Taxation (Core Provisions) Act 1996
Taxation (Core Provisions) Act 1996
Public Act |
1996 No 67 |
|
Date of assent |
26 July 1996 |
|
Contents
An Act to amend the Income Tax Act 1994 and certain other Acts and, in particular,—
(a)
to clarify the core principles on which the income tax law is based, and
(b)
to adopt a global/gross basis for the calculation of income tax liabilities
BE IT ENACTED by the Parliament of New Zealand as follows:
1 Short Title and application
(1)
This Act may be cited as the Taxation (Core Provisions) Act 1996.
(2)
This Act applies to the 1997–98 and subsequent income years.
2 Savings
(1)
The replacement of various terms with “gross income”
and “exempt income”
by this Act is not by itself intended to change whether an amount derived by a person is taken into account or disregarded in calculating the person’s income tax liability for an income year.
(2)
The use of “amount”
instead of “profits or gains”
in section CD 3, as added by section 25 of this Act, is not by itself intended to change whether an amount derived by a person is taken into account or disregarded in calculating the person’s income tax liability for an income year.
3 Binding rulings
(1)
This section applies to a private or product ruling made under section 91e or 91f of the Tax Administration Act 1994 (in this section called the “terminated ruling”
) that ceases to apply in whole or in part as a result only of this Act and section 91g of the Tax Administration Act 1994.
(2)
The Commissioner must make a new private or product ruling to the same effect as a terminated ruling if this Act does not alter the way in which the taxation law applies to the person, in the case of a private ruling, and the arrangement to which the terminated ruling applied
(3)
If this Act alters the way in which the taxation law applies to a person or an arrangement that is the subject of a terminated ruling, the Commissioner, if requested to do so, must make a new private or product ruling on the way the altered taxation law applies to the same person, in the case of a private ruling, and the same arrangement.
(4)
A ruling made under this section must be made as if the original application for the terminated ruling, other than any statement of taxation law, were the application for the new ruling, must use the same assumptions as the terminated ruling, and must be for the period beginning on the date on which the ruling ceased to apply and ending at the end of the original period of the terminated ruling.
(5)
The Commissioner must give the applicant for the terminated ruling an opportunity to state the propositions of law (if any) that are relevant to the application of the taxation law to the person, in the case of a private ruling, and the arrangement before making the ruling under subsection (3).
(6)
A ruling made under this section is a private or product ruling, as the case may be, for the purposes of the Tax Administration Act 1994.
(7)
A request under subsection (3) is not an application for the purposes of the Tax Administration Act 1994.
Part 1 Amendments to Income Tax Act 1994
4 Income Tax Act 1994
The Income Tax Act 1994 is amended by this Part.
5 New Part substituted
Part A is replaced by:
“PART A Purpose and Application
“AA 1 Purposes of Act
“The main purposes of this Act are
“(a)
to impose tax on income;
“(b)
to impose obligations in respect of tax;
“(c)
to set out rules to be used to calculate the tax and to satisfy the obligations imposed.
“AA 2 Application to certain persons
“A person who is resident in New Zealand or who has income from New Zealand is subject to this Act and the Tax Administration Act 1994 and must satisfy the obligations imposed by them.
“AA 3 Interpretation
“Principle of interpretation
“(1)
The meaning of a provision of this Act is found by reading the words in context and, particularly, in light of the purpose provisions, the core provisions and the way in which the Act is organised.
“Aids to interpretation
“(2)
Diagrams and lists of defined terms at the end of sections in this Act are included only as aids to interpretation, and
“(a)
if there is a conflict between a diagram and a provision of the Act, the provision governs;
“(b)
if a defined term is used in a section and is not included in the list of defined terms for that section, the term is nevertheless used in the section as it is defined for the purposes of the Act.
“AA 4 Definitions
“Reference to ‘this Act’
“(1)
Except in this Part, 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 words and terms that are defined for the purposes of this Act, and general provisions relating to the interpretation and construction of this Act, appear in Part O.”
Part B CORE PROVISIONS
—This illustrates the structure of Part B
_fig1.JPG)
6 New Part substituted
Part B is replaced by:
“PART B CORE PROVISIONS
“Subpart A—Purpose
“BA 1 Purpose
“The purpose of this Part is
“(a)
to impose income tax, provisional tax, withholding liabilities and other obligations in respect of taxes;
“(b)
to set out procedures to be followed to calculate the tax and satisfy the obligations imposed under this Act;
“(c)
to provide a basis for the application of the other Parts;
“(d)
generally to set up the scheme of the Act and the main links between its Parts.
“Subpart B—Income Tax and Resulting Obligations
“BB 1 Imposition of tax
“Income tax is imposed on taxable income at the rate or rates of tax fixed by an Act from time to time and is payable to the Crown in accordance with this Act.
Defined in this Act: income tax , taxable income , this Act
“BB 2 Principal obligations
“Income tax liability
“(1)
A person must calculate and satisfy the income tax liability the person has in respect of taxable income for an income year in accordance with Subpart BC.
“Provisional tax
“(2)
A person who is a provisional taxpayer must pay provisional tax in respect of an income year in accordance with the provisional tax rules.
“Withholding liabilities
“(3)
A person must satisfy any withholding liabilities of the person in accordance with Subpart BE.
“BC 1 Filing taxpayer calculation of taxable income
—This illustrates the process used by taxpayers (except non-filing tax-payers) to calculate taxable income
_fig2.JPG)
“Other obligations
“(4)
A person must satisfy any obligations of the person that are specified in Subpart BF.
Defined in this Act: income year , income tax liability , person, provisional tax , provisional taxpayer , provisional tax rules , taxable income
“BB 3 Overriding effect of certain matters
“Tax avoidance arrangement—Subpart BG
“(1)
If a person is affected by a tax avoidance arrangement, the person may not have satisfied an obligation under this Act if the satisfaction is dependent on the arrangement being valid for income tax purposes.
“Double tax agreements—Subpart BH
“(2)
If a double tax agreement applies to a person, the person must satisfy the person’s obligations in respect of income tax in accordance with the agreement.
Defined in this Act: double tax agreement , income tax , person , tax avoidance arrangement , this Act
“Subpart C—Calculation and Satisfaction of Income Tax Liabilities
“BC 1 Calculation and satisfaction
“Type of taxpayer
“(1)
If in an income year a person is
“(a)
a non-filing taxpayer, the person’s income tax liability for the year must be calculated under section BC 2, or
“(b)
not a non-filing taxpayer and has schedular gross income for the year, the person’s income tax liability for the year must be calculated under section BC 3, or
“(c)
not a non-filing taxpayer and does not have schedular gross income, the person’s income tax liability for the year must be calculated under sections BC 4 to BC 8.
“Satisfaction
“(2)
The income tax liability of a taxpayer for an income year may be satisfied by crediting any tax paid or withheld or by paying terminal tax under section BC 9 or by both.
Defined in this Act: income tax liability , income year , non-filing taxpayer , person , schedular gross income , taxpayer , terminal tax
“BC 2 Non-filing taxpayer
“The income tax liability for an income year of a non-filing taxpayer is the total of the tax deductions required to De made from all amounts of gross income included in the taxpayer’s annual gross income for the year.
Defined in this Act: annual gross income , gross income , income tax liability , income year , non-filing taxpayer , tax deduction
“BC 3 Taxpayer with schedular gross income
“Income tax liability
“(1)
The income tax liability for an income year of a taxpayer who has any schedular gross income for that year is the total of the taxpayer’s schedular income tax liability for the year, calculated under subsection (2) or (3), and the amount that would be the taxpayer’s income tax liability for the year if the taxpayer had no schedular gross income.
“Schedular gross income
“(2)
If a taxpayer has one type of schedular gross income for an income year, the taxpayer’s schedular income tax liability for the year is the amount that would be the taxpayer’s income tax liability for the income year if the taxpayer’s only gross income for the year were that schedular gross income.
“Multiple schedular gross income
“(3)
If a taxpayer has more than one type of schedular gross income for an income year, the taxpayer’s schedular income tax liability for the year is the total of the schedular income tax liabilities calculated under subsection (2) in respect of each type of schedular gross income.
Defined in this Act: gross income , income tax liability , income year , schedular gross income , taxpayer
“BC 4 Annual gross income
“A taxpayer’s annual gross income is the total of the amounts of gross income under section BD 1 of the taxpayer that are allocated to an income year under section BD 3.
Defined in this Act: annual gross income , gross income , taxpayer
“BC 5 Annual allowable deductions
“A taxpayer’s annual allowable deductions are the total of the allowable deductions under section BD 2 of the taxpayer that are allocated to an income year under section BD 4.
Defined in this Act: annual allowable deductions , allowable deductions , income year , taxpayer
“BC 6 Net income and net loss
“Income more than deductions
“(1)
If for an income year a taxpayer’s annual gross income is more than the taxpayer’s annual allowable deductions, the difference is the taxpayer’s net income for the year.
“Income equals deductions
“(2)
If for an income year a taxpayer’s annual gross income equals the taxpayer’s annual allowable deductions, the taxpayer’s net income for the year is zero.
“Deductions more than income
“(3)
If for an income year a taxpayer’s annual allowable deductions are more than the taxpayer’s annual gross income, the difference is the taxpayer’s net loss for the year, and the taxpayer is deemed to have net income for the year of zero.
“BC 8 Income Tax Liability
—This illustrates the process used by taxpayers (except non-filing tax-payers) to calculate income tax liability
_fig3.JPG)
“Treatment of net loss
“(4)
In accordance with Part I (Treatment of Net Losses), a taxpayer with a net loss for an income year
“(a)
may offset it against net income in a future year, or
“(b)
may make the net loss available to another taxpayer for offset against that other taxpayer’s net income in that or a future income year.
Defined in this Act: annual allowable deductions , annual gross income , income year , net income , net loss , taxpayer
“BC 7 Taxable income
“A taxpayer’s taxable income for an income year is determined by offsetting any available net losses of the taxpayer in accordance with Part I (Treatment of Net Losses) against the taxpayer’s net income.
Defined in this Act: available net loss , income year , net income , taxable income , taxpayer
“BC 8 Income tax liability
“Application
“(1)
The income tax liability for an income year of a taxpayer who is not a non-filing taxpayer is the amount calculated in accordance with subsections (2) to (5).
“Unadjusted income tax liability
“(2)
The unadjusted income tax liability of the taxpayer for the income year is the product of the taxpayer’s taxable income for the year and the applicable basic tax rate.
“Interim income tax liability
“(3)
The unadjusted income tax liability of the taxpayer is adjusted by subtracting the allowable rebates from the unadjusted income tax liability and adding the applicable surcharges.
“BC 9 Satisfaction of income tax liability
—This illustrates the process to be used by all taxpayers to satisfy income tax liability
_fig4.JPG)
“Result positive
“(4)
If the resulting amount under subsection (3) is zero or more, that amount is the taxpayer’s income tax liability for the income year.
“Result negative
“(5)
If the resulting amount under subsection (3) is negative, the taxpayer’s income tax liability for the income year is zero.
“Surplus rebates
“(6)
If the resulting amount under subsection (3) is negative,
“(a)
the taxpayer’s surplus rebates are an amount equal to the lesser of
“(i)
the total of the refundable rebates to which the taxpayer is entitled for the year, and
“(ii)
the difference between zero and the amount calculated under subsection (3), and
“(b)
the Commissioner must deal with the surplus rebates in accordance with section BC 10.
Defined in this Act: allowable rebates , applicable basic tax rate , applicable surcharges , income year , income tax liability , non-filing tax-payer , refundable rebates , taxable income , taxpayer , unadjusted income tax liability
“BC 9 Satisfaction of income tax liability
“Terminal tax
“(1)
If for an income year a taxpayer’s income tax liability exceeds the total of the taxpayer’s credits for tax paid or withheld determined in accordance with Part L (Credits), the difference is the taxpayer’s terminal tax, and the taxpayer must satisfy the taxpayer’s income tax liability by paying the terminal tax.
“Surplus credits
“(2)
If for an income year the total of a taxpayer’s credits for tax paid or withheld exceeds the taxpayer’s income tax liability,
“(a)
the excess credits are first to be set off in accordance with Part L (Credits), and Part M (Tax Payments) against other income tax obligations of the taxpayer, and
“(b)
any remaining excess is to be dealt with in accordance with Part L (Credits), Part M (Tax Payments) and section BC 10.
“(3)
To determine the composition of any excess credits, the taxpayer’s credits are to be treated as if they were set off against the taxpayer’s income tax liability in the following order:
“(a)
non-refundable credits;
“(b)
credits allowed to the taxpayer under Part L (Credits) in respect of supplementary dividends;
“(c)
convertible credits;
“(d)
refundable credits.
Defined in this Act: Commissioner , income year , income tax liability , non-refundable credits , supplementary dividends , surplus convertible credits , surplus refundable credits , taxpayer , terminal tax
“BC 10 Amounts owing to taxpayers
“(1)
Subject to section KD 4, the Commissioner must refund the amount of any surplus rebates of a person calculated under section BC 8 for an income year.
“(2)
Subject to Part M (Tax Payments) and Part N (Withholding Taxes and Taxes on Income of Others), the Commissioner must refund the amount of any surplus refundable credits of a taxpayer for an income year.
Defined in this Act: Commissioner , income year , person , surplus rebates , surplus refundable credits , taxpayer
“Subpart D—Gross Income, Allowable Deductions and Timing
“BD 1 Gross income
“Definition
“(1)
An amount is gross income of a taxpayer if it is included in the taxpayer’s gross income under Part C (Income Further Defined), D (Deductions Further Defined), E (Timing of Income and Deductions), F (Apportionment and Recharacterised Transactions), G (Avoidance and Non-Market Transactions), H (Treatment of Net Income of Certain Entities) or I (Treatment of Net Losses).
“Exclusions
“(2)
An amount is not gross income of a taxpayer if it is
“(a)
exempt income under Part C (Income Further Defined), D (Deductions Further Defined) or F (Apportionment and Recharacterised Transactions), or
“(b)
excluded from gross income under Part C (Income Further Defined), D (Deductions Further Defined), E (Timing of Income and Deductions), H (Treatment of Net Income of Certain Entities) or I (Treatment of Net Losses), or
“(c)
a foreign-sourced amount and the taxpayer is a non-resident when it is derived.
Defined in this Act: foreign-sourced amount , gross income , non-resident , taxpayer
“BD 2 Allowable deductions
“Definition
“(1)
An amount is an allowable deduction of a taxpayer
“(a)
if it is an allowance for depreciation that the taxpayer is entitled to under Part E (Timing of Income and Deductions), or
“(b)
to the extent that it is an expenditure or loss
“(i)
incurred by the taxpayer in deriving the taxpayer’s gross income, or
“(ii)
necessarily incurred by the taxpayer in the course of carrying on a business for the purpose of deriving the taxpayer’s gross income, or
“(iii)
allowed as a deduction to the taxpayer under Part C (Income Further Defined), D (Deductions Further Defined), E (Timing of Income and Deductions), F (Apportionment and Recharacterised Transactions), G (Avoidance and Non-Market Transactions), H (Treatment of Net Income of Certain Entities), I (Treatment of Net Losses), L (Credits) or M (Tax Payments).
“Exclusions
“(2)
An amount of expenditure or loss is not an allowable deduction of a taxpayer to the extent that it is
“(a)
of a private or domestic nature, or
“(b)
incurred in deriving exempt income under Part C (Income Further Defined), D (Deductions Further Defined) or F (Apportionment and Recharacterised Transactions), or
“(c)
incurred in deriving income from employment, or
“(d)
incurred in deriving schedular gross income subject to final withholding, or
“(e)
of a capital nature, unless allowed as a deduction under Part D (Deductions Further Defined) or E (Timing of Income and Deductions), or
“(f)
disallowed as a deduction under Part D (Deductions Further Defined), E (Timing of Income and Deductions), F (Apportionment of Recharacterised Transactions), G (Avoidance and Non-Market Transactions), H (Treatment of Net Income of Certain Entities), I (Treatment of Net Losses), L (Credits) or M (Tax Payments).
Defined in this Act: allowable deduction , business , gross income , income from employment , taxpayer
“BD 3 Allocation of gross income
“Application
“(1)
A taxpayer or the Commissioner must allocate each amount of gross income to an income year in accordance with this section.
“Gross income subject to timing regime
“(2)
If an amount of gross income is subject to a timing regime, the amount must be allocated to an income year in accordance with that regime.
“Other gross income
“(3)
An amount of gross income that is not subject to a timing regime must be allocated to the income year in which the amount is derived.
“Gross income allocated once
“(4)
A particular amount of gross income may be allocated only once.
Defined in this Act: Commissioner , gross income , income year , taxpayer , timing regime
“BD 4 Allocation of allowable deductions
“Application
“(1)
A taxpayer or the Commissioner must allocate each allowable deduction to an income year in accordance with this section.
“Subject to timing regime
“(2)
If an allowable deduction is subject to a timing regime, the deduction must be allocated to an income year in accordance with that regime.
“Other allowable deductions
“(3)
An allowable deduction that is not subject to a timing regime must be allocated to the income year in which the allowable deduction is incurred.
“Expenditure or loss deductible once
“(4)
If an expenditure or loss gives rise to more than one allowable deduction, the allowable deductions may be allocated to income years to the extent that their total does not exceed the amount of that expenditure or loss.
Defined in this Act: allowable deduction , Commissioner , income year , taxpayer , timing regime
“Subpart E—Withholding Liabilities
“BE 1 Withholding liabilities
“Source deduction payments
“(1)
A person who makes a source deduction payment must make a deduction from the payment in accordance with the PAYE rules.
“Resident withholding income
“(2)
A person who makes a payment of resident withholding income must make a deduction from the payment in accordance with the RWT rules.
“Non-resident withholding income
“(3)
A person who makes a payment of non-resident withholding income must make a deduction from the payment in accordance with the NRWT rules.
“Fringe benefits
“(4)
A person who provides a fringe benefit to another person must pay fringe benefit tax in accordance with 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 in accordance with the SSCWT rules.
“Dividend withholding payments
“(6)
A person who receives dividends must make dividend withholding payments in accordance with the dividend withholding payment rules.
Defined in this Act: dividend withholding payment , dividend withholding payment rules , fringe benefit , fringe benefit tax , non-resident withholding income , NRWT rules , PAYE rules , person , resident withholding income , RWT rules , SSCWT rules , source deduction payment , specified superannuation contribution , specified superannuation contribution withholding tax , superannuation fund
“Subpart F—Other Obligations
“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 , person , non-qualifying trust , taxable distribution , withdrawal tax
“Subpart G—Avoidance
“BG 1 Avoidance
“Arrangement void
“(1)
A tax avoidance arrangement is void as against the Commissioner for income tax purposes.
