1 to EX 7 (which relate to the definition of a controlled foreign company); and
(b)
the accounting period ends during the income year; and
(c)
the person has an income interest in the foreign company for the accounting period, under sections EX 8 to EX 13 (which relate to calculating a person’s income interest); and
(d)
at any time in the accounting period, the person is a New Zealand resident who is not a transitional resident; and
(e)
the person’s income interest is 10% or more for the accounting period, under sections EX 14 to EX 17 (which relate to the 10% threshold); and
(f)
the CFC has a branch equivalent loss for the accounting period, under section EX 21 (Branch equivalent income or loss: calculation rules); and
(g)
the CFC is not an unqualified grey list CFC for the accounting period, under section EX 22 (Unqualified grey list CFCs).
Defined in this Act: accounting period, attributed CFC loss, branch equivalent loss, CFC, foreign company, grey list, income interest, income year, New Zealand resident, transitional resident
Compare: 1994 No 164 ss CG 6(1), CG 7(1), CG 13(1)
Paragraph (d) was substituted, as from 1 October 2005, by section 50(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 50(3) and (4) of that Act as to the application of this amendment.
The list of defined terms was amended, as from 1 October 2005, by section 50(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting the words “transitional resident”
with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 50(3) and (4) of that Act as to the application of this amendment.
DN 3 Calculation of attributed CFC loss
The amount of an attributed CFC loss is calculated under sections EX 18 to EX 20 (which relate to the calculation of attributed CFC income or loss).
Defined in this Act: amount, attributed CFC loss
DN 4 Ring-fencing cap on deduction
Amount of deduction
(1)
The deduction that a person is allowed for an attributed CFC loss from a CFC in an income year is no more than the total of—
(a)
any attributed CFC income of the person for the income year from another CFC that is resident in the same country as the first CFC for the relevant accounting period; and
(b)
any FIF income of the person for the income year calculated under the branch equivalent method from a FIF that is resident in the same country.
Income only once
(2)
When subsection (1) is applied to an attributed CFC loss, an amount of attributed CFC income or FIF income may be used only to the extent to which the income is not used when—
(a)
subsection (1) is applied to another attributed CFC loss; or
(b)
section DN 9 is applied to a FIF loss.
Relationship with sections IE 3 and IG 4
(3)
Any excess not able to be deducted because of subsection (1) is an attributed CFC net loss able to be used under section IE 3 (Attributed CFC net losses) or IG 4 (Group of companies attributed CFC net losses).
Defined in this Act: accounting period, amount, attributed CFC income, attributed CFC loss, attributed CFC net loss, branch equivalent method, CFC, deduction, FIF, FIF income, FIF loss, income year
Compare: 1994 No 164 s DP 1
Foreign investment fund loss
DN 5 Foreign investment fund loss
Deduction
(1)
A person is allowed a deduction for a FIF loss.
Ring fencing rule for loss under branch equivalent method
(1B)
The deduction for a FIF loss calculated under the branch equivalent method is subject to the jurisdictional ring-fencing rule in section DN 9.
