“CD 7B Shares issued under profit distribution plans

• “Profit distribution plan shares

  “(1) A share issued by a company under a profit distribution plan is a dividend.

  “Amount of dividend

  “(2) The amount of the dividend is the amount offered by the company for the repurchase of the share.

  “Relationship with section CD 22

  “(3) Section CD 22 does not apply in relation to a share issued under a profit distribution plan and repurchased by the company as part of the plan.

  “Defined in this Act: amount, company, dividend, profit distribution plan, RWT, share”.

“CD 23B Returns of capital: shares repurchased under profit distribution plans

• “When this section applies

  “(1) This section applies when a company has issued a share to a shareholder under a profit distribution plan and the shareholder exercises the option to have the share repurchased by the company.

  “Amount paid

  “(2) The amount paid by the company to repurchase the share is not a dividend.

  “Defined in this Act: amount, company, dividend, pay, profit distribution plan, share, shareholder”.

• “(ab) in the case of a share issued under a profit distribution plan, the amount offered by the company for the repurchase of the share; and”.

• “(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.”

“CG 4 Receipts for expenditure or loss from insurance, indemnity, or otherwise

• “When this section applies

  “(1) This section applies when—

  • “(a) a person is allowed a deduction for expenditure or loss; and

  • “(b) the person derives an amount relating to the expenditure or loss, whether through insurance, indemnity, or otherwise; and

  • “(c) the amount, to the extent of the deduction, is not income of the person under any other provision of this Act.

  “Income

  “(2) The amount derived is, to the extent of the deduction, income of the person.

  “Timing of income

  “(3) The income is allocated to the later of—

  • “(a) the income year in which the expenditure or loss is incurred:

  • “(b) the income year in which the amount is derived.

  “Defined in this Act: amount, deduction, income year, loss”.

• “(3) The income is allocated to the later of—

  • “(a) the income year to which the replaced income relates:

  • “(b) the earlier of—

    • “(i) the income year in which the amount is received:

    • “(ii) the income year in which the amount is reasonably able to be estimated.”

• “(4) This section does not apply to—

  • “(a) a fixed-rate share, within the meaning of paragraphs (a) to (d) of the definition of that term; or

  • “(b) a share for which the amount payable on cancellation is no more than the available subscribed capital per share calculated under the slice rule.”

“CZ 25 Insurance or compensation for buildings replaced as revenue account property affected by Canterbury earthquakes Land and buildings as revenue account property affected by Canterbury earthquakes and replaced—insurance or compensation, Government purchase

• “When this section applies

  “(1) This section applies for a person and an income year (the current year) before the 2016–17 income year when the person,—

  • “(a) in or before the current year, receives insurance or other compensation for buildings (the affected property), each of which is revenue account property and, as a result of a Canterbury earthquake as that term is defined in section 4 of the Canterbury Earthquake Recovery Act 2011 is rendered useless for the purpose of deriving income, and demolished or abandoned for later demolition, because of damage to the building or to the neighbourhood of the building; and

  • “(a) in or before the current year, derives for buildings or land (the affected property), all of which is revenue account property,—

    • “(i) insurance or compensation, if a Canterbury earthquake as that term is defined in section 4 of the Canterbury Earthquake Recovery Act 2011 damages the land and damages each building, or the neighbourhood of the building, causing the building to be useless for the purpose of deriving income and consequently to be abolished or abandoned for later demolition:

    • “(ii) an amount from a purchase by the Government from the person under section 53(1) of the Canterbury Earthquake Recovery Act 2011; and

  • “(b) in the absence of this section, would have in or before the current year a total amount of income under section CG 6 (Receipts from insurance, indemnity, or compensation for trading stock) from the insurance or compensation for the affected property that exceeds the total amount of deductions under section DB 23 (Cost of revenue account property) for the affected property; and

  • “(c) plans in the current year to acquire property (the replacement property) replacing affected property and meeting the requirements of subsection (4); and

  • “(d) gives written notice to the Commissioner under subsection (6) in relation to the affected property.

  “Suspended recovery income

  “(2) The amount of the excess (the excess recovery) referred to in subsection (1)(a) is not income of the person except to the extent of the amount (the suspended recovery income) remaining after adjustment under subsection (3) that is attributed to an income year by subsection (5).