“Enforcement
“(2)
The Commissioner, in accordance with Part G (Avoidance and Non-Market Transactions), may counteract a tax advantage obtained by a person from or under a tax avoidance arrangement.
Defined in this Act: Commissioner , income tax , tax advantage , tax avoidance arrangement
“Subpart H—Double Tax Agreements
“BH 1 Double tax agreements
“Overriding effect
“(1)
If the Government of New Zealand has negotiated a double tax agreement for one or more of the purposes set out in subsection (2), the Governor-General may declare, by Order in Council, that the agreement has effect in relation to income tax notwithstanding anything in this Act or in any other enactment.
“Purpose
“(2)
A double tax agreement to which effect is given under this section may
“(a)
provide relief from double taxation, or
“(b)
provide relief from tax, or
“(c)
charge the income derived from any source in New Zealand to non-residents, or
“(d)
determine the income to be attributed to non-residents or their agencies, branches or establishments in New Zealand, or
“(e)
determine the income to be attributed to New Zealand residents who have special relationships with non-residents, or
“(f)
prevent fiscal evasion, or
“(g)
facilitate the exchange of information.
“Meaning of profits
“(3)
A reference in a double tax agreement to the profits of an activity or business shall be read, if possible, as a reference to the amount that would be a taxpayer’s net income if that activity or business were the taxpayer’s only activity or business.
Defined in this Act: business , double tax agreement , income tax , New Zealand , New Zealand resident , net income , non-resident.”
Amendments to Part C
7 Exempt income—interest
(1)
Section CB 1(1) is replaced by:
“CB 1
“(1)
To the extent that in the absence of this section the following amounts would be gross income, they are exempt income:
“(a)
Interest from Post Office National Development Bonds or New Zealand Savings Certificates (being interest in respect of the period from the date of issue to the date of maturity or earlier surrender of those bonds or those certificates) derived by any person (not being an absentee, a company, a public authority, a Maori authority, an unincorporated body or, if the interest is beneficiary income, a trustee):
Provided that the amount of interest that is exempt income of a person under this paragraph in any income year does not exceed $500:
Provided further that where interest which would otherwise be exempt income is derived by the trustee of a trust, that interest shall not be exempt income unless—
“(i)
The trust arose on the death of any person; and
“(ii)
Those bonds or those certificates were owned by that person at that person’s death:
“(b)
Interest on post-war credits derived by any person being interest payable under section 2 of the Income Tax (Repayment of Post-War Credits) Act 1959 of the United Kingdom Parliament:
“(c)
Interest on any farm vendor finance bond or in respect of any farm vendor mortgage, derived by any person (not being an absentee, or a company, or a public authority, or a Maori authority, or an unincorporated body, or a trustee assessable and liable for income tax under sections HH 3 to HH 6, HK 14, and HZ 2):
Provided that the amount of the interest which is exempt income of a person under this paragraph in any income year shall not exceed 50% of the interest derived in that year:
Provided also that if any interest is exempt income under this paragraph, the person who derives the interest shall not, in respect of that interest, be entitled to a rebate under section KE 1.”.
(2)
In section CB 1(2), paragraph (b) of the definition of “farm vendor mortgage”
is replaced by:
“(b)
Which was approved by the Rural Banking and Finance Corporation of New Zealand for the purpose of subsection (1)(d); and”.
8 Non-residents’ exempt income
(1)
Section CB 2(1) and (2) are replaced by:
“CB 2
“(1)
To the extent that in the absence of this section the following amounts would be gross income, they are exempt income:
“(a)
Any amount derived by any non-resident entertainer (within the meaning of regulations made under section NC 21) from any activity or performance—
“(i)
Under a cultural programme of, or wholly or partly sponsored by, any overseas government or the Government of New Zealand; or
“(ii)
In accordance with the programme of a foundation, trust, or other organisation, being a foundation, trust, or other organisation outside New Zealand which exists for the promotion, whether in whole or in part, of any cultural activity and which is not carried on for the private pecuniary profit of any proprietor, member, or shareholder; or
‘(iii)
In relation to any game or sport where the participants are the official representatives of an association, league, union, or other body which administers the game or sport in an overseas country:
“(b)
Any interest or redemption payment, where that interest or redemption payment is payable out of New Zealand, derived by a person who is not resident in New Zealand from or in respect of—
“(i)
Any money lent to the Government of New Zealand; or
“(ii)
Any money lent to any local or public authority for the purposes of any activity, not being a commercial activity, carried on in New Zealand by that local or public authority, where that interest or redemption payment derived from or in respect of that money lent is, in accordance with approval given in that behalf by the Government of New Zealand, to be exempt income:
Provided that this paragraph is subject to the application provisions of section CZ 2:
“(c)
Any amount derived by a person who is not resident in New Zealand, from personal (including professional) services performed by that person within New Zealand during a visit to New Zealand, if—
“(i)
That visit does not exceed a period of 92 days; and
“(ii)
In the country or territory in which that person is resident, the amount, being exempt income in New Zealand, is chargeable with any tax which in the opinion of the Commissioner is substantially of the same nature as income tax under this Act; and
“(iii)
Those services are performed for or on behalf of a person who is not resident in New Zealand:
Provided that this paragraph shall not apply to any amount derived by public entertainers (including, but without limiting the generality of the term ‘public entertainers’, theatre, motion picture, television, and radio artists, singers, musicians, dancers, lecturers, circus performers, boxers, wrestlers, athletes, and other professional sportspersons):
Provided also that this paragraph shall not apply to any amount derived in any income year by a person who is present within New Zealand for a period or periods exceeding in the aggregate 92 days during that year:
“(d)
Any amount derived by any person who is not resident in New Zealand,—
“(i)
From personal (including professional) services performed by that person within New Zealand for or on behalf of an employer who is not resident in New Zealand; or
“(ii)
From any maintenance, allowance, scholarship, or bursary provided for or paid to that person,—
if that amount is derived by that person during and in respect of that persons presence within New Zealand for the purpose of providing professional or expert advice or assistance, or of teaching or lecturing, or of making investigations, or of receiving education, training, or experience, in every case under any arrangement for assistance entered into by the Government of New Zealand:
“(e)
Interest derived by any person (not being interest payable in respect of any period during which that person is resident in New Zealand) from a country or territory outside New Zealand which is exempt from income tax (being any tax which, in the opinion of the Commissioner, is substantially of the same nature as income tax imposed under section BB 1) under the laws of that country or territory.
“(2)
If any question arises as to whether any amount derived by a person is exempt income in whole or in part under subsection (1)(d) or as to whether any scheme, plan, or arrangement is an arrangement for assistance entered into by the Government of New Zealand, that question shall be determined by the Commissioner, and there shall be no right of challenge to any determination of the Commissioner under this subsection.”.
(2)
Section CB 2(5) is replaced by:
“(5)
Notwithstanding subsection (1)(b), section 61(18)(b) of the Income Tax Act 1976, as it was in force immediately before the enactment of the Income Tax Amendment Act 1983, shall, in relation to interest which is, in accordance with an agreement or arrangement made with the Government of New Zealand, to be exempt from income tax in New Zealand, continue to apply in any case where the exemption is authorised as a result of an application received by, or posted to, the Government of New Zealand before 29 July 1983, and any such interest is exempt income.”.
9 Public and local authorities’ exempt income
(1)
In section CB 3, the portion before paragraph (a)(i) is replaced by:
“CB 3
To the extent that in the absence of this section the following amounts would be gross income, they are exempt income:
“(a)
Any amount derived, other than an amount received in trust, by any public authority other than the following:”.
(2)
Section CB 3(b) is replaced by:
“(b)
Any amount derived by a local authority other than—
“(i)
An amount received in trust:
“(ii)
An amount (other than rates) derived by a local authority from—
“(A)
Any local authority trading enterprise; or
“(B)
Any airport company, port company, or energy company referred to in subparagraph (i) or subparagraph (ii) or subparagraph (iia) of paragraph (b) of the definition of ‘local authority trading enterprise’ in section 594b of the Local Government Act 1974, being a company that, but for its exclusion by that paragraph, would be a local authority trading enterprise within the meaning of that section:
“(iii)
An amount derived by a port operator within the meaning of section 38(4) of the Port Companies Act 1988, to the extent that the amount relates to a port related commercial undertaking within the meaning of that section:”.
(3)
Section CB 3(d) is replaced by:
“(d)
An amount derived by Geothermal Development Limited:”.
10 Non-profit bodies’ and charities’ exempt income
(1)
In section CB 4(1), the portion before paragraph (f) is replaced by:
“CB 4
“(1)
To the extent that in the absence of this section the following amounts would be gross income, they are exempt income:
“(a)
Any amount derived by a friendly society, except so far as it is derived from business carried on beyond the circle of its membership:
“(b)
Any amount derived by any society or association, whether incorporated or not, which is, in the opinion of the Commissioner, established substantially or primarily for the purpose of promoting or encouraging scientific or industrial research, and which is approved by the Royal Society of New Zealand, if no part of the funds of the society or association is used or available to be used for the private pecuniary profit of any proprietor, member, or shareholder of the society or association:
“(c)
Any amount derived by trustees in trust for charitable purposes or derived by any society or institution established exclusively for charitable purposes and not carried on for the private pecuniary profit of any individual, except where the amount so derived is an amount to which paragraph (e) applies:
“(d)
Any amount derived in any income year by the executor or administrator of the estate of any person dying on or after 22 June 1972 to the extent to which the Commissioner is satisfied that the funds represented by the amount are held for the benefit of any trustees, society, or institution to which paragraph (c) refers and that, if the amount had been derived by any such trustees, society, or institution, it would have been exempt income under paragraph (c) or paragraph (e); and for this purpose the Commissioner shall have regard to all relevant matters including—
“(i)
The terms of the will of the deceased person, including the rights of annuitants, legatees, and other beneficiaries; and
“(ii)
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
“(iii)
The shares and prospective shares of the beneficiaries in the income and assets of the estate:
“(e)
Any amount derived directly or indirectly from any business carried on by or on behalf of or for the benefit of trustees in trust for charitable purposes within New Zealand, or derived directly or indirectly from any business carried on by or on behalf of or for the benefit of any society or institution established exclusively for such purposes and not carried on for the private pecuniary profit of any individual:
Provided that if those purposes are not limited to New Zealand the Commissioner may apportion the amount in such manner as the Commissioner deems just and reasonable between those purposes within New Zealand and the like purposes out of New Zealand, and accordingly only a part of the amount may be exempt income:
Provided also that in any case where, in any income year, in the carrying on of that business, any benefit or advantage, whether or not convertible into money, or any amount of any of the kinds referred to in section CC 1, Subpart CD and sections CE 1, CE 3, CF 1, CG 1 and CH 3 is able to be afforded to, or received, gained, achieved, or derived by any person—
“(i)
Who is a settlor or trustee of the trust by which the business is carried on; or
“(ii)
Who is a shareholder or director of the company by which the business is carried on; or
“(iii)
Who is a settlor or trustee of a trust that is a shareholder of the company by which the business is carried on; or
“(iv)
Where that person and that settlor or trustee or shareholder or director referred to in any of subparagraphs (i) to (iii) are associated persons—
and that person is, in the opinion of the Commissioner, able, by virtue of that capacity as settlor or trustee or shareholder or director or associated person, in any way (whether directly or indirectly) to determine, or to materially influence in any way the determination of, the nature or extent of that benefit or advantage or that amount or the circumstances in which it is or is to be so received, gained, achieved, afforded, or derived, the amount so derived directly or indirectly from that business in that income year is not exempt income, and notwithstanding any other provision of this Act, where that business is carried on by or on behalf of or for the benefit of trustees in trust, the amount shall be trustee income and for the purposes of this paragraph—
“(v)
A person shall, in relation to a trust, be deemed to be a settlor of the trust and to gain a benefit or advantage in the carrying on of a business of the trust, in any case where that person has disposed of or disposes of, to the trust, any asset that is used by the trust in the carrying on of that business, and where that person retains or reserves an interest in that asset or that asset will revert to that person:
“(vi)
The deriving by any trustee of any rents, fines, premiums, or other revenues from any asset shall, in any case where any person, being a person of any of the kinds referred to in subparagraphs (i) to (iv), has disposed of or disposes of, to the trust, any asset that is used by the trustee in the deriving of those rents, fines, premiums, or other revenues, and where that person retains or reserves an interest in that asset or that asset will revert to that person, be deemed to be the carrying on of a business by the trustee:
“(vii)
Interest on money lent that, in the opinion of the Commissioner, is payable at not more than current commercial rates, having regard to the nature and term of the loan shall be deemed not to be an amount derived by any person of any of the classes referred to in subparagraphs (i) to (iv):
“(viii)
A person shall not, by reason only that the person renders professional services to any trust or company by which a business is carried on, be considered to be able to determine, or to materially influence the determination of, the nature or the extent of any benefit or advantage or amount afforded to, or received, gained, achieved, or derived by the person or the circumstances in which it is or is to be so received, gained, afforded, or derived, in any case where that ability to so determine or to so materially influence results from the rendering by that person, in the course of and as part of the carrying on as a business of a professional public practice by that person, of professional services to the trust or company by which the business first mentioned in this paragraph is carried on; and, for the purposes of this subparagraph, the Public Trustee, the Maori Trustee, and any trustee company within the meaning of the Trustee Companies Act 1967 shall each be deemed to be a person carrying on as a business a professional public practice:”.
(2)
Wherever it occurs in section CB 4(1)(f), (g), (h), (i)(vi) and (j), “income or other”
is omitted.
(3)
Section CB 4(1)(k) is repealed.
11 Certain pensions, benefits, and other compensation exempt
(1)
In section CB 5(1), the portion before paragraph (g) is replaced by:
“CB 5
“(1)
To the extent that in the absence of this section the following amounts would be gross income, they are exempt income:
“(a)
Any pension or allowance derived by any person under the War Pensions Act 1954, other than any veteran’s pension, or from any other pension or allowance granted in New Zealand or elsewhere by any Government in respect of any war or in respect of any disability or disablement attributable to or aggravated by service in any naval, military, air, or police forces:
“(b)
Any distribution derived by any person from any fund approved by the Minister in Charge of War Pensions for the payment of compensation for ex-prisoners of war who were held in German concentration camps in World War II:
“(c)
Pensions, annuities, and allowances paid as or by way of compensation by a State of the Federal Republic of Germany or the Republic of Austria under the laws of that Republic relating to compensation of victims of National Socialist persecution:
“(d)
Any retiring allowance or other benefit paid—
“(i)
From the Government Superannuation Fund to a person who was formerly a member of the Cook Islands Public Service or to a dependant of any such person, if that person or that dependant is, at the time of receiving that allowance or benefit, resident in the Cook Islands (including Niue); or
“(ii)
From the Government Superannuation Fund or the Western Samoan Superannuation Fund Account within the National Provident Fund to a person who was formerly a member of the Western Samoan Public Service or to a dependant of any such person, if that person or that dependant is, at the time of receiving that allowance or benefit, resident in Western Samoa:
“(e)
Any monetary benefit derived by any person payable under Part I of the Social Security Act 1964, other than from New Zealand superannuation or any income-tested benefit:
“(f)
Any amount derived by any person from any overseas pension to the extent to which, under section 70 of the Social Security Act 1964, a deduction in respect of that amount is made by the Department of Social Welfare from the amount of any entitlement to any monetary benefit (other than New Zealand superannuation) payable under Part I of that Act:”.
(2)
Section CB 5(1)(i), (j), (k), (l) and (m) are replaced by:
“(i)
Any amount derived by any trustee in trust for any sick, accident or death benefit fund, not being an amount derived directly or indirectly from any business carried on by or on behalf of or for the benefit of that trustee:
“(j)
Compensation received by any person under the Worker’s Compensation Act 1956, whether as a lump sum or by weekly payments:
“(k)
Compensation received by any person under the Criminal Injuries Compensation Act 1963, whether as a lump sum or by periodical payments:
“(l)
Any amount derived by any trustee, and any amount distributed to a beneficiary, of a trust for the benefit of persons harmed by the drug known as ‘thalidomide’, where that trust was created—
“(i)
By an order of Court under the Minors’ Contracts Act 1969; or
“(ii)
Under the law of any country or territory outside New Zealand in any case where—
“(A)
The funds settled on the trust were money paid in compensation by the producer or supplier of that drug; and
“(B)
The purpose and effect of the trust are the same or substantially the same as the purpose and effect of a trust that is of the kind referred to in subparagraph (i) and the amount derived by the trustee which is, under this paragraph, exempt income:
“(m)
Any amount derived—
“(i)
By any trustee of the New Zealand Agent Orange Trust from the corpus of the Trust to the extent that it represents—
“(A)
The settlement fund; and
“(B)
All accretions of income attributable to the settlement fund; and
“(ii)
By any beneficiary to the Trust by way of any distributions to the beneficiary from the Trust:”.
12 Certain allowances and fees exempt
In section CB 6, the portion before paragraph (b) is replaced by:
“CB 6
To the extent that in the absence of this section the following amounts would be gross income, they are exempt income:
“(a)
Any nominal amounts derived by a disabled person in respect of therapeutic activities undertaken in—
“(i)
A sheltered workshop within the meaning of the Disabled Persons Employment Promotion Act 1960; or
“(ii)
Any other workshop that is, in the opinion of the Commissioner, of a similar nature to the sheltered workshop:
Provided that in no circumstance shall such amounts be nominal for the purposes of this paragraph if they exceed (on average in respect of the number of weeks during which, in any income year, those activities are undertaken by that person) $50 per week:”.
13 Public offices’ exempt income
In section CB 7, the portion before paragraph (a) is replaced by:
“CB 7
To the extent that in the absence of this section the following amounts would be gross income, they are exempt income.
14 Certain income from Niue exempt
(1)
Section CB 8(1) and (2) are replaced by:
“CB 8
“(1)
To the extent that in the absence of this section the following amounts would be gross income, they are exempt income:
“(a)
Any amount derived by a New Zealand company, being a company—
“(i)
That the Commissioner is satisfied derives its income exclusively or principally from Niue; and
“(ii)
That, if it were a foreign company, would not at any time during the income year in which the income was derived be a controlled foreign company.