Ring fencing rule for loss under branch equivalent method
Link with subpart DA
(2)
This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: branch equivalent method, calculation method, capital limitation, deduction, FIF loss, general limitation, general permission, supplement
Compare: 1994 No 164 ss DP 2(1), DP 3(1)
Subsection (1) and the preceding heading were substituted, as from 1 April 2007, by section 24(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81). See section 24(2) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
Subsection (1B) and the preceding heading were inserted, as from 1 April 2007, by section 24(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81). See section 24(2) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
DN 6 When FIF loss arises
General rule
(1)
A person has a FIF loss in an income year if,—
(a)
at any time in the year, the person has—
(i)
rights in a foreign company, or a foreign superannuation scheme, or an entity listed in schedule 4, part A (Foreign investment funds); or
(ii)
rights under a life insurance policy issued by a non-resident; and
(b)
at that time, the rights are an attributing interest in a FIF under sections EX 30 (Attributing interests in FIFs) and EX 31 (Direct income interests in FIFs); and
(c)
at that time, the rights are not exempt from being an attributing interest in a FIF under any of—
(i)
the CFC regime exemption in section EX 32 (CFC rules exemption):
(ii)
the grey list exemption in section EX 33(Exemptions: direct income interests in FIF in grey list country):
(iib)
the exemptions limited by income years in section EX 33B (Exemptions limited by income years: shares in certain grey list companies):
(iic)
the exemption for shares in a listed Australian company in section EX 33C (Exemption: shares in listed Australian company):
(iid)
the exemption for units in certain Australian unit trusts in section EX 33D (Exemption; units in certain Australian unit trusts):
(iie)
the Australian superannuation fund exemption in section EX 33E (Australian superannuation fund exemption):
(iii)
the foreign exchange control exemption in section EX 34 (Foreign exchange control exemption):
(iv)
the exemption for a non-resident or transitional resident, in section EX 35 (Income interest of non-resident or transitional resident):
(v)
the immigrant’s accrued superannuation entitlement exemption in section EX 36 (Immigrant’s accrued superannuation entitlement exemption):
(vi)
the annuity or pension exemption in section EX 37 (Non-resident’s pension or annuity exemption); and
(d)
if the person is a natural person and not acting as a trustee, the person holds, at any time in the year when the person is a New Zealand resident, attributing interests in FIFs for which the total of the following amounts is more than $50,000:
(i)
if subparagraph (ii) does not apply to the interest, the cost of the interest calculated under section EX 56 (Measurement of cost):
(ii)
if the person acquired the interest before 1 January 2000 and chooses, for the year or an earlier year, that this subparagraph and section CQ 5(1)(d)(ii) (When FIF income arises) apply to all interests acquired before 1 January 2000, half of the market value of the interest on 1 April 2007; and
(db)
if the person is acting as a trustee of a trust that meets the requirements of subsection (4), the person holds, at any time in the year, attributing interests in FIFs for which the total of the following amounts is more than $50,000:
(i)
if subparagraph (ii) does not apply to the interest, the cost of the interest calculated under section EX 56 (Measurement of cost):
(ii)
if the person acquired the interest before 1 January 2000 and chooses, for the year or an earlier year, that this subparagraph and section CQ 5(1)(d)(ii) apply to all interests acquired before 1 January 2000, half of the market value of the interest on 1 April 2007; and
(e)
at any time in the year, the person is a New Zealand resident who is not a transitional resident and holds the attributing interest; and
(f)
under the relevant calculation method chosen by the person, a loss amount is calculated for the income year or relevant accounting period under sections EX 38 to EX 45B (which relate to the calculation of FIF income or loss).
Treatment of deemed transaction under section EX 51, EX 53, or EX 54B
(1B)
If a person is treated under section EX 51(5) (Consequences of changes in method), EX 53 (Changes in application of FIF exemptions), or EX 54B (FIF rules first applying to interest for income year beginning on or after 1 April 2007) as disposing of or acquiring rights in an income year, the disposal or acquisition is ignored for the purposes of subsection (1)(d) and (db).
Look-through calculation methods
(2)
Despite subsection (1), if the calculation method is the accounting profits method or branch equivalent method,—
(a)
FIF loss arises in the income year only if the relevant accounting period of the FIF ends during the year; and
(b)
the tests in subsection (1)(a), (b), (c), and (e) are applied on the basis that references in subsection (1)(a), (b), (c), and (e) to any time in the income year are read as references to any time in the relevant accounting period.
Special rule: CFC with FIF interest
(3)
A person with an income interest of 10% or more in a CFC can also have a FIF loss in an income year under the special rule in section EX 46 (Additional FIF income or loss if CFC owns FIF), which applies when a CFC has an attributing interest in a FIF (whether or not the CFC is an unqualified grey list CFC under section EX 22 (Unqualified grey list CFCs)).
When application of subsection (1) affected by subsection (1)(db)
(4)
Subsection (1)(db) applies to the trustee of a trust for an income year if—
(a)
the settlor of the trust—
(i)
is a relative or legal guardian of a beneficiary of the trust, or a person associated with a relative or legal guardian of a beneficiary of the trust under section OD 7 (Defining when 2 persons are associated persons); and
(ii)
is required by a court order to pay damages or compensation to the beneficiary:
(b)
the settlor of the trust—
(i)
is the estate of a deceased person; and
(ii)
is required by a court order to settle on the trust the proceeds of damages or compensation for the beneficiaries of the trust:
(c)
the settlor of the trust is the Accident Compensation Corporation:
(d)
the trust is of the estate of a deceased person and the income year begins on or before the day that is 5 years after the person’s death.