  “Effect of purchase of replacement property

  “(3) If the person incurs expenditure (the replacement cost) to acquire replacement property,—

  • “(a) for the purposes of determining the value of the replacement property for section EA 2 (Other revenue account property), the amount of the person's expenditure on the replacement property, to the extent that it is less than or equal to the total amount of the income under section CG 6 for the affected property, is treated as being reduced by an amount calculated by multiplying the replacement cost by the excess recovery and dividing the result by the total amount of deductions under section DB 23 for the affected property; and

  • “(b) the amount of the suspended recovery income immediately before the expenditure is reduced by an amount equal to the reduction of expenditure under paragraph (a) for the purposes of section EA 2.

  “Requirements for replacement property

  “(4) For an item of affected property, replacement property must be a building or land that is revenue account property—

  • “(a) acquired in or before the person's 2015–16 income year; and

  • “(b) located in greater Christchurch as that term is defined in section 4 of the Canterbury Earthquake Recovery Act 2011.

  “Amount remaining at end of 2015–16 income year or when person changes intentions, is liquidated, or becomes bankrupt

  “(5) The person has an amount of income for the affected property in the current year equal to the amount of suspended recovery income when—

  • “(a) the current year ends, if the current year is the 2015–16 income year:

  • “(b) in the current year, the person decides not to replace the affected property:

  • “(c) in the current year, the person goes into liquidation or becomes bankrupt.

  “Notice of election for affected property

  “(6) A person choosing to rely on this section to suspend in a current year the recognition of suspended recovery income from the insurance for affected property must give written notice to the Commissioner—

  • “(a) by the later of 31 January 2012 and the date on which the return of income is filed for the earliest income year (the estimate year) in which the amount of the insurance for the affected property can be reasonably estimated; and

  • “(b) if the current year is after the estimate year,—

    • “(i) for each income year between the estimate year and the current year, by the date on which the return of income is filed for that income year; and

    • “(ii) for the current year, by the date on which the return of income is filed for the current year.

  “Contents of notice of election

  “(7) A notice under subsection (6) must—

  • “(a) describe the affected property; and

  • “(b) give details of replacement property acquired in the current year to replace, in full or in part, the affected property; and

  • “(c) give the cost of the replacement property and the reduction under subsection (3) of that cost for the purposes of section EA 2; and

  • “(d) give the amount, for the affected property, of the income from insurance or compensation remaining suspended under this section at the end of the current year.

  “Relationship to section CG 6

  “(8) This section overrides section CG 6.

  “Defined in this Act: amount, deduction, income, income year, notice, return of income”.

“CZ 26 Land and buildings affected by Canterbury earthquakes—sections CB 9 to CB 12 overridden for Government purchase

• Sections CB 9 to CB 12 (which relate to disposals within 10 years of acquisition) do not apply to a person and land or buildings purchased by the Government from the person under section 53(1) of the Canterbury Earthquake Recovery Act 2011.

  “Defined in this Act: land”.

“Unsuccessful software development

“DB 40B Expenditure in unsuccessful development of software

• “When this section applies

  “(1) This section applies when a person incurs expenditure in the development of software for use in the person's business if—

  • “(a) the development of the software is abandoned when the software is not depreciable property of the person; and

  • “(b) the software would have been depreciable property of the person if the development had been completed.

  “Deduction

  “(2) The person is allowed a deduction for expenditure incurred in the development of the software to the extent to which no deduction has been allowed for the expenditure under another provision of this Act or under another Act.

  “Timing of deduction

  “(3) The deduction is allocated to the income year in which the development of the software is abandoned.

  “Link with subpart DA

  “(4) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.

  “Defined in this Act: capital limitation, deduction, general limitation, general permission, income year”.

• “(1) This section applies when a foreign investment PIE incurs expenditure or loss in deriving income attributable to—

  • “(a) a notified foreign investor in the PIE:

  • “(b) a transitional resident who has chosen under section HM 55D(9) (Requirements for investors in foreign investment PIEs) to use the specified prescribed investor rate.”

• “(a) means a person that—

  • “(i) is employed by a company:

  • “(ii) is not a corporation sole, a body corporate, or an unincorporated body:”.

“Amount of deduction: CFC not elective attributing CFC

• “(1) The deduction that a person is allowed in an income year for an attributed CFC loss from a CFC (the first CFC) that is not an elective attributing CFC for the person in the income year is no more than the total of—

  • “(a) total attributed CFC income of the person for the income year from other CFCs, each of which is resident in the same country as the first CFC for the relevant accounting period:

  • “(b) total FIF income of the person for the income year from FIFs,—

    • “(i) each of which is resident in the same country as the first CFC for the relevant accounting period; and

    • “(ii) for each of which the person uses the branch equivalent method.