Provided that no amount derived by the company from sources in New Zealand is exempt income under this paragraph:
“(b)
Dividends from a New Zealand company, being a company that the Commissioner is satisfied derives its income exclusively or principally from Niue, derived by any person other than—
“(i)
A person who is resident in New Zealand; or
“(ii)
A company that, at any time during the income year in which the dividends were derived, is a controlled foreign company; or
“(iii)
A trustee of a trust where at any time during the income year in which the dividends were derived any settlor or any beneficiary of the trust is resident in New Zealand:
Provided that no dividends are exempt income under this paragraph to the extent that those dividends constitute distribution of any amount derived by the company from sources in New Zealand.
“(2)
Where the income of a New Zealand company is derived exclusively or principally from any business or enterprise (being a business or enterprise that under an Order in Council made under subsection (3) is a development project for the purposes of this section) carried on by that company in Niue, any amount derived by that company from sources in Niue from that business or enterprise, being an amount so derived while that Order in Council remains in force, is exempt income.”.
(2)
Section CB 8(4) is replaced by:
“(4)
This section does not restrict application of section CG 1 and the FIF rules and, for the purposes of those provisions, a company which derives its income exclusively or principally from Niue and has exempt income under subsection (1)(a) of this section shall be treated as a foreign entity.”.
15 Other exempt income
In section CB 9, the portion before paragraph (a) is replaced by:
“CB 9
To the extent that in the absence of this section the following amounts would be gross income, they are exempt income.
16 Exempt income—dividends
(1)
Section CB 10(1) is replaced by:
“CB 10
“(1)
Any dividends derived from a foreign company by—
“(a)
Any company resident in New Zealand; or
“(b)
The trustee of any group investment fund as category A income of that fund—
shall be exempt income.”.
(2)
In section CB 10(2), the portion after paragraph (a) and before paragraph (e)(ii) is replaced by:
“(b)
Is so derived from a company that is neither a foreign company nor a company that derives only exempt income (in this subsection and subsection (3) referred to as the ‘payer’)—
shall be exempt income where—
“(c)
The recipient and the payer are a wholly-owned group of companies at the time the dividend is derived; and
“(d)
At the time the dividend is derived, either—
“(i)
The recipient and the payer have income years or non-standard accounting years ending with the same balance date; or
“(ii)
Where the recipient and the payer have different balance dates, the Commissioner has, on the application of the recipient or the payer in such form as the Commissioner may allow, determined that this difference is necessary in order to avoid a material distortion of the net income calculated under this Act of either that would arise if they had income years or non-standard accounting years ending with the same balance date by causing gross income and allowable deductions for a single business cycle to be reported in different income years; and
“(e)
The dividend is not—
“(i)
Allowed as a deduction under section FZ 1 to the company paying the dividend; or”.
17 Exempt income—pay of service personnel in operational areas
Section CB 11(1) and (2) are replaced by:
“CB 11
“(1)
Where any person engaged in any naval, military, or air force raised in New Zealand or in any other part of the Commonwealth is in receipt of pay and allowances in respect of that engagement directly from the New Zealand Government or of pay and allowances receivable in respect of that engagement which but for this section would be gross income, such portion of that person’s pay and allowances as relates to the period of the person’s service in an operational area as defined in subsection (4) is exempt income.
“(2)
Where any person who has exempt income under subsection (1) suffers any sickness, injury, or disablement during a period of service in an operational area and that sickness, injury, or disablement is not due to that person’s negligence or misconduct, the person’s service in the operational area shall, for the purposes of this section, be deemed to continue until such time as the person is certified as fit for further service, whether in an operational area or elsewhere, or is discharged from the force”.
18 Exempt income—employee allowances and expenditure on account of employee
(1)
Section CB 12(1) is replaced by:
“CB 12
“(1)
An amount paid by an employer in respect of an employee’s employment or service is exempt income where and to the extent that the amount—
“(a)
Reimburses the employee for expenditure that, but for section BD 2(2)(c), would be an allowable deduction to the employee; or
“(b)
Is expenditure on account of an employee which, if incurred by the employee and but for section BD 2(2)(c), would be an allowable deduction to the employee.”.
(2)
In section CB 12(2), the portion before paragraph (a) is replaced by:
“(2)
Any allowance, not being an allowance or part of an allowance which is exempt income under subsection (1), is exempt income to the extent to which—”.
19 Exempt income—certain aircraft operators
Section CB 14(1) is replaced by:
“CB 14
“(1)
Where any aircraft operator, or any class or classes of aircraft operators, being resident in a country or territory outside New Zealand and not being resident in New Zealand, is or are engaged in air transport from New Zealand, and derives from that air transport from New Zealand any amount which would be gross income but for this section, the Commissioner may treat that amount as exempt income in whole or in part if and so far as the Commissioner is satisfied that in corresponding circumstances the like aircraft operator or the like class or classes of aircraft operators, being resident in New Zealand, are not liable to or are exempt from income tax imposed by the laws of that country or territory outside New Zealand.”.
20 Exempt income—dispositions of shares not resulting in cancellation of share
Section CB 15 is replaced by:
“CB 15
Any amount that would otherwise be gross income derived by any company from the disposition of any share in the company, where the acquisition by the company of the share was deemed, under section 67a(1) of the Companies Act 1993, not to result in cancellation of the share, is exempt income.”.
21 Certain compensation, benefits, and other payments are gross income
In section CC 1(1), the portion before paragraph (a) is replaced by:
“CC 1
“(1)
The gross income of any person includes—”.
22 Payments to employees or former employees while on naval, military, or air service
Section CC 2(1) is replaced by:
“CC 2
“(1)
The gross income of any serving employee includes all money paid to the employee by the employee’s employer and not forming part of the employee’s gross income otherwise than by virtue of this section:
Provided that this subsection shall not apply with respect to any payment or payments if the Commissioner is satisfied that the payment or payments have not been made for the purpose of supplementing the gross income of the serving employee, and were not in any manner induced by or due to the employment or former employment of the serving employee by the employer, and were not otherwise directly or indirectly connected with or related to that employment or former employment.”.
23 Forestry encouragement grants
Section CC 3(1) is replaced by:
“CC 3
“(1)
Where, in any income year, a payment to any taxpayer is made under the Forestry Encouragement Grants Regulations 1970 or the Forestry Encouragement Grants Regulations 1981 or the Forestry Encouragement Grants Regulations 1983, the amount (if any) of the labour portion of that payment is gross income of the taxpayer for the income year.”.
24 Land transactions
(1)
Section CD 1(1) is replaced by:
“CD 1
“(1)
Any amount derived from the sale or other disposition of any land, being an amount to which this section applies, is gross income.”.
(2)
In section CD 1(2), the portion before paragraph (a) is replaced by:
“(2)
For the purposes of subsection (1), the gross income of any person includes the following amounts—’.
(3)
Section CD 1(2)(e) is replaced by:
“(e)
Any amount derived from the sale or other disposition of land (not being an amount which is gross income under any of paragraphs (a), (b), (c), (d), and (f)), if—
“(i)
The land was disposed of by the taxpayer within 10 years after the date on which it was acquired by the taxpayer; and
“(ii)
The total amount derived by the taxpayer from the disposition exceeds the cost of the land; and
“(iii)
In the opinion of the Commissioner at least 20% of the excess is due to any one or more of the following:
“(A)
The rules of an operative district plan under the Resource Management Act 1991 which relate to that land or any change of those rules after the acquisition of that land by the taxpayer; or
“(B)
The likelihood of the imposition of such rules or of any change to such rules; or
“(C)
Any consent granted in relation to that land under any provision of that Act or any decision of the Planning Tribunal made in relation to that land under that Act, where that consent was granted or that decision made after the acquisition of that land by the taxpayer; or
“(D)
The likelihood of any such consent being granted or of any such decision being made; or
“(E)
The removal of any condition, obligation, restriction, prohibition, or covenant including any designation or heritage order imposed under that Act in relation to that land, where that removal occurred after the acquisition of that land by the taxpayer; or
“(F)
The likelihood of the removal of any such condition, obligation, restriction, prohibition, or covenant including any designation or heritage order; or
“(G)
Any change or occurrence of a similar nature to any of the changes or occurrences referred to in any of the preceding subparagraphs or the likelihood of any such change or occurrence in respect of or in relation to that land:”.
(4)
Section CD 1(2)(g) is replaced by:
“(g)
Any amount, not being an amount which is gross income under any of paragraphs (a), (b), (c), (d), (e), and (f), derived from the sale or other disposition of any land to the extent that the amount is derived from the carrying on or the carrying out of any undertaking or scheme, whether or not an adventure in the nature of trade or business, involving the development or division into lots of that land, and the Commissioner is satisfied that development or division work (being work involving significant expenditure on earthworks, contouring, levelling, drainage, roading, kerbing, or channelling or on any other work, service, or amenity customarily undertaken or provided in major projects involving the development of land for industrial, commercial, or residential purposes) has been carried on or carried out by or on behalf of the taxpayer on or in relation to that land.”.
(5)
In section CD 1(3), the portion before paragraph (a) is replaced by:
“(3)
Paragraphs (a), (b), (c), and (d) of subsection (2) shall not apply to any amount derived from the sale or disposition of—”.
(6)
In section CD 1(3), the portion after paragraph (b) is replaced by:
“unless, in either case, the taxpayer has engaged in the acquisition or erection of those business premises or dwelling houses, and the subsequent sale or disposition of those business premises or dwelling houses, to the extent that, in the opinion of the Commissioner, a regular pattern of such transactions has emerged and, in any case where the Commissioner is of that opinion, any amount derived from any such transaction or transactions shall be deemed to be an amount to which paragraph (a) or paragraph (b) or paragraph (c) or paragraph (d), as the case may be, of subsection (2) applies.”.
(7)
In section CD 1(4), the portion before paragraph (a) is replaced by:
“(4)
Subsection (2)(e) shall not apply to any amount derived from the sale or other disposition of any land in any case where the Commissioner is satisfied that—”.
(8)
Section CD 1(5) is repealed.
(9)
Section CD 1(6) is replaced by:
“(6)
Subsection (2)(f) and (g) shall not apply to any amount derived from the sale or other disposition of any land by any taxpayer where that land is a lot resulting from the division into 2 or more lots of a larger area of land (being an area which before any division by the taxpayer did not exceed 4,500 square metres) which was occupied by that taxpayer primarily and principally as residential land for the taxpayer and any member of the taxpayer’s family living with the taxpayer.”.
(10)
In section CD 1(7), the portion before paragraph (a) is replaced by:
“(7)
Subsection (2)(f) and (g) shall not apply to any amount derived from the sale or other disposition of any land in any case where—”.
(11)
Section CD 1(8) and (9) are repealed.
25 Royalties
Section CD 2 is replaced by:
“CD 2
The gross income of any person includes all royalties.”.
26 New sections added
After section CD 2, the following are added:
“CD 3 Business
The gross income of any person includes any amount derived from any business.
“CD 4 Personal property
The gross income of any person includes, any amount derived from the sale or other disposition of any personal property or any interest in personal property (not being property or any interest in property which consists of land), if the business of the person comprises dealing in such property or if the property was acquired for the purpose of selling or otherwise disposing of it, and any amount derived from the carrying on or carrying out of any undertaking or scheme entered into or devised for the purpose of making a profit.
“CD 5 Gross income according to ordinary concepts
The gross income of a person includes any amount that is included in gross income under ordinary concepts.”.
27 Investment income
(1)
In section CE 1(1), the portion before paragraph (a) is replaced by:
“CE 1
“(1)
The gross income of any person includes:”.
(2)
Section CE 1(1)(c) and (d) are replaced by:
“(c)
Any amount deemed to be gross income under the qualified accruals rules:
“(d)
Any amount received by a person on account of a bad debt for which a deduction has been allowed to the person.”.
28 Amounts derived from use or occupation of land
Section CE 2 is replaced by:
“CE 2
Subject to sections CJ 1, and FF 7, the gross income of any person includes any amount derived from the use or occupation of any land.”.
29 Commercial bills
(1)
In section CE 3(1), the portion before paragraph (b) is replaced by:
“CE 3
“(1)
Subject to the application provisions of section CZ 2, the gross income of any person includes:
“(a)
The amount received by a taxpayer on the redemption of a commercial bill (not being a redemption to which paragraph (b) applies) owned by the taxpayer, or, where the bill is not redeemed by the taxpayer but is disposed of by the taxpayer (otherwise than by way of a transfer made in accordance with a matrimonial agreement), whether by way of sale, gift, conversion, or otherwise, the value of that bill on the day of disposal:”.
(2)
Section CE 3(2) is replaced by:
“(2)
For the purposes of this section, if a person who owns a commercial bill dies, the person shall be deemed to sell the bill on the date on which the person dies.”.
30 Amounts remitted to be gross income
After section CE 3, the following is added:
“CE 4
“(1)
Subject to section EZ 9(2), where the amount of any expenditure or loss incurred by a taxpayer has been allowed as a deduction for any income year, and subsequently the liability of the taxpayer in respect of that amount is remitted or cancelled in whole or in part, the amount so remitted or cancelled shall be deemed to be gross income for that income year.
“(2)
For the purposes of this section—
“(a)
A liability shall be deemed to have been remitted to the extent to which the taxpayer has been discharged from that liability without fully adequate consideration in money or money’s worth:
“(b)
A liability shall be deemed to have been cancelled to the extent to which the taxpayer has been released from that liability by the operation of the Bankruptcy Act 1908 or the Companies Act 1955 or the Insolvency Act 1967 or the Companies Act 1993 or the laws of any country or any territory other than New Zealand, or by any deed or agreement of composition with the taxpayer’s creditors:
“(c)
A liability shall be deemed to have been cancelled to the extent to which it has become irrecoverable or unenforceable through lapse of time.
“(3)
For the purposes of giving effect to this section the Commissioner may at any time alter any assessment, notwithstanding the time bar.”.
31 Dividends are gross income
Section CF 1 is replaced by:
“CF 1
The gross income of any person includes all dividends.”.
32 Meaning of term “dividends”
(1)
In section CF 2(1)(g), the portion of paragraph (g) before subparagraph (i) is replaced by:
“(g)
Any amount (whether in money or money’s worth) distributed in any manner and under any name from and in respect of any—”.
(2)
Section CF 2(1)(i) is replaced by:
“(i)
All distributions to a unit holder and all other payments to and transactions with a unit holder in relation to the unit holder’s interest in the unit trust that would, if made to or with a shareholder in relation to shares in a company, be dividends under this Act:”.
(3)
Section CF 2(1)(j)(ii) is replaced by:
“(ii)
Expenditure that is an allowable deduction to the company:”.
(4)
Section CF 2(8)(a)(i) is replaced by:
“(i)
Notwithstanding the time bar, amend any income tax assessment of the shareholder, any determination of net loss or net loss carried forward of the shareholder, any assessment of the shareholder made under the dividend withholding payment rules, or any assessment of the company made under the imputation rules, the NRWT rules, and the RWT rules or by virtue of section LE 1(2); and”.
(5)
Section CF 2(9) is replaced by:
“(9)
Where any amount payable by a shareholder in respect of a loan and deemed by virtue of section 4(1)(b) of the Income Tax Act 1976 (as that provision was in force before its repeal by section 4(1) of the Income Tax Amendment Act (No. 2) 1992) or subsection (1)(b) of this section to constitute a dividend is subsequently repaid to the company in whole or in part, the Commissioner shall, if notified in writing of the repayment, amend in such manner as may be appropriate the assessment made in respect of the income tax liability of that shareholder for the income year in which the dividend was deemed to be derived, or in respect of fringe benefit tax payable by the company in respect of the quarter or income year during which that dividend was paid or otherwise made available, and shall, notwithstanding anything in section MD 1 but otherwise subject to the provisions of this Act, at any time refund any such tax found to be paid in excess of the amount properly payable.”.
(6)
Section CF 2(10) is replaced by:
“(10)
Where the Commissioner is satisfied that dividends arising under paragraph (j) of subsection (1) (or any corresponding dividends arising under paragraph (k) of that subsection) arise from the charging or expenditure, in the accounts of the company, in the reasonable belief of all of the shareholders of the company that the benefit of that expenditure was enjoyed by the company and not by any other person, the Commissioner may, where any of that expenditure is subsequently repaid to the company, amend in such manner as may be appropriate the assessment in respect of the income tax liability of the shareholder, for the income year in which the benefit arose, and may, notwithstanding anything in section MD 1, at any time refund any tax found to have been paid in excess of the amount properly payable.”.
(7)
Section CF 2(15) is replaced by:
“(15)
Subject to section FC 3, where any amount (whether in money or money’s worth) is derived by a person from and in respect of the acquisition, redemption, or other cancellation (referred to in this subsection as the ‘cancellation’) by a company of a share in the company, for the purposes of this Act in calculating the amount of gross income of the person under section CD 3 or CD 4 or any other provision of this Act (other than the other subsections of this section and section CE 1(1)(a)) in respect of the cancellation,—
“(a)
The consideration derived by the person from the company in respect of the cancellation shall be deemed to be reduced (to an amount not less than nil) by the amount of any dividend (exclusive of any imputation credit or dividend withholding payment credit attached to the dividend) derived by the person in respect of the cancellation, other than a dividend to the extent to which—
“(i)
The dividend is exempt income under section CB 10; and
“(ii)
The person was not required by section NH 1 to deduct from the dividend an amount by way of dividend withholding payment (which extent is to be calculated by deducting from the dividend the amount which is equal to any dividend withholding payment (if any) required by section NH 2(1) to be deducted multiplied by a fraction of which the numerator is 1 and the denominator is the basic rate of income tax for companies, expressed as a percentage, stated in clause 5 of Part A of Schedule 1 and applying in respect of the income year that is concurrent with the imputation year in which occurred the quarter in which the dividend was paid); and
“(b)
Any amounts derived by the person from the cancellation (as calculated subject to paragraph (a)) may be gross income of the person notwithstanding that those amounts may be excluded from the meaning of the term ‘dividends’ by section CF 3.”.
(8)
Section CF 2(16)(b)(i) is replaced by:
“(i)
In any case where the person is a company which has exempt income under section CB 10 in respect of the dividend, on the date falling 6 months after the end of the accounting period of the controlled foreign company in respect of which the attributed repatriation is calculated; and”.
33 Exclusions from term “dividends”
(1)
Section CF 3(1)(ia)(iii) is replaced by:
“(iii)
The amount distributed is in respect of part of an amount deemed under section ME 33 to have been a dividend which a member of the board has included in gross income:”.