Defined in this Act: accounting period, accounting profits method, amount, attributing interest, branch equivalent method, calculation method, CFC, FIF, FIF loss, foreign company, foreign superannuation scheme, grey list, income interest, income year, life insurance policy, New Zealand resident, non-resident, transitional resident, trustee
Compare: 1994 No 164 ss CG 7(5), CG 15(1), (2), CG 16(2)
Subsection (1)(a) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Subsection (1)(a)(ii) was amended, as from 1 February 2004, by section 25(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “non-resident; and”
for “non-resident:”
.
Subsection (1)(b) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Subsection (1)(b) was amended, as from 1 February 2004, by section 25(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “FIFs); and”
for “FIFs):”
.
Subsection (1)(c)(i) to (v) were amended, as from 21 December 2004, by section 270Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; or”
.
Subsection (1)(c)(ii) was amended, as from 1 April 2007, by section 25(3)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “(Exemptions: direct income interests in FIF in grey list country)”
for “(Grey list exemption)”
.
Subsection (1)(c)(iib) to (iie) was inserted, as from 1 April 2007, by section 25(3)(b) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
Subsection (1)(c)(iv) was substituted, as from 1 October 2005, by section 51(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year.
Subsection (1)(c)(vi) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Subsection (1)(c)(vi) was amended, as from 1 February 2004, by section 25(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “exemption); and”
for “exemption):”
.
Subsection (1)(d) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Subsection (1)(d) was substituted, as from 1 October 2005, by section 51(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 51(4) and (5) of that Act for the application of this amendment.
Subsection (1)(d) was amended, as from 1 February 2004, by section 25(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “$50,000; and”
for “$50,000:”
.
Subsection (1)(d) was substituted, as from 1 April 2007, by section 25(6) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81). See section 25(10) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
Section DN 6(1)(d): amended (with effect from 1 April 2007), on 19 December 2007, by section 38(1)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (1)(db) was inserted, as from 1 April 2007, by section 25(6) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81). See section 25(10) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
Section DN 6(1)(db): amended (with effect from 1 April 2007), on 19 December 2007, by section 38(1)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (1)(e) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “:”
for “; and”
.
Subsection (1)(e) was amended, as from 1 February 2004, by section 25(7) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “time; and”
for “time:”
.
Subsection (1)(e) was substituted, as from 1 October 2005, by section 51(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 51(4) and (5) of that Act for the application of this amendment.
Subsection (1)(f) was amended, as from 1 April 2007, by section 25(8) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81) by substituting “EX 45B”
for “EX 45”
. See section 25(10) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
Section DN 6(1B) heading: inserted (with effect from 1 April 2007), on 19 December 2007, by section 38(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DN 6(1B): inserted (with effect from 1 April 2007), on 19 December 2007, by section 38(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subsection (4) and the preceding heading were inserted, as from 1 April 2007, by section 25(9) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81). See section 25(10) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
The list of defined terms was amended, as from 1 October 2005, by section 51(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by inserting “transitional resident”
with application for: a person who becomes a transitional resident as from 1 April 2006; and as from the income year corresponding to the 2005–06 tax year. See section 51(4) and (5) of that Act as to the application of this amendment.
DN 7 Calculation of FIF loss
The amount of a FIF loss is calculated, using the relevant calculation method, under sections EX 38 to EX 49 (which relate to the calculation of FIF income or loss).
Defined in this Act: amount, calculation method, FIF loss
Section DN 7 was amended, as from 1 October 2005, by section 181 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “EX 38”
for “EX 42”
.
DN 8 Ring-fencing cap on deduction: not branch equivalent method
[Repealed]Section DN 8 was repealed, as from 1 April 2007, by section 26(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81). See section 26(2) of that Act for the application of this amendment for income years beginning on or after 1 April 2007.