“Amount of deduction: elective attributing CFC

• “(1B) The deduction that a person is allowed in an income year for an attributed CFC loss from a CFC (the first CFC) that is an elective attributing CFC for the person in the income year is no more than the total of—

  • “(a) total attributed CFC income of the person for the income year from other CFCs, each of which—

    • “(i) is resident in the same country as the first CFC for the relevant accounting period; and

    • “(ii) is an elective attributing CFC for the person in the income year; and

    • “(iii) has the same election commencement year as the first CFC:

  • “(b) total FIF income of the person for the income year from FIFs, each of which—

    • “(i) is resident in the same country as the first CFC for the relevant accounting period; and

    • “(ii) is an elective attributing FIF for the person in the income year; and

    • “(iii) has the same election commencement year as the first CFC.”

• “(3) Any excess not able to be deducted because of subsection (1) or (1B) is an attributed CFC net loss able to be used under sections IQ 2, IQ 4, and IQ 9 (which relate to the use of attributed CFC net losses).”

“Amount of deduction: FIF not elective attributing FIF

• “(1) The deduction that a person is allowed in an income year for a FIF loss from a FIF (the first FIF) that is not an elective attributing FIF for the person in the income year is no more than the total of—

  • “(a) total attributed CFC income of the person for the income year from CFCs, each of which is resident in the same country as the first FIF for the relevant accounting period:

  • “(b) total FIF income of the person for the income year from other FIFs,—

    • “(i) each of which is resident in the same country as the first FIF for the relevant accounting period; and

    • “(ii) for each of which the person uses the branch equivalent method.

“Amount of deduction: elective attributing FIF

• “(1B) The deduction that a person is allowed in an income year for a FIF loss from a FIF (the first FIF) that is an elective attributing FIF for the person in the income year is no more than the total of—

  • “(a) total attributed CFC income of the person for the income year from CFCs, each of which—

    • “(i) is resident in the same country as the first FIF for the relevant accounting period; and

    • “(ii) is an elective attributing CFC for the person in the income year; and

    • “(iii) has the same election commencement year as the first FIF:

  • “(b) total FIF income of the person for the income year from other FIFs, each of which—

    • “(i) is resident in the same country as the first FIF for the relevant accounting period; and

    • “(ii) is an elective attributing FIF for the person in the income year; and

    • “(iii) has the same election commencement year as the first FIF.”

• “(3) Any excess not able to be deducted because of subsection (1) or (1B) is a FIF net loss able to be used under section IQ 3 (Ring-fencing cap on FIF net losses).”

“DZ 20 Expenditure incurred while income-earning activity interrupted by Canterbury earthquake

• “When this section applies

  “(1) This section applies for a person and an income year (the current year) before the 2016–17 income year when—

  • “(a) the person has an income-earning activity in greater Christchurch (as defined in section 4 of the Canterbury Earthquake Recovery Act 2011) immediately before a Canterbury earthquake (as defined in that section); and

  • “(b) the activity is interrupted for a period (the period of interruption) as a result of the Canterbury earthquake; and

  • “(c) in the current year, during the period of interruption, the person incurs expenditure or loss (the interruption expenditure) in meeting an obligation relating to the income-earning activity; and

  • “(d) the interruption expenditure does not meet the requirements of the general permission for the person and the income-earning activity but would do so but for the interruption; and

  • “(e) the person resumes the income-earning activity in an income year (the resumption year) before the 2016–17 income year.

  “Deduction for interruption expenditure

  “(2) The person is allowed a deduction for the interruption expenditure.

  “Timing of deduction

  “(3) The deduction is allocated to the resumption year.

  “Link with subpart DA

  “(4) This section supplements the general permission; the general limitations still apply.

  “Defined in this Act: deduction, general limitation, general permission, income, income year, loss”.

“When this subpart applies

• “(1) This subpart applies to the valuation of property when a person who owns or carries on a business, other than of selling livestock, holds livestock for the purposes of sale or exchange in the ordinary course of carrying on the business.”