(2)
Section CF 3(1)(j)(iii) is replaced by:
“(iii)
The amount distributed is in respect of part of an amount deemed under section ME 38 to have been a dividend which a shareholder of the cooperative company has included in gross income:”.
(3)
Section CF 3(4) is replaced by:
“(4)
Any distribution referred to in paragraph (i) or paragraph (ia) or paragraph (j) of subsection (1) shall, for the purposes of section BD 2(2)(e), be deemed to be a return of capital.”.
(4)
Section CF 3(7) and (8) are replaced by:
“(7)
Subject to subsections (8) to (10), the capital gain amount of a company, on or after 1 April 1988, is—
“(a)
In respect of each realisation by the company of a capital asset, whether voluntarily or involuntarily, for an amount in excess of the cost to the company of the asset, where the amount received in respect of the realisation is not gross income of the company, an amount calculated in accordance with the following formula:
“a − b
“where—
“a
is the amount realised on the asset’s realisation; and
“b
is the cost to the company of the asset.
“(b)
In respect of each other instance in which the company has, in the opinion of the Commissioner, made a capital gain, including a capital gain by way of gift, where no amount in respect of that capital gain is gross income of the company, the amount of the capital gain.
“(8)
Subject to subsection (9), where any asset of any company has been realised as part of, or subject to, any transaction or series of related or connected transactions between the company and any person related to the company, any amount arising from that realisation shall not constitute, for the purposes of subsection (7), a capital gain amount.”.
(5)
Section CF 8(10) is replaced by:
“(10)
Where a company has a capital gain amount under subsection (7), the capital gain amount shall, for the purposes of subsection (1)(c), be reduced by any capital losses arising from the realisation of capital assets (other than a realisation to which subsection (8) applies) incurred in the income year in which the capital gain amount arose or in any subsequent income year or in any preceding income year that commences on or after 1 April 1992 (those losses not being losses already taken into account in calculating capital gain amounts).”.
(6)
In section CF 3(11), “derived”
is omitted.
34 Amount of dividend includes credits and certain foreign tax
In section CF 6(1), the portion before paragraph (a) is replaced by:
“CF 6
“(1)
In Parts B, C, E, F, and LE, but subject to section LB 1, the term ‘dividends’ includes—”.
35 Attributed foreign income and foreign investment fund income included in gross income
Section CG 1 is replaced by:
“CG 1
The gross income of any person includes—
“(a)
All attributed foreign income:
“(b)
All foreign investment fund income.”.
36 Calculation and attribution of controlled foreign company repatriation
Section CG 8(13) is replaced by:
“(13)
Notwithstanding the time at which any person commences or ceases to be resident in New Zealand, any attributed repatriation of that person shall be deemed, for the purposes of section NH 1, to De derived while that person is resident in New Zealand.”.
37 Branch equivalent income calculation
(1)
In section CG 11(3), the portion before the proviso is replaced by:
“(3)
The branch equivalent income or loss of the controlled foreign company for that period shall be calculated in the currency in which it prepares its financial accounts, or, if it does not prepare such accounts, in the currency of the country or territory in which the foreign company is resident, and converted into New Zealand currency at the average of the close of trading spot exchange rates for the 15th of each complete month falling within that period:”.
(2)
Section CG 11(5)(b)(ii) is replaced by:
“(ii)
The adjusted base price, being, in the case of the issuer of a financial arrangement, the acquisition price of that financial arrangement together with all expenditure deemed to be incurred by the issuer less consideration paid by the issuer in relation to that financial arrangement for periods prior to that period, and, in the case of the holder of a financial arrangement, the acquisition price of that financial arrangement together with all gross income deemed to be derived by the holder less consideration received by the holder in respect of that financial arrangement for periods prior to that period.”.
(3)
Section CG 11(7)(a) is replaced by:
“(a)
Sections CE 2 and CJ 3 to CJ 7; and”.
(4)
In section CG 11(9), the portion before paragraph (a) of the proviso is replaced by:
“(9)
Sections CB 10 and CZ 4 shall not apply and all dividends (not being attributed repatriation) derived by the controlled foreign company shall be gross income:
Provided that dividends shall be exempt income if derived—”.
(5)
Section CG 11(11) is replaced by:
“(11)
Section CD 1, CK 1, and GD 9 shall not include any amounts in gross income if those amounts would not be gross income but for the nature of activities undertaken by persons associated with the controlled foreign company where those persons are resident outside New Zealand.”.
(6)
Section CG 11(16) is replaced by:
“(16)
The controlled foreign company shall be assumed not to be entitled to carry forward, under sections IE 1 and IF 1, to the accounting period net losses in respect of any previous accounting period.”.
(7)
Section CG 11(18) is replaced by:
“(18)
Where a controlled foreign company—
“(a)
Has derived an amount from transferring to any other person the ability to utilise any losses of that controlled foreign company for income tax purposes, that amount shall be gross income of the controlled foreign company; or
“(b)
Has made a payment to any other person resident in the same country or territory as the controlled foreign company in consideration for the transfer from the other person to the controlled foreign company of the ability to utilise any losses of the other person for income tax purposes, and that payment is deductible under the taxation law of the country or territory in which the controlled foreign company is resident, the payment shall be allowed as a deduction to the controlled foreign company.”.
38 What constitutes an interest in a foreign investment fund
Section CG 15(2)(e)(iii) is replaced by:
“(iii)
The exchange controls prevent the person from—
“(A)
Deriving any amounts in respect of the interest in; or
“(B)
Disposing of the interest for,— New Zealand currency or consideration readily convertible into New Zealand currency; or”.
39 Calculation of foreign investment fund income or loss
In section CG 16(6), the portion after paragraph (b) is replaced by:
“then, except to the extent to which section CG 22 applies with respect to the person and the interest, the person shall—
“(c)
Not be treated as deriving any dividend or other gross income (other than foreign investment fund income) from that interest for the period; and
“(d)
Not be allowed any deduction with respect to any expenditure or loss (other than foreign investment fund loss) incurred as part or all of the cost of acquiring the whole or any part of the interest in the period; and
“(e)
Not treat the interest as trading stock in the period,—
under or for the purposes of any provision of this Act.”.
40 Deemed rate of return method of calculation
In section CG 19(5), the definition of quantity “j”
is replaced by:
“j
is the aggregate of all amounts which are foreign investment fund income of the person with respect to the interest in the income year under section CG 22.”.
41 Taxation on distributions from foreign investment funds
Section CG 22(1)(d) is replaced by:
“(d)
The gain would have been a dividend or other gross income of the person had section CG 16(6) not been enacted,—”.
42 Benefit from share option or purchase schemes
Section CH 2(1) is replaced by:
“CH 2
“(1)
‘Monetary remuneration’ includes any benefit (determined in accordance with this section) conferred on any taxpayer in respect of, or in relation to, or in the course of, or by virtue of, the taxpayer’s employment or service, or future employment or service, under any agreement, entered into on or after 19 July 1968, to sell or issue shares in any company to the taxpayer.”.
43 Monetary remuneration
After section CH 2, the following is added:
“CH 3
All monetary remuneration derived by a person is gross income.”.
44 Meaning of “fringe benefit”
(1)
Section CI 1(1) is replaced by:
“(1)
Any benefit by way of the provision of services to a superannuation fund to the extent that the Commissioner is satisfied that the expenditure incurred in providing those services would have been an allowable deduction of the superannuation fund if that expenditure had been incurred by the superannuation fund:”.
(2)
In section CI 1(o), the portion before subparagraph (v) is replaced by:
“(o)
Any benefit to the extent to which—
“(i)
It is—
“(A)
Monetary remuneration to which section CH 1a applies; or
“(B)
Otherwise included or to be included in the gross income of the employee:
“(ii)
It is exempt income of the employee, not being—
“(A)
An allowance that, or such part of an allowance as, is exempt income under section CB 12(1) where and to the extent that the allowance or, as the case may be, the part of the allowance, was provided by the employer of the employee to enable the employee to provide a benefit to any person other than the employee:
“(B)
A payment by an employer of any life insurance premium on any policy of life insurance that is excluded from the definition of ‘expenditure on account of an employee’ by reason of the application of the provisions of any of subparagraphs (i), (ii), and (iii) of paragraph (b) of that definition:
“(iii)
If it had been provided by means of a cash payment, it would have been exempt income of the employee (other than interest and other than dividends), not being an allowance that, or such part of an allowance as, is exempt income under section CB 12(1) where and to the extent that the allowance or, as the case may be, the part of the allowance, was provided by the employer of the employee to enable the employee to provide a benefit to any person other than the employee:
“(iv)
It removes a need which would otherwise exist for the employer of the employee to pay to the employee an allowance, being an allowance that, the Commissioner is satisfied, would, had it so been paid,—
“(A)
Have been exempt income under section CB 12(1); and
“(B)
Have been paid otherwise than to enable the employee to provide a benefit to any person other than the employee:”.
45 Interpretation of Fringe Benefit Tax Rules
In section CI 2(2), “section BB 7”
is replaced by “section BD 2(1)”
.
46 Value of fringe benefit
(1)
Section CI 3(2)(b) is replaced by:
“(b)
Where appropriate having regard to the nature of the loan, the amount of gross income, if any, that would have accrued to the benefit of the employer in that same period if the gross income accruing from that loan, being a financial arrangement, were calculated using the yield to maturity method.”.
(2)
Section CI 3(3)(c) is replaced by:
“(c)
The amount of salary or wages or extra emolument or dividends or interest is gross income of the employee derived in that income year or any previous year; and”.
(3)
In section CI 3(5), the portion before paragraph (a) is replaced by:
“(5)
Where the amount derived by an employee and applied in repayment of an employment related loan—”.
47 Application of other provisions to fringe benefit tax
Section CI 8 is replaced by:
“CI 8
Subject to the FBT rules, the other provisions of this Act and of the Tax Administration Act 1994, so far as they are applicable and with any necessary modifications, shall apply with respect to fringe benefit tax as if it were income tax imposed under section BB 1, and as if every reference to a year of assessment were a reference to a quarter or (where fringe benefit tax is payable on an income year basis under section ND 4) an income year; but nothing in the FBT rules shall be so construed as to include fringe benefit tax in the expressions ‘income tax’ or ‘tax’ for the purposes of,—
“(a)
The provisions listed in section OZ 1(3)(a) to (o); or
“(b)
Sections 121 and 122 of the Tax Administration Act 1994.”.
48 Application of fringe benefit tax provisions
Section CI 9 is repealed.
49 Income from minerals, timber, or flax
(1)
Section CJ 1(1) is replaced by:
“CJ 1
“(1)
The gross income of any person shall include any amount (including an amount deemed to have been realised under section FB 4 or section GD 1 or section GD 2) derived in any income year from—
“(a)
The extraction, removal, or sale or other disposition of any minerals, flax, or timber; or
“(b)
The sale or other disposition of any right to take timber,—
whether by the owner of the land from or on which the minerals, flax, or timber are obtained or situated or by any other person.”.
(2)
Section CJ 1(2)(e) is replaced by:
“(e)
The amount so determined by the Commissioner (or, where appropriate, the amount determined under section FB 4 or section GD 1 or section GD 2) shall be deemed to be the consideration paid for the timber and that amount shall be treated as—
“(i)
Gross income of the person selling or otherwise disposing of the land; and
“(ii)
The cost of the timber to the person acquiring the land.”.
50 Income derived from films
Section CJ 2 is replaced by:
“CJ 2
“(1)
All income from a film derived by a taxpayer who is a film owner is gross income.
“(2)
In this section, ‘income from a film’, in relation to a film owner and to any film, means any amount derived by the film owner from the sale, use, rental, or other exploitation of the film; and includes—
“(a)
Any amount received or receivable by the film owner for the use of, or the right to use, the film or any right or interest in a right in the film; and
“(b)
Any amount received or receivable by the film owner for the granting of any licence in respect of any future right in the film; and
“(c)
Any amount received or receivable by the film owner in respect of the disposal of the whole or any part of any right or interest in any right in the film, or in respect of the assignment of any right or any interest in any right, or in respect of the assignment of any right to derive income from the use of such a right or interest.”.
51 Consideration for damaged permit specific petroleum asset
Section CJ 5 is replaced by:
“CJ 5
Any consideration for damage to a permit specific asset shall be gross income.”.
52 Group companies
Section CK 1 is replaced by:
“CK 1
Where—
“(a)
Two or more companies are members of the same wholly-owned group of companies for any income year; and
“(b)
Any amount derived in that income year by any company in the group would not, but for this section, be gross income of that company but, if the wholly-owned group of companies were one company, would have been gross income of the last-mentioned company,—
that amount shall be deemed to be gross income of the first-mentioned company.”.
53 Energy trading operators
(1)
In section CK 2, the portion before paragraph (b)(i) is replaced by:
“CK 2
The gross income of an energy trading operator shall be deemed—
“(a)
To include (subject to paragraph (b)) investment income derived by the specified local authority that, in its capacity as a supplier of energy, is the energy trading operator from funds that—
“(i)
Have arisen from the activities of the energy trading operator, whether before or after the commencement of this section; or
“(ii)
Have been taken into account in calculating net income of the energy trading operator:
“(b)
Not to include investment income derived by the specified local authority that, in its capacity as a supplier of energy, is the energy trading operator from funds that—”.
(2)
Section CK 2(b)(ii) is replaced by:
“(ii)
Have been taken into account in calculating the net income of the energy trading operator—”.
(3)
Section CK 2(d) is replaced by:
“(d)
Not to include any rate levied on occupiers of land as such by an energy supply authority or a specified local authority, being a rate levied for any purposes relating to the supply of energy, except to the extent that the rate is levied to meet any expenditure or loss incurred by the energy supply authority or, as the case may be, the company that, in relation to the specified local authority, is an energy trading operator, that is allowed as a deduction to the energy supply authority or the company.”.
54 Primary producer co-operative companies
In section CK 3(2), the portion after paragraph (b) is replaced by: “so much of the excess as the Commissioner considers to be attributable to any increase in the value of the assets of the company caused by the application or appropriation by the company of any deduction allowed under section 200(4) of the Income Tax Act 1976 (as so previously in force) is gross income derived by that shareholder in that income year.”
.
55 Crown research institutes
Section CK 4(1) is replaced by:
“CK 4
“(1)
Any payment received by a Crown Research Institute for the purpose of producing public good science outputs within the meaning of section 2 of the Foundation for Research, Science, and Technology Act 1990 is gross income.”.
56 Employer superannuation contributions not to be gross income of superannuation scheme trustee
Section CL 1 is replaced by:
“CL 1
No employer superannuation contribution is gross income of the trustees of the superannuation scheme to whom that employer superannuation contribution is made.”.
57 Trustee income
Section CL 2 is replaced by:
“CL 2
Where any funds of a superannuation fund are invested in a policy of life insurance issued in New Zealand, any payment in respect of that policy derived by the trustee of the fund is not gross income of the trustee.”.
58 Assessable income of life insurers
Section CM 1 is repealed.
59 Exclusions from life insurer’s gross income
Section CM 3 is replaced by:
“CM 3
The following amounts are not gross income of a life insurer—
“(a)
Any premium derived by the life insurer from carrying on the business of life insurance; or
“(b)
Any claim with respect to any policy of life reinsurance.”.
60 Adjustment for superannuation policies in respect of property acquired before 1 April 1988
Section CM 4 is repealed.
61 Mortality profit included in gross income
(1)
In section CM 5(1), the portion before the formula is replaced by:
“CM 5
“(1)
The gross income of a life insurer for any income year includes the mortality profit derived by the life insurer in that income year from the business of providing life insurance, which profit shall, subject to this section, be deemed to be equal to the amount (where that amount is a positive amount) calculated by aggregating, with respect to each life insured under each policy of life insurance in existence at the beginning of that income year for which the life insurer is the insurer, the amount calculated in accordance with the following formula:”.
(2)
In section CM 5(1), paragraph (a)(ii) of the definition of quantity “s1”
is replaced by:
“(ii)
During a previous income year (being the 1990–91 or any subsequent income year), and the amount of the claim payable has not been included in this item in calculating the mortality result for any such previous income year,—”.
(3)
In section CM 5(3), the portion before paragraph (a) is replaced by:
“(3)
In any case where a life insurer commences during any income year to carry on a business of providing life insurance, for the purposes of calculating the mortality result of the life insurer for that income year—”.
(4)
In section CM 5(5), the portion before paragraph (a) is replaced by:
“(5)
In respect of any income year and any life insured under a policy, the mortality result shall never be less than zero, except in any case where—”.
62 Premium loading included in gross income
In section CM 6(1), the portion before paragraph (a) is replaced by:
“CM 6
“(1)
The gross income of a life insurer includes the premium loading derived by the life insurer in any income year from the business of providing life insurance, which loading shall, subject to this section, be deemed to be equal to the amount calculated by aggregating, with respect to each life insured under each policy of life insurance in existence at the beginning of that income year for which the life insurer is the insurer, the amount calculated—”.
63 Discontinuance profit included in gross income
In section CM 7(1), the portion before paragraph (a) is replaced by:
“CM 7
“(1)
The gross income of a life insurer includes the discontinuance profit derived by the life insurer in any income year from the business of providing life insurance, which profit shall, subject to this section, be deemed to be equal to the amount calculated by aggregating, with respect to each policy of life insurance that was in existence at any time during that income year as a policy for which the life insurer was the insurer,—”.
64 Calculation of actuarial reserves
(1)
Section CM 8(2)(c)(i) is replaced by:
“(i)
The specific interest, mortality, and other assumptions and bases of calculation applied in calculating the life insurer’s mortality result, premium loading, discontinuance profit, policyholder income or policyholder net loss for that income year; and”.
(2)
Section CM 8(3) is replaced by:
“(3)
The Commissioner may seek the advice of the Government Actuary or any other actuary with respect to interest, mortality, and other assumptions and bases of calculation used for the purposes of this section, or of section CM 13(1)(d), and the Commissioner may, whether or not the Commissioner has sought or obtained such advice, make assessments of the taxable income and the income tax liability of, and the terminal tax payable by, a life insurer and any income year on the basis of interest, mortality, and other assumptions and bases of calculation different from those used by the actuary acting on behalf of the life insurer.”.
65 No double deductions
Section CM 9 is repealed.
66 Sales or disposals of property
Section CM 10 is replaced by:
“CM 10
“(1)
Subject to subsection (2), any amounts derived by a life insurer on the sale or other disposal of any property of the life insurer’s life insurance business are gross income including, in the case of property which is a financial arrangement to which the accruals rules would apply but for the application of paragraphs (a), (b), and (d) of section EH 9, any amounts received by the life insurer at any time after 1 April 1982 as repayment or partial repayment of that financial arrangement.