DN 9 Ring-fencing cap on deduction: branch equivalent method
Amount of deduction
(1)
If a person has a FIF loss that is calculated under the branch equivalent method, the deduction the person is allowed for the loss in an income year is no more than the total of—
(a)
any attributed CFC income of the person for the income year from a CFC that is resident in the same country as the FIF for the relevant accounting period of the CFC; and
(b)
any FIF income of the person for the income year that is calculated under the branch equivalent method from another FIF resident in the same country.
Income only once
(2)
When subsection (1) is applied to a FIF loss, an amount of attributed CFC income or FIF income may be used only to the extent to which the income is not used when applying—
(a)
subsection (1) to another FIF loss; or
(b)
section DN 4 to an attributed CFC loss.
Relationship with section IE 4
(3)
Any excess not able to be deducted because of subsection (1) is a FIF net loss able to be used under section IE 4 (FIF net losses).
Defined in this Act: accounting period, amount, attributed CFC income, attributed CFC loss, branch equivalent method, CFC, deduction, FIF, FIF loss, FIF net loss, income year
Compare: 1994 No 164 s DP 3
Subpart DO—Farming and aquacultural business expenditure
Contents
Farming
DO 1 Enhancements to land, except trees
Deduction
(1)
A person is allowed a deduction for expenditure that they incur on the following in carrying on a farming or agricultural business on land in New Zealand:
(a)
the destruction of weeds or plants detrimental to the land:
(b)
the destruction of animal pests detrimental to the land:
(c)
the repair of flood or erosion damage to the land:
(d)
the destruction of scrub, stumps, or undergrowth on the land:
(e)
the clearing or removing from the land of scrub, stumps, or undergrowth:
(f)
the construction on the land of fences for farming or agricultural purposes, including buying wire or wire netting for the purpose of making new or existing fences rabbit-proof:
(g)
the regrassing and fertilising of all types of pasture, if the expenditure is not incurred in the course of a significant capital activity.
Link with subpart DA
(2)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: business, capital limitation, deduction, general limitation, general permission, New Zealand
Compare: 1994 No 164 s DO 3(a)-(d), (g)
Subsection (1)(a) to (e) was amended, as from 21 December 2004, by section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “:”
for the expression “; or”
.
Subsection (1)(f) was amended, as from 3 April 2006, by section 52(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by substituting the expression “rabbit-proof:”
for the expression “rabbit-proof.”
with application to expenditure incurred as from 1 April 2005.
Subsection (1)(g) was inserted, as from 3 April 2006, by section 52(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application to expenditure incurred as from 1 April 2005.
DO 2 Erosion and shelter plantings
When this section applies
(1)
This section applies when a person carries on a farming or agricultural business on land in New Zealand, whether or not the business is the principal business carried on on the land.
Deduction
(2)
The person is allowed a deduction for expenditure that they incur in planting or maintaining trees, whether or not on the land, for the purpose of—
(a)
preventing or combating erosion of the land; or
(b)
providing shelter to the land.
Link with subpart DA
(3)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: business, capital limitation, deduction, general limitation, general permission, New Zealand
Compare: 1994 No 164 s DO 3(e), (f)
DO 3 Trees on farms
When this section applies
(1)
This section applies when—
(a)
a person carries on, on land in New Zealand, a farming or agricultural business that is the principal business carried on on the land; and
(b)
they plant or maintain trees on the land; and
(c)
the trees are not—
(i)
trees for which the person is allowed a deduction under section DO 2; or
(ii)
trees planted mainly to produce fruit; or
(iii)
trees planted under a forestry encouragement agreement under the Forestry Encouragement Act 1962.
Deduction
(2)
The person is allowed the following deductions:
(a)
in an income year in which the person incurs expenditure on planting trees on the land, they are allowed a deduction of the lesser of $7,500 and the expenditure that they incur; and
(b)
in an income year in which the person incurs expenditure on maintaining trees on the land, they are allowed a deduction of the lesser of $7,500 and the expenditure that they incur.