• “(i) under sections 80 to 86F of the Climate Change Response Act 2002:

• “(ii) under section 64 of the Climate Change Response Act 2002 for a removal activity listed in Schedule 4, Part 2 of that Act:

• “(iii) by a public authority under a supplementary agreement to a negotiated greenhouse agreement:

• “(iv) by a public authority as a rebate, under a negotiated greenhouse agreement, for an indirect emissions charge; and”.

• “(iii) allocation entitlement under section 64 of the Climate Change Response Act 2002 for a removal activity listed in Schedule 4, Part 2 of that Act:

• “(iv) emissions units corresponding to the actual emissions amount under a supplementary agreement to a negotiated greenhouse agreement:

• “(v) emissions units corresponding to a rebate, under a negotiated greenhouse agreement, for an indirect emissions charge:”.

“ED 3 Part-year tax calculations for transfers: general insurance OCR

• “When this section applies

  “(1) This section applies when an insurer to whom sections CR 4 and DW 4 (which relate to outstanding claims reserves) apply (the transferor) transfers general insurance contracts to another person (the transferee) in an income year.

  “Part-year calculations for transfers

  “(2) The transferor does a part-year calculation immediately before the transfer, as described in subsection (3), for the transferred general insurance contracts, but only for their part-year ending on the day the transfer occurs. The transferee also does a part-year calculation for the transferred contracts, as described in subsection (3), but only for their part-year starting on the day the transfer occurs. The transferee's relevant opening outstanding claims reserve amounts equal the transferor's relevant closing outstanding claims reserve amounts immediately before the transfer, but if the reinsurance associated with transferred policies is not assigned by the transferor to the transferee, the transferee's reserve amounts are calculated without subtracting relevant reinsurance amounts.

  “Part-year calculations for transfers: description

  “(3) For calculating their income tax liability for the tax year that corresponds to the income year, the transferor and transferee treat references, in sections CR 4 and DW 4 and in the new life insurance rules, to an income year or a tax year as if they are references to 2 separate tax years and corresponding income years (the part-years) within that tax year.

  “Part-year calculations for transfers: effect

  “(4) Transferor's and transferee's part-year calculations may give rise to income and deductions for the income year, but they do not create any part-year tax return obligations.

  “Defined in this Act: amount, deduction, general insurance, IFRS 4, income, income tax liability, income year, insurer, outstanding claims reserve, pay, tax year”.

“Insurance or compensation for damage to item

• “(2B) If a person in an income year derives an amount of insurance, indemnity, or compensation (the compensation amount) for damage to an item included in a pool at the end of the income year and the compensation amount exceeds the expenditure or loss that the person incurs because of the damage, the excess is subtracted from the adjusted tax value of the pool.”

• “(f) income from a business of insurance or from being an insurer:”.

attributable CFC – apportioned funding income – apportioned funding costs – other deductions.

“Definition of items in formula

• “(3) In the formula in subsection (2),—

  • “(a) attributable CFC is the CFC's attributable CFC amount for the accounting period:

  • “(b) apportioned funding income is,—

    • “(i) if the CFC is an entity carrying on a business of banking or insurance or is directly or indirectly controlled by such an entity, zero:

    • “(ii) if subparagraph (i) does not apply, the amount calculated using the formula—

    funding income × funding fraction × (1 – asset fraction):

  • “(c) apportioned funding costs is the amount calculated using the formula—

    funding costs × funding fraction × cost fraction:

  • “(d) other deductions is the amount of expenditure and loss incurred in the accounting period by the CFC to the extent to which the expenditure and loss meets the requirements of subsection (13).

“Definition of items in formula

• “(4) The items in the formulas in subsection (3)(b)(ii) and (c) are defined in subsections (5), (6), (8), (10), and (11).

“Funding income

• “(5) Funding income is the total of the amounts in the accounting period that are included in the item attributable CFC and relate to a financial arrangement—

  • “(a) that provides funds for the CFC; and

  • “(b) for which there is no reasonable expectation, when the CFC enters the financial arrangement or when the terms of the financial arrangement are changed, that the CFC will have from the financial arrangement amounts that would be income for the CFC exceeding in total the amounts that would be deductions for the CFC, during—

    • “(i) the period that the CFC is a party to the financial arrangement:

    • “(ii) a period predictable in advance during which the CFC is a party to the financial arrangement.

“Funding fraction

• “(6) Funding fraction is equal to,—

  • “(a) if the item funding in subsection (7)(a) is zero, 1; or

  • “(b) if the item is being used to calculate the item apportioned funding costs and the interest holder chooses to rely on this paragraph, 1; or

  • “(c) if neither of paragraphs (a) and (b) apply, the amount calculated using the formula—

    funding – group funding

    funding.