“(2)
Subsection (1) shall not apply to ascertain the amount of gross income derived in the case of any sale or other disposal of property which is a financial arrangement.”.
67 Certain property not trading stock
Section CM 11 is repealed.
68 Full reinsurance
In section CM 12, the portion after paragraph (b) is replaced by:
“the life insurer shall be deemed for the purposes of this Act in respect of that income year not to carry on the business of providing life insurance; and the following amounts shall not, if derived in that income year, be gross income of the life insurer—
“(c)
Any premium receivable by the life insurer from carrying on the business of life insurance; or
“(d)
Any claim with respect to any policy of life reinsurance that is receivable by the life insurer.”.
69 Policyholder base income or loss
(1)
In section CM 15(1), the portion before the formula is replaced by:
“CM 15
“(1)
A life insurer must perform the following policyholder base calculation in respect of each income year:’.
(2)
In section CM 15(1), the definition of quantity “u”
is replaced by:
“u is the underwriting result of the life insurer in that income year from that business; and”.
(3)
Section CM 15(2), (3) and (4) are replaced by:
“(2)
If the result of the policyholder base calculation—
“(a)
Is positive, an amount equal to that result is policyholder income and is deemed to be derived by the life insurer in that year;
“(b)
Is negative, an amount equal to that result is a policyholder net loss of the life insurer for that year.
“(3)
Any policyholder income is deemed to be gross income.
“(4)
A policyholder net loss for an income year is to be dealt with exclusively under sections II 1 and II 2.”.
70 Non-resident life insurer issuing policies in New Zealand
(1)
In section CM 16, the portion before paragraph (a) is replaced by:
“CM 16
Where a life insurer not resident in New Zealand is in any income year the insurer under policies of life insurance offered or entered into in New Zealand (whether or not executed in New Zealand and whether or not the life insurer has a fixed establishment or agent in New Zealand), in performing under section CM 15 the policyholder base calculation for that income year,—”.
(2)
In section CM 16(b), “section BB 3”
is replaced by “section OE 4”
.
71 Partial reinsurance
In section CM 17(1), the portion before the formula is replaced by:
“CM 17
“(1)
Where any life insurer is the holder of policies of life reinsurance offered or entered into in New Zealand (whether or not executed in New Zealand and whether or not the insurer under the policy of life reinsurance is resident in New Zealand, has a fixed establishment in New Zealand, or has an agent in New Zealand), in performing under section CM 15 the policyholder base calculation for that income year, there shall be deducted from the amount of item p of the formula set out in subsection (1) of that section an amount calculated in accordance with the following formula:”.
72 Transfer of life insurance business
After section CM 17 the following is added:
“CM 18
“(1)
Where in any income year there is a transfer of a life insurance business to which this subsection applies, the transferor and transferee shall perform the policyholder base calculation for that income year under section CM 15(1) as if—
“(a)
In respect of the transferor, for item v1 in that formula there were substituted the following item:
“v1
is the aggregate of the actuarial reserves of the life insurer in respect of all policies of life insurance for which the life insurer was the insurer immediately before the transfer; and
“(b)
In respect of the transferee, for item v0 in that formula there were substituted the following item:
“v0
is the aggregate of the actuarial reserves of the life insurer in respect of all policies of life insurance for which the life insurer was the insurer immediately after the transfer.
“(2)
Subsection (1) applies to a transfer of life insurance business where—
“(a)
The transferor and the transferee in the year of transfer are members of the same wholly-owned group of companies (whether or not resident in New Zealand); and
“(b)
All of the life insurance business of the transferor is transferred to the transferee or, if the transferor is not resident in New Zealand, all of the policies of life insurance offered or entered into in New Zealand that are held by the transferor are transferred to the transferee; and
“(c)
The Commissioner receives confirmation from the Government Actuary that—
“(i)
The life insurance business being transferred comprises all of the life insurance business (or all of the New Zealand life insurance business, where appropriate) of the transferor; and
“(ii)
No policyholder will be unduly disadvantaged as a result of the transfer; and
“(d)
The Commissioner is satisfied that the transfer is being undertaken for genuine commercial reasons and that no undue tax advantage to either the transferor or the transferee will arise as a result of the transfer.”.
73 Carriage by sea outside New Zealand of merchandise, goods, livestock, mails, or passengers shipped or embarked in New Zealand
Section CN 1(1) is replaced by:
“CN 1
“(1)
Notwithstanding anything in this Act, where a ship belonging to or chartered by any person, being resident in a country or territory outside New Zealand and not being resident in New Zealand, carries outside New Zealand merchandise, goods, livestock, mails, or passengers shipped or embarked in New Zealand, 5% of the gross amount paid or payable to that person in respect of that carriage, whether that amount is payable in or outside New Zealand, shall be deemed to be gross income derived by that person from New Zealand.
“(1a)
No deduction is allowed to the person to whom this section applies for any expenditure or loss incurred by or allowance available in respect of the gross income deemed to be derived under subsection (1).”.
74 Non-resident film renters
(1)
In section CN 2(1), the proviso is replaced by:
“Provided that this section shall not apply to any such person in any case where the Commissioner is satisfied that the gross income from renting films is a minor and relatively insignificant part of the gross income of that person from any business.”.
(2)
Section CN 2(2) and (3) are replaced by:
“(2)
Notwithstanding anything in this Act, every person to whom this section applies who derives income from renting films in any income year shall be deemed to have derived from that activity in that income year gross income equal to 10% of the gross rents receivable by that person or by any other person in that income year in respect of that activity carried on by that person.
“(2a)
No deduction is allowed to a taxpayer for any expenditure or loss incurred in respect of gross income deemed to be derived under subsection (2).
“(2b)
No allowance is available to a taxpayer in respect of gross income deemed to be derived under subsection (2).
“(3)
The gross income from renting films of any person to whom this section applies shall be gross income only to the extent provided in this section, and, in determining net income unrelated to the renting of films derived by any such person, no regard shall be had to the gross income from renting films or to any expenditure or loss incurred in connection with that income from renting films.”.
75 Non-resident life insurer issuing policies in New Zealand
(1)
Section CN 3(1) is replaced by:
“CN 3
“(1)
Where any life insurer not resident in New Zealand carries on a business of providing life insurance in any income year, to the extent to which that business consists of or relates to any one or more policies of life insurance for which that life insurer is the insurer which were offered or entered into in New Zealand (whether or not executed in New Zealand and whether or not the life insurer has a fixed establishment in New Zealand or has an agent in New Zealand) the life insurer’s gross income from life insurance is determined as if the business consists of or relates to any one or more policies of life insurance for which the life insurer is the insurer being policies offered or entered into in New Zealand (whether or not executed in New Zealand and whether or not the life insurer has a fixed establishment or agent in New Zealand).
“(1a)
For the purposes of section OE 4, the gross income from life insurance of a non-resident life insurer determined under subsection (1) is deemed to be derived from New Zealand.”.
(2)
In section CN 3(2), the portion before paragraph (a)(ii) is replaced by:
“(2)
To the extent to which that life insurer not resident in New Zealand derives in that income year—
“(a)
Amounts of gross income from New Zealand other than the amount of—
“(i)
Any gross income from life insurance; and”.
(3)
In section CN 3(2), the portion after paragraph (b) is replaced by:
“the life insurer shall calculate its taxable income as if it were not a person carrying on a business of providing life insurance in that income year”.
76 Insurance with persons not carrying on business in New Zealand
(1)
In section CN 4(1), the portion after paragraph (c) is replaced by:
“the insurer shall be deemed to have derived from that premium gross income equal to 10% of the gross amount of the premium.”.
(2)
Section CN 4(2) is replaced by:
“(2)
No deduction is allowed to the insurer for any expenditure or loss incurred or allowance available in respect of the gross income deemed to be derived under subsection (1) including in particular but without limitation any amount claimable under the contract of insurance by the insured person.”.
77 Resident insurance underwriters
Section CN 5(1) is replaced by:
“CN 5
“(1)
Notwithstanding anything in this Act, with respect to the income of an underwriter carrying on the business of insurance, the gross income of the underwriter shall not include gross income derived from insurance business carried on out of New Zealand to the extent that the gross income so derived consist of income other than income of the kinds referred to in any of paragraphs (e), (f), (g), (h), (l), (m), and (n) of section OE 4(1).”.
78 Gains and losses due to exchange variations in respect of repayment of loans
(1)
Section CZ 1(2) is replaced by:
“(2)
Notwithstanding anything in this Act, where in any income year an exchange variation arises in respect of the repayment, in whole or in part, of any loan made to any taxpayer carrying on business in New Zealand for the purposes of the taxpayer’s business in New Zealand or by any taxpayer in the course of carrying on business in New Zealand, and the Commissioner is satisfied that any profit is derived or loss is incurred by that taxpayer in respect of that exchange variation, the amount of that profit is gross income and the amount of that loss is an allowable deduction.”.
(2)
Section CZ 1(3)(b) is replaced by:
“(b)
The amount of any gross income which the taxpayer has derived shall not be less than the amount of the gross income which that taxpayer would, in the opinion of the Commissioner, have derived—”.
79 Application provision in respect of income from certain money lent or redemption payments
Section CZ 2(a) and (b) are replaced by:
“(a)
Interest, derived from money lent under a binding contract entered into on or after 29 July 1983; and
“(b)
A redemption payment made in respect of a commercial bill issued (within the meaning of the Bills of Exchange Act 1908) on or after 29 July 1983, not being a commercial bill issued under a binding contract entered into before that date.”.
80 Insurance companies other than life insurance companies
(1)
Section CZ 6(c)(vi) is replaced by:
“(vi)
Any amount payable by the company with respect to a claim under the contract and the period of risk shall be allowed as a deduction to the company where, and only where, the event giving rise to the claim occurs after the transition time; and”.
(2)
Section CZ 6(d)(iv) is replaced by:
“(iv)
An amount in respect of the premium payable by the company out of New Zealand, determined under subparagraph (v), shall be allowed as a deduction; and”.
(3)
In section CZ 6(d)(v), the portion before the formula is replaced by:
“(v)
The amount so allowed as a deduction shall be calculated in accordance with the following formula:”.
Amendments to Part D
81 Certain deductions not allowed
In section DB 1(1), the portion before paragraph (a) is replaced by:
“DB 1
“(1)
Except as expressly provided in this Act, no deduction is allowed to a person in respect of any of the following sums or matters:”.
82 Government grants to businesses
Section DC 1(2) and (3) are replaced by:
“(2)
Where, and to the extent that, in any income year, a grant is made to any taxpayer in respect of expenditure incurred by the taxpayer (not being expenditure of any of the kinds referred to in subsection (3)) that is allowed as a deduction under this Act, the amount of the deduction otherwise allowed, in respect of that expenditure shall be reduced by the amount of that grant, and the amount of that grant shall be deemed not to be gross income of that taxpayer.
“(3)
Where, and to the extent that, a grant is made to any taxpayer in respect of expenditure incurred by that taxpayer in the acquisition, construction, installation, or extension of any asset (being an asset in respect of which a deduction for depreciation is allowed under this Act), the amount of that expenditure shall, for the purposes of determining the amount of any deduction allowed in respect of the depreciation of that asset, be deemed to be reduced by the amount of that grant, and the amount of that grant shall be deemed not to be gross income of the taxpayer.
83 Specified suspensory loans
Section DC 2(1) is replaced by:
“DC 2
“(1)
Subject to this section, where any taxpayer has been granted a specified suspensory loan in relation to the business of the taxpayer and the liability of the taxpayer in respect of that loan is remitted, in whole or in part, the amount remitted shall be deemed to be gross income of the taxpayer derived equally in 3 income years, being the income year in which that amount is remitted and the next 2 succeeding income years:
Provided that the taxpayer may, if the taxpayer elects by notice in accordance with subsection (3) (which election shall, subject to subsection (4), be irrevocable) be entitled to allocate the whole or any part of that amount which is deemed to be gross income derived by the taxpayer in either of those 2 succeeding income years to be gross income derived by the taxpayer in any earlier income year, being one of those 3 income years.”.
84 Certain deductions not allowed—rents, interest, and premises
(1)
In section DD 1, the portion before paragraph (b)(iii) is replaced by:
“DD 1
Except as expressly provided in this Act, no deduction is allowed to a taxpayer in respect of any of the following sums or matters:
“(a)
Rent of any dwelling house or domestic offices, save that, so far as any such dwelling house or offices are used in the derivation of the taxpayer’s gross income, the Commissioner may allow a deduction to a taxpayer of such proportion of the rent as the Commissioner may think just and reasonable:
“(b)
Interest (not being interest of any of the kinds referred to in section DB 1(1)(e) and not being interest to which section LF 7 applies to prohibit a deduction), except so far as the Commissioner is satisfied that—
“(i)
It is payable in deriving the taxpayer’s gross income; or
“(ii)
It is necessarily payable in carrying on a business for the purpose of deriving the taxpayer’s gross income; or.
(2)
Section DD 1(c) is replaced by:
“(c)
Any loss incurred on the demolition or destruction of any premises (other than a temporary building).”.
85 Testamentary annuities charged on property
In section DD 2(1), the portion before the provisos is replaced by:
“DD 2
“(1)
Notwithstanding anything in this Act, where property has been devised or bequeathed by will subject to the payment of an annuity or has been made subject to the payment of an annuity by an order of the Court under the Family Protection Act 1955 or by a deed of family arrangement, and that property or any property substituted for it has been transferred to a beneficiary and that property so transferred or any property substituted for it by the beneficiary is charged with payment of the annuity or any part of the annuity, any amount paid in any income year on account of that annuity by the owner of that property or substituted property shall be allowed as a deduction to the owner in that income year to the extent of the amount that would but for this subsection be the net income of the owner in the income year if the owner’s only gross income were from that property or substituted property:.
86 Deduction for interest where funds borrowed to purchase shares in amalgamating company
Section DD 3 is replaced by:
“DD 3
Where—
“(a)
An amalgamating company ceases to exist on a qualifying amalgamation; and
“(b)
Another company has borrowed money to acquire shares in the amalgamating company; and
“(c)
The amalgamating company and the other company were members of the same group of companies immediately before the amalgamation,—
interest payable, in the income year in which the amalgamation takes place or subsequently, on the money borrowed will be allowed as a deduction to the other company.”.
87 Depreciation for asset used in employment
Section DE 1 is replaced by:
“DE 1
Notwithstanding anything in section EG 1, no deduction is allowed to a taxpayer in respect of the depreciation of any asset to the extent to which it is used in deriving income from employment.”.
88 Certain deductions not allowed—superannuation contributions, bonuses, retiring allowances, etc.
In section DF 1, the portion before paragraph (a) is replaced by:
“DF 1
Except as expressly provided in this Act, no deduction is allowed to a taxpayer in respect of the following sums or matters:”.
89 Contributions to employees’ benefit funds
In section DF 2(1), the portion before the proviso is replaced by:
“DF 2
“(1)
The Commissioner may allow a deduction to an employer of any amount set aside or paid by the employer as or to a fund (not being a superannuation scheme) to provide individual personal benefits to employees of that employer.”.
90 Contributions to employees’ superannuation schemes
Section DF 3(1) is replaced by:
“DF 3
“(1)
Subject to subsections (2) to (4) of this section and to sections BD 2(1)(b)(i) and (ii) and EO 1, a deduction shall be allowed to a person in respect of any employer superannuation contribution made by that person in that income year; and except as provided in section EO 1 any such contribution shall be deemed to be expenditure incurred at the time when the contribution is made.”.
91 Pensions payable to former employees
In section DF 4(1), the portion before paragraph (a) is replaced by:
“DF 4
“(1)
Subject to this section, the Commissioner may, in any income year, allow a deduction to a taxpayer who carries on a business in respect of any amount (being an amount that is not allowed as a deduction otherwise than under this section and which is, in the opinion of the Commissioner, reasonable in the particular circumstances of the case) paid by the taxpayer in that income year by way of a pension to any former employee of the taxpayer in that business, or to the surviving spouse of any such employee, in consideration of the past services of that employee in that business of the taxpayer, where subject to section FF 17 the Commissioner is satisfied that:”.
92 Retiring allowances payable to employees
Section DF 5(1) is replaced by:
“DF 5
“(1)
The Commissioner may, in any income year, allow a deduction to a taxpayer who carries on a business in respect of the amount of any payment (being a payment which is not allowed as a deduction otherwise than under this section) made in a lump sum by the taxpayer in that income year by way of a bonus, gratuity or retiring allowance to any employee of that business on the occasion of the retirement of that employee.”.
93 Payments to employees or former employees while on naval, military, or air service
In section DF 6(1), the portion before the proviso is replaced by:
“DF 6
“(1)
The Commissioner may allow as a deduction to an employer any money paid by that employer to any serving employee, which is not allowed as a deduction otherwise than under this section, if the Commissioner is satisfied that the payment or payments have been made for the purpose of supplementing the income of the serving employee, or were in any manner induced by or due to the employment or former employment of the serving employee by the employer, or were otherwise directly or indirectly connected with or related to that employment or former employment:”.
94 Notional interest on loans made to employees under employee share purchase scheme
In section DF 7(1), the portion before paragraph (a) is replaced by:
“DF 7
“(1)
Notwithstanding anything in this Act, where in any income year there has been provided, or there has continued to be provided, under any employee share purchase scheme, financial assistance, whether directly or indirectly, by means of an interest free loan to any employee, the employing company in that income year is allowed a deduction of an amount equal to the amount of interest that would have been payable by the employing company for that income year
95 Payments to partners for services performed for the partnership
In section DF 8(1), “section BB 7(b)”
is replaced by “section BD 2(1)(b)(ii)”
.
96 Limitation on deduction for expenditure on specified types of entertainment
Section DG 1(1), (2) and the portion of section DG 1(3) before paragraph (b) are replaced by:
“DG 1
“(1)
This section and Schedule 6a are intended to limit the amount of the deduction allowed for expenditure or loss incurred on certain types of entertainment, being entertainment that generally involves a significant element of private benefit, to 50% of that expenditure or loss (but subject always to the express provisions of this section and Schedule 6a).
“(2)
If a taxpayer incurs expenditure or loss on a type of entertainment or benefit (whether consumed or enjoyed by the taxpayer or by anyone else) specified in Part A of Schedule 6a then, unless and to the extent that the entertainment or benefit is specified as excluded entertainment in Part B of that Schedule, the deduction allowed for that expenditure or loss will be limited to 50% of the amount that would be allowed as a deduction but for this section.