Link with subpart DA
(3)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: business, capital limitation, deduction, general limitation, general permission, income year, New Zealand
Compare: 1994 No 164 s DO 7(1), (2)(e)
DO 4 Improvements to farm land
When this section applies
(1)
This section applies when—
(a)
a person carries on a farming or agricultural business on land in New Zealand; and
(b)
an improvement described in schedule 7, part A (Expenditure on farming, aquacultural, and forestry improvements) has been made to the land; and
(c)
the expenditure on the improvement is not expenditure to which sections DO 4B to DO 4D apply.
Deduction: expenditure: owner of land
(2)
A person who owns the land is allowed a deduction for expenditure to which all the following apply:
(a)
it is incurred on making the improvement; and
(b)
it is incurred by the person or by another person; and
(c)
it is not incurred on anything described in any of sections DO 1 to DO 3; and
(d)
it is incurred in the 1995-96 income year or in a later income year, not including the income year in which the person disposes of the land. (The income year referred to in this paragraph is the income year of the person who owns the land.); and
(e)
it is incurred in developing the land; and
(f)
it is of benefit to the business in the income year in which the person is allowed the deduction.
Deduction: expenditure: non-owner of land
(3)
A person who does not own the land is allowed a deduction for expenditure to which all the following apply:
(a)
it is incurred on making the improvement; and
(b)
it is incurred by the person; and
(c)
it is not incurred on anything described in any of sections DO 1 to DO 3; and
(d)
it is incurred in the 1995-96 income year or in a later income year, not including the income year in which the person ceases to carry on the business on the land; and
(e)
it is incurred in developing the land; and
(f)
it is of benefit to the business in the income year in which the person is allowed the deduction.
Amount, and timing, of deduction
(4)
The amount of the deduction is calculated using the formula—
schedule 7 percentage x diminished value
Definition of items in formula
(5)
In the formula,—
(a)
schedule 7 percentage is the percentage set out opposite the description of the improvement in schedule 7, part A (Expenditure on farming, aquacultural, and forestry improvements):
(b)
diminished value is the diminished value of the improvement.
Amount, and timing, for obsolete vines or trees
(6)
When non-listed horticultural plants described in schedule 7, part A, item 8 (Expenditure on farming, aquacultural, and forestry improvements) have ceased to exist, or to be used in deriving income, on or after 16 December 1991,—
(a)
subsection (4) does not apply; and
(b)
the amount of the deduction is the diminished value of the non-listed horticultural plants at the time they ceased to exist or to be used in deriving income; and
(c)
the deduction is allocated to the income year in which the non-listed horticultural plants ceased to exist or to be used in deriving income.
Link with subpart DA
(7)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Order in Council to amend schedule 7
(8)
The Governor-General may from time to time by Order in Council make regulations amending schedule 7 to vary the categories of improvements and percentages of diminished value of those improvements allowed as a deduction.
Defined in this Act: amount, business, capital limitation, deduction, diminished value, general limitation, general permission, income, income year, New Zealand, own
Compare: 1994 No 164 s DO 4(1)-(3)(b), (4)
Subsection (1)(b) was amended, as from 1 October 2005, by section 182(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “land; and”
for the word “land.”
with application as from income years corresponding to the 2005–06 tax year.
Subsection (1)(c) was inserted, as from 1 October 2005, by section 182(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from income years corresponding to the 2005–06 tax year.
Subsection (6) was amended, as from 1 October 2005, by section 182(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting “non-listed horticultural plants”
for “vines or trees”
with application as from income years corresponding to the 2005–06 tax year.
Subsection (8) was inserted, as from 1 October 2005, by section 53(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) with application as from the income year corresponding to the 2005–06 tax year.
DO 4B Expenditure on land: planting of listed horticultural plants
Application of section
(1)
This section applies if—
(a)
a person carries on a farming or agricultural business (including a horticultural business) on land in New Zealand; and
(b)
the land has been developed by the planting of listed horticultural plants on the land.
Deduction and timing
(2)
For an income year in which the planting benefits the business and for which subsection (3) does not apply, the person is allowed a deduction relating to expenditure incurred by the person, or by another person, in developing the land.
Income year in which no deduction
(3)
The person is not allowed a deduction under subsection (2) for an income year in which—
(a)
if the person owns the land, the person disposes of the land:
(b)
if the person does not own the land, the person ceases carrying on the business on the land.