“Definition of items in formula

• “(7) In the formula in subsection (6),—

  • “(a) funding is the total of amounts, each of which is the outstanding balance for—

    • “(i) a financial arrangement to which the CFC is a party and which provides funds for the CFC:

    • “(ii) a fixed rate foreign equity, or share giving a right to a deductible foreign equity distribution, issued by the CFC and held by a company that is a New Zealand resident or CFC:

  • “(b) group funding is the lesser of the item funding and the total of amounts, each of which is the outstanding balance for a financial arrangement—

    • “(i) under which the CFC provides funds to another CFC associated with the CFC under section YB 2 (Two companies); and

    • “(ii) that produces for the CFC an amount included in the item arrangement under section EX 20B(4).

“Asset fraction

• “(8) Asset fraction is the amount calculated using the formula—

attributable CFC's assets – group funding

total CFC's assets – group funding.

“Definition of items in formula

• “(9) In the formula in subsection (8),—

  • “(a) attributable CFC's assets is the total of amounts for the CFC's assets, each of which is the value of an asset to the extent to which the asset is used for the purpose of deriving an attributable CFC amount and not used for the purpose of deriving an amount that is not an attributable CFC amount:

  • “(b) group funding is—

    • “(i) zero, if subparagraph (ii) does not apply; or

    • “(ii) the amount of the item group funding referred to in subsection (7)(b), if subsection (6)(c) applies for the interest holder and the CFC:

  • “(c) total CFC's assets is the total value of the CFC's assets.

“Funding costs

• “(10) Funding costs is the total of amounts in the accounting period, each of which—

  • “(a) would be a deduction of the CFC relating to a financial arrangement to which the CFC is a party and which provides funds for the CFC:

  • “(b) is a distribution relating to fixed-rate foreign equity or a deductible foreign equity distribution of the CFC and is paid by the CFC to a company resident in New Zealand or to a CFC.

“Cost fraction

• “(11) Cost fraction is,—

  • “(a) if the CFC is not excessively debt funded under section EX 20D, the amount of the item asset fraction referred to in subsection (8); or

  • “(b) if the CFC is excessively debt funded under section EX 20D, the lesser of—

    • “(i) the amount of the item asset fraction referred to in subsection (8):

    • “(ii) the amount calculated under section EX 20D.”

“Requirements for item other deductions

• “(13) Amounts of expenditure or loss contribute to the item other deductions to the extent to which—

  • “(a) the amounts do not relate to a financial arrangement or share and—

    • “(i) are incurred for the purpose of deriving an attributable CFC amount; and

    • “(ii) are not incurred for the purpose of deriving an amount that is not an attributable CFC amount; and

    • “(iii) are deductions of the CFC:

  • “(b) the amounts relate to financial arrangements or shares referred to in the definition of the item funding in subsection (7)(a) and exceed in total the amount given by multiplying the items funding costs and funding fraction, used in calculating the item apportioned funding costs under subsection (3)(c):

  • “(c) the amounts—

    • “(i) do not relate to financial arrangements that provide funds for the CFC; and

    • “(ii) relate to financial arrangements referred to in section EX 20B(4).”

• “(10) The formula for the CFC's cost fraction is—”

  attributable foreign company assets

  total foreign company assets.

• “(1) Non-attributing active CFC, for an accounting period and a person (the interest holder), means a CFC—

  • “(a) for which the interest holder is not affected by an election under section EX 73 for the accounting period; and

  • “(b) that meets the requirements of subsection (2) or (3), alone or as part of a test group of companies under section EX 21D or EX 21E.”

• “(a) at all times in the year, the item income interest calculated under section EX 50(4) for the person and the FIF is 10% or more; and”.

• “(b) the FIF would meet the test for a non-attributing active CFC under section EX 21B(2)(b) if the items added passive and reported revenue under section EX 21E(5), (8), and (10) for the FIF included the amounts given by subsection (7C)(a)—

  • “(i) relating to the FIF's interests in each member of a grouping of one or more foreign companies including the foreign company; and

  • “(ii) reported in the accounts of the FIF, or in the consolidated accounts of the FIF's test group under section EX 21E.”