“(3)
For the purposes of this section—
“(a)
A taxpayer will be treated as incurring expenditure on a specified type of entertainment to the extent that the taxpayer pays an allowance for, or reimburses an employee’s expenditure on, the specified type of entertainment and the allowance or reimbursement is exempt income under section CB 12:”.
97 Deductions for motor vehicle expenses
(1)
Section DH 1(1) is replaced by:
“DH 1
“(1)
Except as provided in this section, no deduction is allowed in relation to expenditure incurred by a taxpayer in respect of or in relation to a motor vehicle used in deriving gross income of a taxpayer.”.
(2)
Section DH 1(2)(a)(i) is replaced by:
“(i)
The deriving of gross income; or”.
98 Allowable deductions of building societies
In section DI 1(1), the portion before paragraph (a) is replaced by:
“DI 1
“(1)
Subject to this section the Commissioner shall allow a deduction to a building society in any income year for—”.
99 Deduction to Maori authorities for donations to Maori associations
Section DI 2 is replaced by:
“DI 2
The Commissioner may allow a deduction to a Maori authority for any donation made by the Maori authority to any Maori association within the meaning of the Maori Community Development Act 1962 for the purposes of that Act:
Provided that the amount allowed as a deduction under this section to any Maori authority in respect of any income year shall not exceed 5% of the amount that would be net income of the Maori authority in that year in the absence of this section.”.
100 Expenditure incurred by superannuation funds
Section DI 3 is replaced by:
“DI 3
“(1)
Subject to this Act, a deduction is allowed to a trustee of a superannuation fund for expenditure incurred by the superannuation fund to the extent to which it is incurred in respect of developing, marketing, selling, promoting and advertising for members to the fund, not being—
“(a)
Expenditure incurred in acquiring any plant, machinery, equipment, land or building; or
“(b)
Expenditure which is not gross income of the recipient.
“(2)
Notwithstanding any other provision of this Act, where in respect of any income year—
“(a)
Any funds of a superannuation fund (in this section referred to as the ‘first superannuation fund’) are invested in whole or in part in another superannuation fund (in this section referred to as the ‘second superannuation fund’); and
“(b)
The first superannuation fund has incurred expenditure in respect of developing, marketing, selling, promoting or advertising for members to the fund, or in respect of management of the fund, not being expenditure incurred in acquiring any plant, machinery, equipment, land, building, or expenditure which is not gross income in the hands of the recipient,—
that expenditure may, if and to the extent to which the first superannuation fund elects by notice in writing given to the Commissioner within the time within which that fund is required to furnish a return of its income for that income year, or within such further time as the Commissioner may allow, be treated as if it were expenditure incurred by the second superannuation fund in deriving gross income, and for this purpose—
“(c)
The expenditure shall be treated as if it were incurred by the second superannuation fund on the day on which it was incurred by the first superannuation fund; and
“(d)
That expenditure shall be allowed as a deduction to the second superannuation fund to the extent that it does not exceed the following amount:
“a − b
“where—
“a
is the amount that would, in the absence of this section, be the second superannuation fund’s taxable income for the year in which the expenditure was incurred; and
“b
is the sum of any amounts of non-resident withholding income of any of the kinds to which section NG 4 applies derived by the second superannuation fund in the year in which the expenditure was incurred; and
“(e)
The amount of the expenditure so allowed as a deduction to the second superannuation fund shall be deemed not to be incurred by the first superannuation fund.”.
101 New sections added
After section DI 3, the following are added:
“DI 4 Group companies
Where—
“(a)
Two or more companies are members of the same wholly-owned group of companies for any income year; and
“(b)
Any company in the group derives gross income under section CK 1; and
“(c)
Any expenditure incurred in that income year by that company in deriving that gross income would not, but for this section, be an allowable deduction to that company but, if the wholly-owned group of companies were one company, would have been an allowable deduction to the company which incurred the expenditure in deriving that gross income,—
that expenditure shall be deemed to be an allowable deduction to the company which incurred the expenditure and be allocated to the year in which the gross income is derived under section CK 1.
“DI 5 Taxpayer who derives beneficiary income
A person who has beneficiary income is not allowed a deduction for any expenditure or loss incurred by a trustee in deriving that income.
“DI 6 Expenditure incurred by trustee
For the purposes of determining the allowable deductions of a trustee of a trust for any income year, all amounts that are beneficiary income of beneficiaries of the trust for that year are deemed to be trustee income for that year.”.
102 Certain deductions not allowed—bad debts, share losses, and indemnities
Section DJ 1 is replaced by:
“DJ 1
Except as expressly provided in this Act, no deduction is allowed to a taxpayer in respect of any of the following sums or matters:
“(a)
Bad debts, except where and to the extent that,—
“(i)
In the case of a debt which is an amount owing to the taxpayer in respect of a financial arrangement where the accruals rules apply to the taxpayer in respect of the financial arrangement, a deduction is allowed under section EH 5; and
“(ii)
In any case other than that of a debt which is an amount owing to the taxpayer in respect of a financial arrangement where the accruals rules apply to the taxpayer in respect of the financial arrangement, the bad debt is not a loss of capital subject to section BD 2(2)(e); and
“(iii)
The debt is proved to the satisfaction of the Commissioner to have been actually written off as a bad debt by the taxpayer in the income year; and
“(iv)
In any case where—
“(A)
The taxpayer is a company; and
“(B)
The debt is owed by a company (referred to in this subparagraph as the ‘debtor’); and
“(C)
The application of the amount giving rise to the debt is taken into account in calculating a net loss (referred to in this subparagraph as the ‘resultant loss’) of the debtor or any other company funded (directly or indirectly) by the debtor; and
“(D)
Any one or more amounts have been offset under section IG 2 of this Act or section 191a of the Income Tax Act 1976 by the taxpayer (or by any other company which is at any time in the income year in which the resultant loss is incurred in the same group of companies as the taxpayer), in any income year commencing on or after 1 April 1993 and preceding the income year in which the bad debt is written off, in respect of the resultant loss,—
the debt exceeds the aggregate of the amounts so offset.
“(b)
A decline in the value of any shares (referred to in this paragraph as the ‘share loss’) issued by any company (referred to in this paragraph as the ‘issuing company’) determined as follows:
“(i)
If the snares have not been disposed of by the taxpayer, from a valuation made under section EE 1 or otherwise; or
“(ii)
If the shares have been disposed of by the taxpayer, from the amount, if any, by which the gross income of the company in respect of the disposal is less than the deduction allowed to the company in respect of the cost of the shares (whether that amount is determined under section FB 3 or otherwise) where in either case—
“(iii)
The taxpayer is a company; and
“(iv)
The application of the amount subscribed (whether subscribed by the taxpayer or any other person) in respect of the shares is taken into account in calculating a loss (referred to in this paragraph as the ‘resultant loss’) of the issuing company or by any other company funded (directly or indirectly) by the issuing company; and
“(v)
Any one or more amounts have been offset under section IG 2 by the taxpayer (or by any other company which is at any time in the income year in which the resultant loss is incurred in the same group of companies as the taxpayer), in any income year preceding the income year in which the share loss is incurred, in respect of the resultant loss,—
except to the extent that share loss (when aggregated with any other losses incurred by the taxpayer as a result of the decline in value of the shares, in income years preceding the income year in which the share loss is incurred, for which a deduction has been prohibited by this paragraph) exceeds the aggregate of the amounts so offset under section IG 2:
“(c)
Any expenditure or loss recoverable under any insurance or right of indemnity.”.
103 Deduction from estate income of irrecoverable book debts
Section DJ 2 is replaced by:
“DJ 2
Where the amount of any debt owing to any person at the date of the person’s death has been included in gross income of the person or of the trustee of the person’s estate for any income year, and the debt or any part of it is proved to the satisfaction of the Commissioner to be irrecoverable and to have been actually written off by the trustee as a bad debt, the amount so written off shall be deemed to be a loss incurred by the trustee in the income year in which the amount was written off, and shall be allowed as a deduction, first to the trustee to the extent of any gross income derived by the trustee as trustee income, and then, as to any balance, to any beneficiary to the extent of any gross income derived in that year by or in trust for the beneficiary if that beneficiary has a vested interest in the capital of the estate to the extent that the loss is chargeable against the capital of that beneficiary; and any balance not allowed as a deduction in that year shall be allowed as a deduction in that same manner to the extent of gross income of the trustee or beneficiary derived in the next income year and so on.”.
104 Chatham Islands dues
Section DJ 3(1) is replaced by:
“DJ 3
“(1)
The Commissioner may in any income year allow a deduction to a taxpayer in respect of any amount (being an amount that is not allowed as a deduction otherwise than under this section) of dues, whether county dues levied under the Chatham Islands County Council Empowering Act 1980 or council dues levied under the Chatham Islands Council Act 1995, paid in the income year by the taxpayer in respect of any goods used by the taxpayer in connection with a business carried on by the taxpayer.”.
105 Gifts of money by companies not closely held
Section DJ 4 is replaced by:
“DJ 4
Subject to this section, any company (not being a close company) is in any income year allowed to deduct the amount of any gift of money (being an amount that is not allowed as a deduction otherwise than under this section) made to any society, institution, organisation, trust or fund of any of the kinds referred to in section KC 5(1):
Provided that the amount of the deduction allowed under this section—
“(a)
In respect of the aggregate of all gifts made in that income year by any company (not being a close company) to any one donee, shall not exceed the greater of—
“(i)
1% of the amount that would but for this section be the net income of the company; or
“(ii)
$4,000; and
“(b)
In respect of the aggregate of all gifts made in that income year by any company (not being a close company), shall not exceed—
“(i)
$1,000; or
“(ii)
5% of the amount that would but for this section be the net income of the company (not being a close company) in that year,—
whichever is the greater.”.
106 Expenditure relating to determination of liability to tax
(1)
In section DJ 5(1), the portion before paragraph (b) is replaced by:
“DJ 5
“(1)
Subject to this section, a taxpayer is allowed a deduction in any income year in respect of any expenditure incurred by the taxpayer during that income year in connection with—
“(a)
The determination of the income tax liability of the taxpayer for any income year:”.
(2)
Section DJ 5(1)(d)(i) is replaced by:
“(i)
That expenditure is allowed as a deduction to that other taxpayer and relates to any matter affecting the determination of the income tax liability of, or any goods and services tax payable by, the first-mentioned taxpayer; and”.
107 Patent expenses
Section DJ 6 is replaced by:
“DJ 6
“(1)
The Commissioner may allow a taxpayer such deduction as the Commissioner thinks fit for any income year in respect of any expenditure incurred by the taxpayer during that year in connection with the grant, maintenance or extension of a patent used by the taxpayer in the derivation of the taxpayer’s gross income for that year.
“(2)
Where—
“(a)
A patent has been granted in respect of any invention; and
“(b)
A taxpayer who actually devised the invention, whether alone or in conjunction with any other person, has in any income year used the patent in the derivation of the taxpayer’s gross income or assessable income for that year,—
the Commissioner may allow such deduction as the Commissioner thinks fit in respect of any expenditure incurred before 1 April 1993 by the taxpayer in connection with the devising of the invention (not being expenditure in respect of which, or of assets representing which, a deduction is otherwise allowed).”.
108 Misappropriation by partner of property entrusted to partnership
Section DJ 7 is replaced by:
“DJ 7
Where a taxpayer carries on business in partnership, and any partner (other than the taxpayer or the spouse of the taxpayer) misappropriates any property of any kind belonging to any person (other than a partner in the partnership or the spouse of any such partner) received in the course of the business either by the partnership or by any one or more of the partners in the partnership, and the taxpayer makes any payment for the purpose of making good any loss suffered by that person as a result of that misappropriation, the Commissioner may, where the Commissioner is satisfied that the taxpayer was under a legal liability to make good that loss, allow a deduction in respect of the payment so made in the income year in which the payment was made:
Provided that any amount recouped by the taxpayer at any time, whether by way of insurance, indemnity, reimbursement, recovery, or otherwise, in respect of any amount allowed as a deduction under this section shall be deemed to be gross income derived by the taxpayer in the income year in which the amount was recouped.”.
109 Misappropriation by employees and other persons engaged for purposes of business of taxpayer
Section DJ 8(1) is replaced by:
“DJ 8
“(1)
Where a taxpayer carrying on any business incurs any loss (being a loss which has not been taken into account otherwise than under this section for any income year) in the course of the business as a result of the misappropriation of property of any kind by any person who is employed by, or renders services to, the taxpayer for the purposes of that business, the Commissioner may, in the year in which the loss is ascertained, or in such one or more earlier years as the Commissioner considers equitable in the circumstances, allow a deduction for the amount of that loss:
Provided that any amount recouped by the taxpayer at any time, whether by way of insurance, indemnity, reimbursement, recovery, or otherwise, in respect of that loss shall be deemed to be gross income derived by the taxpayer in the income year in which the amount was recouped.’’.
110 Expenditure on scientific research
Section DJ 9(1) is replaced by:
“DJ 9
“(1)
The Commissioner may for any income year, in calculating the gross income derived by any taxpayer during that income year,—
“(a)
Allow such deduction as the Commissioner thinks fit in respect of any expenditure, incurred by the taxpayer during that income year, in connection with scientific research carried on or carried out for the purpose of the derivation, by the taxpayer, of gross income, except so far as the expenditure relates to an asset (not being an asset created from the scientific research) in respect of which a deduction for depreciation is allowed under this Act:
“(b)
Subject to sections EG 17, EG 19 and FF 16, allow such deduction as the Commissioner thinks fit by way of depreciation in respect of any asset used by the taxpayer in that income year in connection with scientific research carried on or carried out for the purpose of the derivation, by the taxpayer, of gross income; and any deduction so allowed shall be in substitution for all other deductions otherwise allowed to the taxpayer by way of depreciation in respect of that asset in that income year under section EG 1.”.
111 Expenditure to prevent or combat pollution of environment
Section DJ 10(1) is replaced by:
“DJ 10
“(1)
Subject to this section, where the Commissioner is satisfied that any taxpayer engaged in any business in New Zealand (other than a farming or agricultural business) has incurred in that business any expenditure in the construction on land in New Zealand of earthworks, ponds, settling tanks, or other similar improvements primarily for the purpose of treating industrial waste in order to prevent or combat pollution of the environment (not being expenditure in respect of which a deduction, whether by way of depreciation or otherwise, is allowed under any other provision of this Act or the Income Tax Act 1976), the Commissioner shall allow a deduction to the taxpayer in accordance with this section of the amount of that expenditure.”.
112 Expenditure incurred in borrowing money or obtaining lease
Section DJ 11 is replaced by:
“DJ 11
The Commissioner may allow such deduction as the Commissioner thinks fit in respect of expenditure incurred by a taxpayer during an income year for the preparation, stamping, and registration of any lease of property used in the derivation of the taxpayer’s gross income, or of any renewal of any such lease, or in the borrowing of money employed by the taxpayer as capital in the derivation of gross income.”.
113 No deduction in respect of acquisition and disposition by company of its shares
Section DJ 12 is replaced by:
“DJ 12
Any expenditure or loss incurred by a company in respect of the acquisition and disposition of any share in the company where the acquisition by the company was deemed under section 67a(1) of the Companies Act 1993 not to result in cancellation of the share, shall not be allowed as a deduction.”.
114 New sections added
After section DJ 12, the following are added:
“DJ 13 Cost of revenue account property not of a capital nature
In this Act, an amount of expenditure incurred by a taxpayer as the cost of revenue account property is not expenditure of a capital nature under section BD 2(2)(e).
“DJ 14 Expenditure on acquiring land
“(1)
If an amount derived from the disposition of any land is gross income of a person under section CD 1(2)(e) (and is not otherwise included in gross income of the person), the person is allowed as a deduction, in addition to any other allowable deductions including any deduction for the cost of the land, the greater of—
“(a)
$1,000; and
“(b)
10% of the excess of the amount derived over the cost of the land, multiplied by the number (not exceeding 10) of complete consecutive periods of 12 months, the first of which periods commenced on the date of acquisition of the land, as are included in the period from acquisition of the land until disposition.
“(2)
Notwithstanding subsection (1), the deduction allowed under subsection (1) must not exceed the excess of the amount included in gross income under section CD 1(2)(e) over the cost of the land.
“(3)
If an amount derived from the disposition of any land is gross income of a person under section CD 1(2)(g) (and is not otherwise included in gross income of the person), for the purposes of determining the deduction allowed to the person for the cost of the land, the person will be treated as having disposed of the land to an unrelated third party immediately before the commencement of the undertaking or scheme and to have reacquired it immediately after the commencement for a cost equal to the market value of the land at the time.
“(4)
If an amount derived from the disposition of any land is gross income of a person under section CD 1, the Commissioner may—
“(a)
Determine the cost of the land (including under subsection (3) of this section):
“(b)
If the land is acquired together with any other property, apportion the cost of acquisition between the land and the other property.
“DJ 15 Expenditure incurred in acquiring personal property
If an amount derived from the disposition of any property is gross income of a person in relation to an undertaking or scheme to which section CD 4 applies (and is not otherwise included in gross income of the person), for the purposes of determining the deduction allowed to the person for the cost of the property, the person will be treated as having disposed of the property to an unrelated third party immediately before the commencement of the undertaking or scheme and to have reacquired it immediately after the commencement for a cost equal to the market value of the property at the time.
“DJ 16 Expenditure incurred on acquiring commercial bills
If an amount received from the redemption or disposal of a commercial bill is included in the gross income of a person under section CE 3(1)(a) and the person acquired the commercial bill from another person (other than under a matrimonial agreement), for the purposes of determining the deduction allowed to the person for the cost of the commercial bill, the person will be treated as having acquired it at a cost equal to its value on the date of acquisition.
“DJ 17 Non-profit bodies
Any society, association or organisation, whether incorporated or not, which is not carried on for the purposes of profit or gain to any proprietor, member or shareholder and which is, by the terms of its constitution, rules or other document constituting that society, association or organisation or governing its activities, prohibited from making any distribution, whether by way of money, property or otherwise, to any such proprietor, member or shareholder, is allowed a deduction for an amount equal to the lesser of—
“(a)
$1,000; or
“(b)
The amount that would be the net income of the society, association or organisation but for this section.”.