Amount of deduction other than under subsections (6) and (7)
(4)
For expenditure to which subsections (6) and (7) do not apply for the income year, the amount of the deduction under subsection (2) is calculated using the formula:
1.2 x rate x diminished value.
Definition of items in formula
(5)
In the formula—
(a)
rate is the percentage rate determined for the type of listed horticultural plant by the Commissioner under section 91AAB of the Tax Administration Act 1994:
(b)
diminished value is the diminished value of the expenditure.
Deduction: expenditure on replaced plant if no deduction under section DO 4C
(6)
If a listed horticultural plant in a planting of the person ceases in an income year to exist or to be used in deriving assessable income and the person has no deduction under section DO 4C for the income year for the expenditure incurred in replacing the listed horticultural plant—
(a)
the person is allowed a deduction:
(b)
the amount of the deduction is the diminished value of the expenditure on the listed horticultural plant at the time that the listed horticultural plant ceases to exist or to be used in deriving assessable income:
(c)
the deduction is allocated to the income year in which the listed horticultural plant ceases to exist or to be used in deriving income.
Treatment of expenditure on replaced plant if deduction under section DO 4C
(7)
If a listed horticultural plant in a planting of the person ceases in an income year to exist or to be used in deriving assessable income and the person has a deduction under section DO 4C for the income year for all or some of the expenditure incurred in replacing the listed horticultural plant—
(a)
the person is not allowed a deduction under this section; and
(b)
the person may add the diminished value, immediately before the replacement, of the expenditure on the listed horticultural plant to the diminished values, at the end of the income year, of the expenditure on listed horticultural plants that are in the planting at the end of the income year; and
(c)
the person may elect the method of making the addition by applying the method in a return of income for the income year.
Link with subpart DA
(8)
This section overrides the general permission and the capital limitation. The other general limitations still apply.
Defined in this Act: assessable income, business, capital limitation, deduction, diminished value, general limitation, general permission, income year, listed horticultural plant, planting, return of income
Section DO 4B was inserted, as from 1 October 2005, by section 183 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
DO 4C Expenditure on land: horticultural replacement planting
Application of section
(1)
This section applies to a person who carries on a horticultural business on land in New Zealand and who, in an income year (called the current income year)—
(a)
plants, or causes to be planted, on the land a listed horticultural plant as a replacement plant:
(b)
regrafts, or causes to be regrafted, a listed horticultural plant on the land as a replacement plant.
Deduction
(2)
The person is allowed a deduction of an amount given by 1 of subsections (3) and (5) if, in the current income year—
(a)
the person incurs expenditure in replacing a listed horticultural plant; and
(b)
the replacement plant benefits the business; and
(c)
the person does not dispose of the land on which the listed horticultural plant is cultivated; and
(d)
the person elects that this section apply to the expenditure by making a return of income for the current income year on that basis.
Amount of deduction if no deduction in 1 or both of 2 preceding income years
(3)
If the person has had no deduction under this section for 1 or both of the 2 income years preceding the current income year, the amount of the deduction under subsection (2) is calculated using the formula—
Definition of items in formula
(4)
In the formula—
(a)
replacement expenditure is the amount of the expenditure incurred by the person in replacing the listed horticultural plant:
(b)
fraction is the greater of 7.5% and the replaced area fraction for the planting for the current income year.
Amount of deduction if deduction in both of 2 preceding income years
(5)
If the person has had a deduction under this section for a planting for both of the 2 income years preceding the current income year, the amount of the deduction under subsection (2) is the lesser of—
(a)
the amount that is calculated using the formula in subsection (6):
(b)
the amount that is calculated using the formula in subsection (8).
Formula for first amount
(6)
The first amount is calculated using the formula
Definition of items in formula
(7)
In the formula—
(a)
replacement expenditure is the amount of the expenditure incurred by the person:
(b)
fraction is the greater of 7.5% and the replaced area fraction for the planting for the current income year.
Formula for second amount
(8)
The second amount is calculated using the formula—
Definition of items in formula
(9)
In the formula—
(a)
replacement expenditure is the amount of the expenditure incurred by the person:
(b)
earlier fraction is the lesser of 7.5% and the replaced area fraction for the planting for the earlier of the 2 income years preceding the current income year:
(c)
later fraction is the lesser of 7.5% and the replaced area fraction for the planting for the later of the 2 income years preceding the current income year:
(d)
replaced area fraction is the replaced area fraction for the planting for the current income year.