“Requirements for test under subsection (7B)(b)

• “(7C) In determining whether a FIF would meet the requirements of subsection (7B)(b) for an accounting period,—

  • “(a) the amounts required to be included in the items are—

    • “(i) amounts recognised in profit and loss under the equity method under whichever is appropriate of NZIAS 28, NZIAS 31, an equivalent IFRSE, and an equivalent standard or principle in the generally accepted accounting principles in the United States of America:

    • “(ii) amounts recognised in profit or loss under proportionate consolidation under whichever is appropriate of NZIAS 31, an equivalent IFRSE, and an equivalent standard or principle in the generally accepted accounting principles in the United States of America:

    • “(iii) dividends and net fair value changes recognised in profit or loss in relation to investments accounted for under whichever is appropriate of NZIAS 39, an equivalent IFRSE, and an equivalent standard or principle in the generally accepted accounting principles in the United States of America; and

  • “(b) an interest holder must not use the result of the test applied to the FIF and a foreign company as a member of a grouping of foreign companies if the interest holder uses for the period a result of the test applied to the FIF and a different grouping of foreign companies.”

• “(5) Despite subsection (4), the CFC's FIF income or loss does not include an amount actuarially determined to be attributable to policyholders in the CFC or another company as a result of applying section EX 21(25) and (26) to the CFC.”

“Optional transitional rule: interests excluded by section EX 39 until 2012–13 income year

• “(12) For interests that were acquired by the person before 1 January 2005 and excluded by section EX 39 from being attributing interests until the beginning of the 2012–13 income year, the person may choose to treat the cost of every interest as being the market value of the interest at the beginning of the 2012–13 income year, for the purposes of the $50,000 threshold in sections CQ 5(1)(d) or (e) and DN 6(1)(d) or (e).”

“Election relating to CFC or FIF

“EX 73 Election that CFC not non-attributing active CFC or FIF not non-attributing active FIF

• “Election to have elective attributing CFC

  “(1) A person (the interest holder) may elect by notice to the Commissioner for each accounting period of the election, that—

  • “(a) a CFC of the interest holder, in which the interest holder has an income interest of 10% or more, not be a non-attributing active CFC for the interest holder:

  • “(b) a FIF of the interest holder, for which the interest holder uses the attributable FIF income method, not be a non-attributing active FIF for the interest holder.

  “Exception

  “(2) The interest holder must not make an election under subsection (1) for a CFC or FIF that is—

  • “(a) an entity carrying on a business of banking or insurance or is directly or indirectly controlled by such an entity:

  • “(b) a non-attributing Australian CFC.

  “Period of election

  “(3) An election under subsection (1) is made for all accounting periods—

  • “(a) for a CFC, ending in the interest holder's income years beginning on or after 1 July 2009, if the notice—

    • “(i) specifies that the election is made under this paragraph or for that period; and

    • “(ii) meets the requirements of subsection (4); or

  • “(b) for a FIF, ending in the interest holder's income years beginning on or after 1 July 2011, if the notice—

    • “(i) specifies that the election is made under this paragraph or for that period; and

    • “(ii) meets the requirements of subsection (4); or

  • “(c) beginning in the interest holder's income years beginning after—

    • “(i) the date on which the notice is given to the Commissioner; or

    • “(ii) another date agreed by the Commissioner.

  “Timing of retrospective election

  “(4) A notice of election for a period given by subsection (3)(a) or (b) is not effective unless given to the Commissioner by the later of—

  • “(a) the end of the interest holder's income year in which this subsection receives the Royal assent:

  • “(b) a date allowed by the Commissioner.

  “Currency of election

  “(5) An election under subsection (1) remains effective until the beginning of the earliest income year—

  • “(a) for which the election is revoked under subsection (6):

  • “(b) in which the election ceases to be effective under subsection (7).

  “Revoking election

  “(6) The interest holder may revoke an election under subsection (1) if—

  • “(a) the interest holder gives notice of the revocation to the Commissioner before the beginning of the interest holder's first income year for which the notice is given; and

  • “(b) the interest holder satisfies the Commissioner that—

    • “(i) expenditure or loss of a CFC included, while the election is effective, in net attributable CFC income or loss for the interest holder is extremely unlikely to result after the revocation in an amount that would otherwise have been an attributable CFC amount for the CFC; and

    • “(ii) the revocation is not made for a purpose or effect of reducing a tax liability; and

  • “(c) the Commissioner agrees to the revocation.