115 Limitation of deduction for certain film expenditure to amount at risk
(1)
Section DK 1(2) and (3) are replaced by:
“(2)
Where in any income year the whole or any part of a limited recourse loan made at any time to any taxpayer is used in the payment of any expenditure incurred by the taxpayer in respect of or in relation to the acquisition, production, or marketing of any film (not being expenditure of any of the kinds referred to in subsection (3)) mat would, but for this subsection, be allowed as a deduction (whether in that income year or in any other income year) the amount of that deduction shall, for the purposes of this Act, be the amount of that expenditure reduced by an amount equal to so much of the amount of that limited recourse loan as is so used.
“(3)
Where in any income year the whole or any part of a limited recourse loan made at any time to any taxpayer is used in the payment of any expenditure of a capital nature incurred by the taxpayer in the acquisition, construction, installation, or extension of any asset (being an asset purchased for use in respect of or in relation to the acquisition, production, or marketing of any film and in respect of which a deduction by way of depreciation may be allowed whether in that income year or in any other income year), the amount of that expenditure shall, for the purposes of determining the amount of any such deduction by way of depreciation in respect of that asset, be reduced by an amount equal to so much of the amount of that limited recourse loan as is so used.”.
(2)
Section DK 1(7) is replaced by:
“(7)
No deduction is allowed to any taxpayer in any income year in respect of any interest payable in respect of a limited recourse loan (being a limited recourse loan which is used in the payment of any expenditure incurred in respect of the acquisition, production or marketing of any film) except to the extent that the Commissioner is satisfied that the interest has been paid during the income year.”.
116 Deduction for expenditure or loss incurred by persons associated with petroleum miners
In section DK 2, the portion after paragraph (c) is replaced by:
“the deductions allowed, under this Act, to the associated person on account of expenditure or loss incurred by the associated person in carrying out those petroleum mining operations shall be limited to an amount equal to the amount of consideration, received or receivable by the associated person on account of those petroleum mining operations, which constitutes gross income derived by the associated person.”.
117 Certain deductions not allowed—life insurers
Section DK 3 is replaced by:
“DK 3
The following amounts are not allowable deductions of any life insurer—
“(a)
Any premium with respect to any policy of life reinsurance;
“(b)
Any expenditure or loss being claims or amounts credited to holders of policies in the actuarial reserves of the life insurer; or
“(c)
Any expenditure or loss incurred in the derivation of policyholder income.”.
118 New sections added
After section DK 3, the following are added:
“DK 3a Deduction for mortality loss of life insurer
In any income year in which the mortality result of a life insurer is a negative amount, the life insurer is allowed a deduction equal to that amount.
“DK 3b Deduction on disposal of property by life insurer
“(1)
In any income year in which a life insurer sells or otherwise disposes of any property of the life insurer’s life insurance business, the life insurer shall be allowed a deduction for the cost of that property, ascertained as follows:
“(a)
In any case where the property was acquired on or before the last day of the 1982–83 income year, the specified base cost for 1983 income year property;
“(b)
In any other case, the cost price or acquisition value of that property.
“(2)
Subsection (1)(a) and (b) shall not apply to ascertain the deduction allowed on the sale or other disposal of property which is—
“(a)
A financial arrangement; or
“(b)
Property where the cost of that property has been allowed as a deduction (other than as a deduction in respect of depreciation of the property) to the life insurer in any income year.
“(3)
Subsection (1)(a) and (b) shall not apply to ascertain the deduction allowed on the sale or other disposal of property where—
“(a)
The property consists of land or buildings acquired on or before the last day of the 1989–90 income year, and is not property to which subsection (2) applies; and
“(b)
If that property had been disposed of at a profit on or before the last day of the 1989–90 income year, that profit would have been a capital profit or gain and not a profit on disposal of an investment subject to income tax in accordance with section 204 of the Income Tax Act 1976 (as that section was in force before its repeal and substitution by section 13(1) of the Income Tax Amendment Act (No. 2) 1990),—
and the amount allowed as a deduction on the sale or other disposal of that property shall instead be the market value of the property on the last day of the 1989–90 income year.
“DK 3c Deduction in respect of superannuation policies in respect of property acquired before 1 April 1988
“(1)
A life insurer that first commenced carrying on the business of life insurance on or before the last day of the 1988–89 income year is in any income year allowed a deduction of an amount calculated in accordance with the following formula:
_eqn01.JPG)
“where—
“a
is the amount of so much of the liabilities of the life insurer in respect of policies of life insurance at the last day of the 1987–88 income year as, in the opinion of the Commissioner, relate to—
“(a)
Superannuation policies included in the Life Insurance Fund of the life insurer; and
“(b)
Specified mortgage repayment insurance policies included in that Fund; and
“(c)
Annuities granted included in that Fund; and
“b
is the amount of the liabilities of the life insurer in respect of policies of life insurance at the last day of the 1987–88 income year; and
“c
is the amount, or aggregate amount, in respect of property (other than property whose cost of acquisition has been taken into account in calculating the net income of the insurer for any income year other than by way of a deduction in respect of the depreciation of that asset or under the accruals rules) sold or disposed of by the life insurer in the income year first referred to in this subsection (being property acquired before 1 April 1988) ascertained as follows:
“(a)
In respect of any such property acquired on or before the last day of the 1982–83 income year, the amount shall be the amount obtained by subtracting from the market value of that property on 1 April 1988 the specified base cost for 1983 income year property; and
“(b)
In respect of any such property acquired after the end of the 1982–83 income year, the amount shall be,—
“(i)
Where the property is not a financial arrangement, the amount obtained by subtracting from the market value of the property on 1 April 1988 the cost price or acquisition value of the property:
“(ii)
Where the property is a financial arrangement, an amount equal to the amount that would be the base price adjustment of the property, calculated in accordance with section EH 4(1), if the property had matured on 1 April 1988.
“(2)
This section shall not apply in the case of any sale or other disposal of property to which section DK 3b(3) applies.
“DK 3d Full reinsurance—deductions
Notwithstanding any other provision of the life insurance rules, where any life insurer in any income year is the holder of any one or more policies of life reinsurance that—
“(a)
Are offered or entered into in New Zealand (whether or not executed in New Zealand and whether or not the insurer under the policy of reinsurance is resident in New Zealand, has a fixed establishment in New Zealand, or has an agent in New Zealand); and
“(b)
Fully relieve or fully secure the life insurer against all liability to provide in that income year benefits contingent upon the death or survival of human beings assumed by the life insurer—
“(i)
As part of that life insurer’s business; or
“(ii)
In the case of a life insurer not resident in New Zealand, as part of that life insurer’s business to the extent to which that business consists of or relates to any one or more policies of life insurance for which that life insurer is the insurer which were offered or entered into in New Zealand (whether or not executed in New Zealand and whether or not the life insurer has a fixed establishment in New Zealand or has an agent in New Zealand),—
the life insurer shall be deemed for the purposes of this Act in respect of that income year not to carry on the business of providing life insurance; and the following amounts shall not, if incurred in that income year, be allowed as a deduction to the life insurer—
“(c)
Any premium payable by the life insurer with respect to any policy of life reinsurance; or
“(d)
Any claim that is payable by the life insurer.
“DK 3e Certain property not trading stock
Where in carrying on a business of providing life insurance any life insurer acquires or holds any property, being property that is either—
“(a)
A financial arrangement to which the accruals rules would apply but for the application of any of paragraphs (a), (b), and (d) of section EH 9; or
“(b)
An excepted financial arrangement,—
then, subject to section GD 7, that property shall be deemed not to be trading stock and any expenditure or loss incurred in acquiring that property shall not be allowed as a deduction except in accordance with section DK 3b.”.
119 Expenditure incurred by airport operators
Section DK 4 is replaced by:
“DK 4
An airport operator is not allowed a deduction in respect of any expenditure or loss, or of any provision that (under section OC 1(2)(h)) is deemed to be expenditure or, as the case may be, a loss in the nature of interest, to the extent that the expenditure, loss, or provision is, in terms of the joint venture agreement that relates to the airport operator, a charge against any part of the joint income (of the parties to the joint venture agreement) that has been allocated to or, as the case may be, distributed to any of the parties.”.
120 Cost of timber
(1)
Section DL 1(1) and (2) are replaced by:
“DL 1
“(1)
If a person disposes of timber, or of a right to take timber, to an associated person—
“(a)
The deduction allowed to the person for the cost of the timber must not exceed the amount derived from the disposition included in gross income under section CJ 1; and
“(b)
For the purposes of determining the deduction allowed to the associated person for the cost of the timber, or the right to take timber, the associated person will be treated as having acquired the timber for a cost equal to the aggregate of—
“(i)
The cost of the timber to the associated person; and
“(ii)
The amount (if any) that, under paragraph (a), is not allowed as a deduction to the person disposing of the timber or the right to take timber.
“(2)
Any person who carries on a forestry business on any land in New Zealand shall be allowed a deduction in respect of any expenditure (not being expenditure that is allowed as a deduction under subsection (3) or subsection (4)) incurred in the planting or maintaining of trees on the land.”.
(2)
In section DL 1(3), the portion before paragraph (a) is replaced by:
“(3)
A person who carries on a forestry business on any land in New Zealand shall be allowed as a deduction any expenditure incurred by that person in that business being expenditure which is not allowed as a deduction otherwise than under this section,—”.
(3)
Section DL 1(4) is replaced by:
“(4)
A person who carries on a forestry business on any land in New Zealand shall be allowed as a deduction expenditure incurred by the person in that business, being expenditure that is not allowed as a deduction otherwise than under this section, in the construction to or on the land of access tracks that are constructed for a specific operational purpose and are used for no longer than 12 months after construction.”.
(4)
Section DL 1(7), (8), (9), (10), (11) and (12) are replaced by:
“(7)
Where any person has been allowed a deduction under this section or under any other provision of this Act in respect of any expenditure, that expenditure shall be deemed not to form part of the cost of timber for the purposes of this section.
“(8)
Where a deduction has been allowed in respect of any asset under subsection (5), the expenditure of a capital nature in respect of that asset shall, to the extent of the deduction so allowed, be deemed not to form part of the cost of the timber for the purposes of this section.
“(9)
For the purposes of this section the cost of timber shall be deemed not to include expenditure incurred in land contouring or expenditure of any of the kinds specified in Part B of Schedule 7.
“(10)
Notwithstanding subsection (8), for the purposes of this section the cost of timber shall be deemed not to include any amount of expenditure incurred in the 1987–88 income year or any subsequent income year which does not form part of a determination made in accordance with subsection (11).
“(11)
Where any taxpayer furnishes a return of income in respect of any income year in which the taxpayer has incurred expenditure (being expenditure which will at any time form part of the cost of timber for the purposes of this section), the Commissioner shall determine the amount of that expenditure in accordance with the provisions of this Act and section 92(5) of the Tax Administration Act 1994 shall, as far as applicable and with the necessary modifications, apply as if such a determination were a determination of net loss made under section 92(3) of that Act.
“(12)
Where in any income year any person who carries on a forestry business on any land in New Zealand suffers, in relation to that business, the loss or destruction of any standing timber, that person shall be allowed a deduction of an amount equal to the cost of that timber, but any amount received by way of insurance, indemnity, compensation or other damages in respect of the loss or destruction of that timber is to be treated as gross income of that person.”.
121 Expenditure on land improvements used for forestry
Section DL 2(1) and (2) are replaced by:
“DL 2
“(1)
Any taxpayer who carries on any forestry business on any land owned by that taxpayer in New Zealand shall in any income year other than the income year in which that taxpayer sells or otherwise disposes of that land, be allowed a deduction in respect of any expenditure of any of the kinds specified in Part B of Schedule 7 incurred by that taxpayer or any other taxpayer in preparing or otherwise developing that land, and being expenditure which is of benefit to that business in that income year.
“(2)
Any taxpayer who carries on any forestry business on any land in New Zealand which is not owned by that taxpayer shall in any income year other than the income year in which that taxpayer ceases to carry on the forestry business on that land, be allowed a deduction in respect of any expenditure of any of the kinds specified in Part B of Schedule 7 incurred by that taxpayer in preparing or otherwise developing that land, and being expenditure which is of benefit to the business in that income year.”.
122 Forestry encouragement grants
(1)
Section DL 3(2)(a), (b), and (c) are replaced by:
“(a)
No amount of the expenditure portion (if any) or of the depreciation portion (if any) of the payment shall be gross income of the taxpayer for the income year in which that payment is made or any other income year;
“(b)
No deduction by way of depreciation in respect of any asset shall be allowed to a taxpayer in an income year in relation to the use of that asset in any period (whether the whole or any part of the income year) ending on or before 8 November 1984, in any case where the amount of depreciation, to which the depreciation portion (if any) of the payment relates and on which it is based, was calculated in relation to that period;
“(c)
The amount of any deduction by way of depreciation, in an income year in respect of any asset, that but for this paragraph, would have been allowed to a taxpayer under this Act in relation to the use of that asset in any period commencing on or after 9 November 1984 (whether that period is the whole or any part of the income year), shall, in any case where the amount of the depreciation, to which the depreciation portion (if any) of the payment relates and on which it is based, was calculated in relation to that period, be reduced by an amount equal to that depreciation portion;”.
(2)
In section DL 3(3), the portion before paragraph (a) is replaced by:
“(3)
Where, in any income year, a payment to any taxpayer is made under the regulations, no deduction shall be allowed to the taxpayer in that income year or in any other income year, in respect of any of the expenditure in respect of which the payment is made unless, and except to the extent to which, the amount of that expenditure exceeds,—”.
(3)
In section DL 3(4), “for the purposes of section CJ 1(1)”
is omitted.
123 Forestry business carried on by company on land acquired partly from Crown, partly from Maori owners, and partly from holding company
(1)
Section DL 5(1)(a) is replaced by:
“(a)
Interest payable under any qualifying debenture shall be exempt income to the extent that interest has been capitalised by the issue of further debentures:”.
(2)
In section DL 5(1)(b), the portion before subparagraph (ii) is replaced by:
“(b)
Where any interest that is capitalised is exempt income under paragraph (a),—
“(i)
Where the qualifying debenture under which the interest is payable has been issued by the forestry company, then, for the purpose of assessing that company for income tax, that interest shall be deemed not to form part of the cost of timber and no deduction shall otherwise be allowed under this Act in respect of that interest; and”.
(3)
In section DL 5(1)(d)(iii), “for the purposes of section CJ 1(1)”
is omitted.
124 Expenditure in respect of forestry encouragement agreements under Forestry Encouragement Act 1962
(1)
In section DL 6(1), the portion before paragraph (a) is replaced by:
“DL 6
“(1)
The Commissioner may in any income year allow a deduction to a taxpayer for—”.
(2)
Section DL 6(2) and (3) are replaced by:
“(2)
Where in any income year an advance is made to any taxpayer under a forestry encouragement agreement under the Forestry Encouragement Act 1962,—
“(a)
No amount in respect of the advance, whether or not the taxpayer is subsequently relieved, in whole or in part, from the taxpayer’s liability to repay the principal in respect of the advance, shall be gross income of the taxpayer; and
“(b)
Where the taxpayer is subsequently relieved, in whole or in part, from the taxpayer’s liability to repay the principal in respect of the advance, an amount equal to the amount in respect of which the taxpayer is so relieved from the taxpayer’s liability to repay shall be deemed not to form part of the cost of timber.
“(3)
Where in any income year any interest is payable by any taxpayer in respect of such an advance and—
“(a)
That interest has not been paid; and
“(b)
A deduction of that interest has not been allowed to the taxpayer; and
“(c)
The taxpayer is relieved, in whole or in part, from liability to pay that interest,—
no amount in respect of the liability from which the taxpayer is so relieved shall be gross income of the taxpayer.”.
125 Amalgamated company allowed a deduction for expenditure on land improvements used for forestry
In section DL 7, the portion after paragraph (d) is replaced by: “the amalgamated company shall be allowed the deduction for the income year.”
.
126 Treatment of petroleum mining exploration and development expenditure
(1)
In section DM 1(2)(b), the portion before subparagraph (i) is replaced by:
“(b)
Development expenditure incurred in any income year shall be treated as deferred deductions and, to the extent such expenditure has not been deducted under any other subsection of this section or under sections DM 2 to DM 5 or section IH 3, shall be allowed as a deduction to the petroleum miner in equal amounts over the 7 income years beginning—”.
(2)
Section DM 1(5)(a) is replaced by:
“(a)
Relinquishes a petroleum permit, any deferred deductions attributable to that permit or to any permit specific asset held solely in respect of that permit that have not been allowed as deductions previously shall be allowed as a deduction in the year of relinquishment:”.
(3)
In section DM 1(5)(b), the portion after subparagraph (ii) is replaced by:
“shall be allowed as deductions in the year that the consideration (being gross income under section CJ 3) is included in the annual gross income of the petroleum miner:
Provided that where the consideration is derived in more than one income year, any deduction allowed in respect of the disposition shall be allocated between the income years in which the income is derived, and the deduction allowed in each year shall bear the same relation to total deductions allowed in respect of the disposition that the gross income derived in that income year bears to the total gross income derived in respect of the disposition:”.
(4)
Section DM 1(6)(a) is replaced by:
“(a)
The petroleum miner shall be allowed deductions under subsection (5)(b) in respect of that asset only to the extent that the deductions do not exceed the amount that would be the net income of the petroleum miner if the only gross income of the petroleum miner were from that disposition.”.
127 Farm-out arrangements
(1)
Section DM 4(2)(a)(i) and (ii) are replaced by:
“(i)
To the extent it was incurred before 16 December 1991 and has not previously been deducted, be allowed as a deduction to the transferee (as so previously defined) in accordance with subsection (2) (and, where appropriate, subsections (5) and (6), other than subsection (5)(c)) of section DM 1;
“(ii)
To the extent it is incurred on or after 16 December 1991, be allowed as a deduction to the transferee (as so previously defined) under section DM 1 (other than subsection (3) of that section) according to whether it is development expenditure, exploration expenditure, or exploratory well expenditure; and”.
(2)
In section DM 4(2)(b), the portion before subparagraph (i) is replaced by:
“(b)
The transferor (as so previously defined) under that farm-out arrangement shall reduce in accordance with subsection (3) (but shall not be allowed as deductions) any deductions attributable to—
128 Dispositions of shares or trust interests
Section DM 6(1) is replaced by:
“DM 6
“(1)
The cost to the person disposing of shares or trust interests in a controlled petroleum mining entity shall be allowed as a deduction to that person in the year the consideration (being gross income under section CJ 6) is included in the gross income of that person.”.