Timing of deduction
(10)
The deduction is allocated to the current income year.
Link with subpart DA
(11)
This section overrides the general permission and the capital limitation. The other general limitations still apply.
Defined in this Act: assessable income, business, capital limitation, deduction, diminished value, general limitation, general permission, income year, listed horticultural plant, planting, replaced area fraction, replacement plant, return of income
Section DO 4C was inserted, as from 1 October 2005, by section 183 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
DO 4D Accounting for expenditure on listed horticultural plants under sections DO 4B and DO 4C
Separate accounting for additional listed horticultural plants if deduction under section DO 4C
(1)
A person to whom section DO 4B applies must, for an income year and for later income years for which subsection (2) does not apply, account separately under sections DO 4B and DO 4C for listed horticultural plants if—
(a)
the person has had a deduction under section DO 4C for 1 or both of the 2 income years preceding the income year; and
(b)
the person acquires the listed horticultural plants in the income year; and
(c)
the listed horticultural plants benefit the business of the person in the income year; and
(d)
the listed horticultural plants are not replacement plants.
Combined accounting for listed horticultural plants if no deduction under section DO 4C
Defined in this Act: deduction, income year, listed horticultural plant, planting, replacement plant
Section DO 4D was inserted, as from 1 October 2005, by section 183 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
DO 4E Some definitions
In this section and sections DO 4B to DO 4D—
planting for a person and an income year means 1 or more listed horticultural plants—
(a)
that are involved in the business of the person during the income year; and
plot means the land occupied by the listed horticultural plants in a planting
replaced area fraction for a planting and an income year means the amount calculated using the formula—
where—
replacement area
is the area, at the end of the income year, of the part of the plot on which listed horticultural plants in the planting are planted or regrafted during the income year as replacement plants
plot area
is the total area, at the end of the income year, of the plot.
Defined in this Act: business, deduction, income year, listed horticultural plant, planting, plot, replaced area fraction, replacement plant
Section DO 4E was inserted, as from 1 October 2005, by section 183 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
DO 5 Farming or horticulture expenditure of lessor or sublessor
When this section applies
(1)
This section applies when a person—
(a)
is the owner of an estate in fee simple or of a leasehold estate in land in New Zealand; and
(b)
grants a lease or a sublease of the land to a person who carries on a farming or agricultural business on the land; and
(c)
Relationship with section DO 1 or DO 2 or DO 4 or DO 4B or DO 4C
Defined in this Act: business, deduction, estate, lease, leasehold estate, New Zealand, own, term of the lease
Compare: 1994 No 164 s DO 6
The heading was amended, as from 1 October 2005, by section 184(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting the words “or horticulture”
after the word “Farming”
.
Subsection (1)(c)(i) was amended, as from 1 October 2005, by section 184(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting the words “or DO 4B or DO 4C”
after the expression “DO 4”
.
Subsection (1)(c)(i) was amended, as from 1 October 2005, by section 184(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting the words “or DO 4B(2) or DO 4C”
after the expression “DO 4(2)”
.
Subsection (2) was amended, as from 1 October 2005, by section 184(4) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting the words “or DO 4B or DO 4C”
after the expression “DO 4”
.
Subsection (2) was amended, as from 1 October 2005, by section 184(5) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting the words “or DO 4B or DO 4C”
after the expression “DO 4”
.
DO 5B Improvement destroyed or made useless
When this section applies
(1)
This section applies if, in an income year of a person,—
(a)
the person owns land, or operates a business on land, to which an improvement described in schedule 7 (Expenditure on farming, aquacultural, and forestry improvements) has been made for the purposes of the business; and
(b)
the improvement is destroyed or irreparably damaged and made useless for the purpose of deriving income; and
(c)
(d)
the damage occurs in an income year that corresponds to the 2005-06 or a subsequent tax year; and
(e)
the damage is caused other than as a result of the action or failure to act of the person, an agent of the person, or an associated person.