  “Expiry of election

  “(7) An election by the interest holder under subsection (1) ceases to be effective in an income year if the election is for—

  • “(a) a CFC that in the income year ceases to be a CFC in which the interest holder has an income interest of 10% or more, except if the CFC becomes at that time a FIF for which the interest holder uses the attributable FIF income method, in which case the election becomes effective as if made for the FIF:

  • “(b) a FIF that in the income year ceases to be a FIF for which the interest holder uses the attributable FIF income method, except if the FIF becomes at that time a CFC meeting the requirements of subsection (8), in which case the election becomes effective as if made for the CFC:

  • “(c) a CFC or FIF that in the income year becomes an entity carrying on a business of banking or insurance or becomes directly or indirectly controlled by such an entity:

  • “(d) a CFC that becomes a non-attributing Australian CFC in the income year.

  “Requirements for CFC to be affected by FIF election

  “(8) For a CFC to be affected under subsection (7)(b) by an election,—

  • “(a) the interest holder must have an income interest of 10% or more in the CFC; and

  • “(b) the CFC must not be a non-attributing Australian CFC.

  “Effect of expiry or revocation of election

  “(9) If an election under subsection (1) ceases to be effective for a CFC or FIF,—

  • “(a) becoming effective for a FIF under subsection (7)(a) because the CFC becomes a FIF for which the interest holder uses the attributable FIF income method, the interest holder may carry forward under section IQ 1B (Losses carried forward to tax year) attributed CFC losses of the CFC to a later tax year as if they were FIF net losses that were attributed from the FIF when the CFC losses were attributed from the CFC:

  • “(b) becoming effective for a CFC under subsection (7)(b) because the FIF becomes a CFC of the interest holder in which the interest holder has an income interest of 10% or more, the interest holder may carry forward under section IQ 1B the FIF net losses of the FIF as if they were attributed CFC losses that were attributed from the CFC when the FIF losses were attributed from the FIF:

  • “(c) other than under paragraphs (a) and (b), the interest holder must not carry forward under section IQ 1B an attributed CFC loss from an elective attributing CFC, or a FIF net loss from an elective attributing FIF, to an income year for which the election for the CFC or FIF has ceased to be effective.

  “Further election

  “(10) The interest holder may make a further election under subsection (1) for a period given by subsection (3)(c) after an earlier election ceases to be effective, if—

  • “(a) the interest holder gives notice of the election to the Commissioner before the beginning of the interest holder's first income year for which the notice is given; and

  • “(b) the interest holder satisfies the Commissioner that—

    • “(i) the expiry of the earlier election was due to an oversight on the part of the interest holder or the CFC or FIF; and

    • “(ii) the interest holder gave notice of the further election within a reasonable time after the expiry; and

    • “(iii) the further election has no purpose or effect of allowing the attribution of deductions without the attribution of corresponding income; and

  • “(c) the Commissioner agrees to the election.

  “Further election for entity by associate of original interest holder

  “(11) An interest holder may not make an election under subsection (1) for a CFC or FIF for which an earlier election by a person associated with the interest holder has ceased to be effective, unless—

  • “(a) the interest holder gives notice of the proposed election to the Commissioner before the beginning of the interest holder's first income year for which the election is made; and

  • “(b) the interest holder satisfies the Commissioner that the proposed election has no purpose or effect of allowing the attribution of deductions without the attribution of corresponding income; and

  • “(c) the Commissioner agrees to the proposed election.

  “Form and means of notice to Commissioner

  “(12) A notice to the Commissioner under this section must be given in the form and by the means prescribed by the Commissioner.

  “Defined in this Act: attributable FIF income method, attributed CFC loss, CFC, Commissioner, elective attributing CFC, elective attributing FIF, FIF, income interest, income year, net attributable FIF loss, non-attributing active CFC, non-attributing active FIF, non-attributing Australian CFC, notice”.

• “(c) the replacement of another policy (the replaced policy) caused by a life insurer being sold, or selling or transferring its rights and obligations under the replaced policy, and––

  • “(i) the replaced policy was existing business under this subsection; and

  • “(ii) the replaced policy and the policy have the same substantial and material terms, conditions, and bonus entitlements ignoring any annual increase in life insurance cover that is less than 10% or is less than the annual percentage change in the consumer price index.”

• “(a) reinstating the old policy after either a lapse in premium payments or cancellation by the insured, if the new policy comes into force within 90 days of the lapse or cancellation, and the life insurer treats the new policy and old policy the same; or”.