Deduction: diminished value of expenditure
(2)
The person is allowed a deduction of the amount of the diminished value, for the income year, of the expenditure on the improvement.
Link with subpart DA
(3)
This section overrides the general permission and the capital limitation. The other general limitations still apply.
Defined in this Act: business, capital limitation, deduction, diminished value, general limitation, general permission, income, income year
Section DO 5B was inserted, as from 1 October 2005, by section 185 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) with application as from income years corresponding to the 2005–06 tax year.
The heading to section DO 5B was amended, as from 3 April 2006, by section 54(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by omitting “by qualifying event”
.
Subsection (1) (excluding the heading) was substituted, as from 3 April 2006, by section 54(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).
The list of defined terms was amended, as from 3 April 2006, by section 54(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3) by omitting “qualifying event”
.
Aquaculture
DO 6 Improvements to aquacultural business
When this section applies
(1)
This section applies when—
(a)
a person carries on an aquacultural business in New Zealand; and
(b)
the aquacultural business is—
(i)
fish farming under a licence issued under the Freshwater Fish Farming Regulations 1983; or
(ii)
mussel farming; or
(iii)
rock oyster farming; or
(iv)
scallop farming; or
(v)
sea-cage salmon farming; and
(c)
an improvement described in any of parts B to F of schedule 7 (Expenditure on farming, aquacultural, and forestry improvements) is made for the purposes of the business.
Deduction: expenditure: owner of improvement
(2)
A person who owns the improvement is allowed a deduction for expenditure to which all the following apply:
(a)
it is incurred on making the improvement; and
(b)
it is incurred by the person or by another person; and
(c)
it is incurred in the 1995-96 income year or in a later income year, not including the income year in which the person ceases to carry on the business. (The income year referred to in this paragraph is the income year of the person who owns the improvement.); and
(d)
it is incurred in developing the business; and
(e)
it is of benefit to the business in the income year in which the person is allowed the deduction.
Deduction: expenditure: non-owner of improvement
(3)
A person who does not own the improvement is allowed a deduction for expenditure to which all the following apply:
(a)
it is incurred on making the improvement; and
(b)
it is incurred by the person; and
(c)
it is incurred in the 1995-96 income year or in a later income year, not including the income year in which the person ceases to carry on the business; and
(d)
it is incurred in developing the business; and
(e)
it is of benefit to the business in the income year in which the person is allowed the deduction.
Amount, and timing, of deduction
(4)
The amount of the deduction is calculated using the formula—
schedule 7 percentage x diminished value
Definition of items in formula
(5)
In the formula,—
(a)
schedule 7 percentage is the percentage set out opposite the description of the improvement in any of parts B to F of schedule 7 (Expenditure on farming, aquacultural, and forestry improvements):
(b)
diminished value is the diminished value of the improvement.
Link with subpart DA
(6)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, diminished value, general limitation, general permission, income year, New Zealand
Compare: 1994 No 164 ss DO 5(1)-(3)(b), OB 1aquaculture
DO 7 Improvement destroyed or made useless
When this section applies
(1)
This section applies if, in an income year of a person,—
(a)
the person carries on an aquacultural business in New Zealand—
(i)
that satisfies section DO 6(1)(b); and
(ii)
for the purposes of which an improvement described in schedule 7 (Expenditure on farming, aquacultural, and forestry improvements) has been made; and
(b)
the improvement is destroyed or irreparably damaged and made useless for the purpose of deriving income; and
(c)
the person would be entitled for the income year to a deduction under section DO 6 for expenditure on the improvement if the improvement had not been destroyed or irreparably damaged and made useless; and
(d)
the damage occurs in an income year that corresponds to the 2005-06 or a subsequent tax year; and
(e)
the damage is caused other than as a result of the action or failure to act of the person, an agent of the person, or an associated person.
Deduction: diminished value of expenditure
(2)
The person is allowed a deduction of the amount of the diminished value, for the income year, of the expenditure on the improvement.
Link with subpart DA
(3)
This section overrides the general permission and the capital limitation. The other general limitations still apply.
Defined in this Act: business, capital limitation, deduction, diminished value, general limitation, general permission, income, income year
Section DO 7 was inserted, as from 3 April 2006, by section 55 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).