129 Further development expenditure in Maui field
(1)
Section DM 11(1)(c)(ii) is replaced by:
“(ii)
The elector company shall be entitled to claim in respect of any income year (being the year of election or any of the 4 income years immediately succeeding the year of election) that an amount be allowed as a deduction in that income year equal to the amount appropriated, in respect of that income year, by the elector company, within the time within which it is required to furnish a return of its income for that income year (or within such further time as the Commissioner may allow), to a special development reserve account of the elector company for the purposes of that specified development expenditure;”.
(2)
Section DM 11(1)(e) is replaced by:
“(e)
The amount of any allowable deduction claimed under paragraph (c)(ii) by the elector company in respect of any income year shall not exceed the amount of the net income for that income year calculated as if a deduction were not allowed under paragraph (c)(ii) or the amount remaining in the development commitment account kept by the elector company, immediately before the claiming of that deduction, whichever is less:”.
(3)
Section DM 11(1)(g) and (h) are replaced by:
“(g)
Where a deduction (not being a deduction which has subsequently been disallowed under paragraph (j) or paragraph (k)) has been allowed under paragraph (c)(ii) in any income year to the elector company and the protected petroleum mining company ceases to be a protected mining company before it has used, for the purposes of the specified development expenditure, an amount equal to the amounts so allowed as a deduction, or the aggregate of all such amounts so allowed as a deduction in every income year to every elector company, the Commissioner may, to the extent of an amount which is, or amounts which in the aggregate are, equal to the amount so not used, disallow in such proportions as the Commissioner considers fair and equitable, the whole or any part of any such deduction, and, notwithstanding the time bar, at any time alter any assessment accordingly:
“(h)
Where a deduction (not being a deduction which has subsequently been disallowed under paragraph (j) or paragraph (k)) has been allowed under paragraph (c)(ii) in any income year to the elector company and the amount so allowed as a deduction, or the aggregate of all such amounts so allowed as a deduction in every income year to every elector company, exceeds the amount of the specified development expenditure incurred by the petroleum mining company, for the purposes of which an amount equal to that amount, or the aggregate of both amounts, so allowed as a deduction was to be used, the Commissioner may to the extent of an amount which is, or amounts which in the aggregate are, equal to the amount of that excess, disallow in such proportions as the Commissioner considers fair and equitable, the whole or any part of any such deduction, and, notwithstanding the time bar, at any time alter any assessment accordingly:”.
(4)
In section DM 11(1)(i), the portion before subparagraph (i) is replaced by:
“(i)
Where a deduction has been allowed under paragraph (c)(ii) of any amount in respect of the amount appropriated by the elector company, no other deductions will be allowed under any other provision of this Act to the elector company or any other company—
(5)
In section DM 11(1)(j), the portion before subparagraph (iii) is replaced by:
“(j)
Where a deduction has been allowed under paragraph (c)(ii) in any income year to the elector company, and the protected petroleum mining company has not, on or before the last day of the period of the 4 income years immediately succeeding the year of election (that last day being referred to in this subsection as the ‘development day’), commenced to incur, in the performing of the specified development work with expedition and in accordance with good oil-field and gas-field practice, the specified development expenditure,—
“(i)
No deduction shall be allowed under this subsection to the elector company in any income year ending after the development day:
“(ii)
The Commissioner shall disallow any deduction which has been allowed under that paragraph to the elector company, in the year of election, and for this purpose the Commissioner may, notwithstanding the time bar, at any time make a revised assessment in respect of the year of election:”.
(6)
Section DM 11(1)(1)(ii) is replaced by:
“(ii)
No deduction shall be allowed under this subsection to the elector company in any income year commencing after the last day of the 5th income year immediately succeeding the income year which ended on the development day:”.
130 New Subpart substituted
Subpart DN is replaced by:
“DN 1 Companies engaged in exploring for, searching for, or mining certain minerals
“(1)
This section shall apply to any New Zealand company in respect of which the Commissioner is satisfied—
“(a)
That its sole or principal source of gross income is the business of mining in New Zealand any specified mineral; or
“(b)
That it carries on, or proposes to carry on, in New Zealand, as its sole or principal undertaking, the activities of exploring or searching for or mining any specified mineral, or performing development work relating to such exploring or searching or mining, not being activities so carried on, or so proposed to be carried on, by that company as a service to any other person for reward unless the Commissioner is satisfied that that reward is solely or principally—
“(i)
Related to and dependent upon the production of that specified mineral; or
“(ii)
By way of participation in profits from the production of that specified mineral.
“(2)
For the purposes of this section, the gross income derived by a mining company shall be divided into the following classes:
“(a)
Gross income from mining:
“(b)
Gross income other than from mining.
“(3)
In any income year in which a mining company has a mining outgoing excess, the mining company may allocate to the income year allowable deductions in respect of the expenditure or loss to which the mining outgoing excess is attributable that do not exceed in total the lesser of—
“(a)
Two-thirds of the mining outgoing excess; and
“(b)
The greater of zero and the amount calculated in accordance with the following formula:
“a − b
“where—
“a
is the mining company’s gross income other than from mining that is allocated to the income year; and
“b
is the sum of allowable deductions of the mining company that are allocated to the income year and are attributable to the derivation of the mining company’s gross income other than from mining that is allocated to the income year.
“(4)
Where, in relation to any income year, any products, being products—
“(a)
Resulting from mining operations carried on by that company; or
“(b)
Where that company also carried on associated mining operations in respect of those products, resulting from a combination of those mining operations and those associated mining operations,—
are, instead of being sold or otherwise disposed of in the state in which those products resulted from those mining operations, or that combination of operations, processed by that company beyond that state or used in a manufacturing activity carried on by that company, the Commissioner may, for the purpose of calculating the gross income from mining and the gross income other than from mining derived by that company in that income year, as the Commissioner considers appropriate in the circumstances of the particular case, either—
“(c)
Apportion the gross income derived by that company in that income year from the sale or other disposal of those products, with such apportionment of the value of stock of those products on hand at the beginning and at the end of that income year as may be appropriate; and for the purposes of the preceding provisions of this paragraph, the Commissioner may take into account the capital employed or the expenditure or losses incurred in, or the extent of, the successive steps of production involving, in relation to those products, the mining operations, associated mining operations, and subsequent processing or use in a manufacturing activity carried on by that company; or
“(d)
Have regard to the amount which, in the Commissioner’s opinion, would have been—
“(i)
The value received or receivable for such of those products as have been sold or otherwise disposed of in that income year if they had been sold or otherwise disposed of in that income year to a wholly independent person in the state in which they resulted from those mining operations or that combination of operations; and
“(ii)
The value of such of those products as were on hand at the end of that income year if they had been valued for the purposes of section EE 1 in the state in which they resulted from those mining operations or that combination of operations—
and in either case the Commissioner may take into account such other matters which the Commissioner considers relevant.
“(5)
Where a mining company has incurred in any income year any exploration expenditure or development expenditure (whether or not as consideration paid or payable for the acquisition of an asset), the Commissioner may, subject to subsection (10), allow a deduction for that income year in respect of that expenditure, and the amount so allowed as a deduction shall be deemed to be expenditure incurred in deriving gross income from mining, and subsection (3) shall apply accordingly in respect of that amount.
“(6)
Where a mining company has, during or within 2 months after the end of any income year or within such extended period as the Commissioner allows, made an appropriation of income (to the extent that the amount appropriated does not exceed that amount that would be the company’s net income for that income year in the absence of this subsection) for the purposes of exploration expenditure or development expenditure—
“(a)
The Commissioner may, if that company makes an election in that behalf, allow a deduction for that income year in respect of so much of the sum which is so appropriated but which is not expended in that income year as the Commissioner is satisfied will be, or is likely to be, expended by that company on such expenditure not later than the end of the second of the 2 income years immediately succeeding that first-mentioned income year, and any amount so allowed as a deduction shall be deemed to be expenditure incurred by that company in that first-mentioned income year in deriving gross income from mining, and subsection (3) shall apply accordingly in respect of that amount; and
“(b)
An amount equal to any amount allowed as a deduction under paragraph (a) of this subsection shall be deemed to be gross income from mining derived by that company in the income year immediately succeeding that first-mentioned income year:
Provided that, where that company has ceased to be a mining company at or before the end of the income year immediately succeeding that first-mentioned income year, it shall be treated, for the purposes of paragraph (b), as if it had not so ceased to be a mining company.
“(7)
For the purposes of this Act—
“(a)
Where a deduction has been allowed to a mining company under this section in respect of any exploration expenditure or development expenditure, no other deduction shall be allowed under any other provision of this Act—
“(i)
In respect of that expenditure; or
“(ii)
Except as expressly provided in this section, to that company by way of depreciation in respect of any asset acquired by it, or of which it has become possessed, as a result of that expenditure:
“(b)
Where a deduction has been allowed to a mining company under section 27 of the Land and Income Tax Amendment Act 1971 in respect of the amount of arrears of exploration expenditure and development expenditure within the meaning of that section, no other deduction shall be allowed under this Act in respect of that amount of arrears:
“(c)
Except as expressly provided in this section, no deduction shall be allowed under this Act to any company by way of depreciation in respect of any asset acquired by it, or of which it has become possessed, as a result of any exploration expenditure or development expenditure referred to in section 27(3)(a) of the Land and Income Tax Amendment Act 1971.
“(8)
Where a mining company has acquired, or become possessed of, any asset as a result of any exploration expenditure or development expenditure, and that asset is subsequently used wholly or principally by that company for the purpose of deriving gross income other than gross income from mining,—
“(a)
An amount equal to such amount as the Commissioner determines, in such manner as the Commissioner thinks fit, was the value of that asset at the date on which it commenced to be used for that purpose shall be deemed to be gross income from mining derived by that company in the income year in which that date falls; and
“(b)
Where that company has ceased to be a mining company at or before the end of that income year, it shall be treated, for the purposes of paragraph (a), as if it had not so ceased to be a mining company; and
“(c)
Subsection (7) shall not apply so as to preclude the Commissioner from allowing, so long as that asset continues to be used for that purpose, such deductions by way of depreciation in respect of that asset (being deductions allowed under this Act) as the Commissioner thinks fit, but in no case exceeding in the aggregate the value referred to in paragraph (a) of this subsection.
“(9)
Where—
“(a)
A mining company has acquired, or has become possessed or, any asset (including any mining or prospecting information or any mining or prospecting right) as a result of any exploration expenditure or development expenditure; and
“(b)
That company has at any time sold or otherwise disposed of that asset to any person,—
an amount equal to the value of the consideration received or receivable by that company for the sale or other disposal of that asset shall, subject to subsection (10), be deemed to be gross income from mining derived by that company in the income year in which that asset was sold or otherwise disposed of:
Provided that where that company has ceased to be a mining company at or before the end of that income year it shall be treated, for the purpose of deeming that amount to be gross income from mining derived by that company in that income year, as if it had not so ceased to be a mining company:
Provided also that nothing in this subsection shall apply in respect of any such asset in any case where the ownership of that asset is relinquished, forfeited, or surrendered (that relinquishment, forfeiture, or surrender of the ownership of that asset being referred to in this proviso as the ‘forfeiture’) by a mining company to another person and where the Commissioner is satisfied that—
“(i)
The forfeiture is not in consequence of a sale of that asset; and
“(ii)
No consideration is received or receivable by that mining company for the forfeiture; and
“(iii)
Where that mining company and that other person are, at any time relevant to the manner and terms of the forfeiture, associated persons, that company and that other person dealt with each other (in relation to that forfeiture) at that time, and every other time so relevant in relation to that forfeiture, in such manner and on such terms as would be expected if that company and that other person had, at all such times, not been associated persons.
“(10)
For the purposes of subsections (5) and (9), the following provisions snail apply in relation to the acquisition or the sale or other disposal of an asset by a mining company:
“(a)
Where that mining company and the person from whom it acquired that asset, or the person to whom it sold or otherwise disposed of that asset, are associated persons, the value of the consideration paid or payable, or of the consideration received or receivable, by that mining company for that asset shall be deemed to be an amount equal to such amount as the Commissioner determines, in such manner as the Commissioner thinks fit, was the value of that asset at the date on which that mining company acquired or (as the case may be) sold or otherwise disposed of that asset:
“(b)
Where—
“(i)
The whole or a part of the consideration paid or payable or of the consideration received or receivable by that mining company for that asset is other than cash; and
“(ii)
That mining company and the person from whom it acquired that asset, or the person to whom it sold or otherwise disposed of that asset, are not associated persons,—
the value of that consideration, or of that part of that consideration, shall be deemed to be such value as is agreed between that mining company and that person for the purposes of the acquisition or (as the case may be) of the sale or other disposal by that mining company of that asset:
Provided that, failing such agreement or where the Commissioner is of the opinion that the value so agreed is unreasonable, the value of that consideration or (as the case may be) of that part of that consideration shall be deemed to be such amount as the Commissioner determines in such manner as the Commissioner thinks fit:
“(c)
Notwithstanding paragraphs (a) and (b) but subject to paragraph (a), if that mining company and the person from whom it acquired that asset or the person to whom it sold or otherwise disposed of that asset give notice to the Commissioner, in accordance with subsection (11), that they have agreed that this paragraph shall apply in respect of that asset, the value of the consideration paid or payable, or of the consideration received or receivable, by that mining company for that asset shall be deemed to be such amount as they specify in that notice, being an amount—
“(i)
Not exceeding such amount as the Commissioner determines, in such manner as the Commissioner thinks fit, was the value of that asset at the date on which that mining company acquired or (as the case may be) sold or otherwise disposed of that asset; and
“(ii)
Not less than the amount of so much of the consideration as is in cash:
“(d)
Paragraph (c) shall not apply unless—
“(i)
In the case of an asset acquired by a mining company, that asset was so acquired for use in mining operations or associated mining operations carried on by that mining company; and
“(ii)
In the case of an asset sold or otherwise disposed of by a mining company, the person acquiring that asset from that mining company acquired it for use in mining operations or associated mining operations or in a mining venture carried on by the person.
“(11)
Every notice under subsection (10)(c) shall be in writing and shall be given to the Commissioner within the time within which the mining company is required to furnish a return of its income for the year in which it acquired or (as the case may be) sold or otherwise disposed of the asset, or within such further time as the Commissioner allows.
“(12)
For the purposes of this Act—
“(a)
Where a mining company has acquired an asset as a result of exploration expenditure or development expenditure, the person from whom it acquired that asset shall be deemed to have sold or otherwise disposed of that asset at an amount equal to the value of the consideration paid or payable by that company as determined in accordance with subsections (5) and (10):
“(b)
Where a company referred to in subsection (9) has sold or otherwise disposed of an asset of the kind referred to in that subsection, the person who acquired that asset from that company shall be deemed to have acquired that asset at an amount equal to the value of the consideration received or receivable by that company as determined in accordance with subsections (9) and (10).
“(13)
Where—
“(a)
Any asset (not being an asset to which subsection (8) has applied, except where subsection (15)(a) has subsequently applied to that asset) of a mining company that the company acquired or became possessed of as a result of any exploration expenditure or development expenditure is lost, destroyed, or damaged (that asset being referred to in this subsection and subsection (14) as the ‘damaged asset’, and that loss, destruction, or damage being referred to in this subsection and subsection (14) as the ‘loss’) in any income year and, in respect of that expenditure, a deduction has been allowed under—
“(i)
This section; or
“(ii)
Section 153f of the Land and Income Tax Act 1954; or
“(iii)
Section 27 of the Land and Income Tax Amendment Act 1971; or
“(iv)
Section 216 of the Income Tax Act 1976,—
to that company in any income year and, in respect of that loss, a payment by way of insurance, indemnity, compensation, or other damages (that payment being referred to in this subsection and subsection (14) as the ‘insurance payment’) is made to that company, that asset shall be deemed to have been sold by that company, in the income year in which that payment is so made, for a consideration equal to the aggregate of—
“(v)
The amount of that insurance payment made to that company; and
“(vi)
The amount (if any) payable to that company on the sale or other disposal of any scrap of that damaged asset,—
and subsection (9) shall, with any necessary modifications, apply accordingly:
“(b)
A mining company to which paragraph (a) applies ceases to be a mining company before (as the case may be)—
“(i)
The amount of the insurance payment is paid to it; or
“(ii)
The scrap of the damaged asset is sold or otherwise disposed of; or
“(iii)
The amount payable to that mining company on that sale or other disposal is received by it,—
that mining company shall be treated, for the purposes of this subsection and subsection (9), as if it had not so ceased.
“(14)
Notwithstanding subsection (13), where the mining company gives, in writing, within the time within which that mining company is required to furnish a return of its income for the income year in which there occurred the loss in respect of which the insurance payment has been or is to be made to that company, notice to the Commissioner that the amount of that insurance payment is to be used for the purpose of the replacement, restoration, or repair of that damaged asset (that replacement, restoration, or repair being referred to in this subsection as the ‘restoration’) and operations for the purpose of that restoration are commenced not later than the end of the 2nd income year immediately succeeding the income year in which that loss occurred, the following provisions shall apply:
“(a)
That damaged asset shall not be deemed to have been sold:
“(b)
The amount (if any) payable to that company on the sale or other disposal of any scrap of that damaged asset shall for the purposes of this subsection be deemed to be an insurance payment made to that company in the income year in which that sale or other disposal occurs:
“(c)
For the purposes of this Act, where any expenditure has been incurred by that company in the restoration of that damaged asset, no deduction shall be allowed under this Act,—
“(i)
Except as provided in paragraph (d), in respect of that expenditure; or
“(ii)
Except as expressly provided in this section, by way of depreciation of the asset acquired by that company, or of which it has become possessed, as a result of that expenditure:
“(d)
In any case where the amount of the expenditure incurred by that company in the restoration of that damaged asset exceeds the amount of that insurance payment made to it in respect of the loss which has occurred in relation to that damaged asset, the amount of that excess shall be deemed to be an amount of expenditure of the kind to which subsection (5) applies:
“(e)
Where the insurance payment made to that company in respect of the loss of that damaged asset exceeds the aggregate of the amounts of the expenditure incurred by that company in the restoration of that damaged asset, an amount equal to the amount of that excess shall, whether or not that company has ceased to be a mining company before the amount of that excess has been determined, be deemed to be gross income from mining derived by that company in the income year in which that restoration was completed; and for the purposes of this paragraph, where the operations for the purpose of that restoration have ceased before the completion of that restoration, that restoration shall be deemed to have been completed on the day on which those operations so ceased:
“(f)
For the purposes of this subsection and subsections (8), (9), and (15)(a), any asset or part of an asset which that company acquires or becomes possessed of as a result of any expenditure incurred by it in the restoration of that damaged asset shall be deemed to be the same asset, or, as the case may be, a part of the same asset, as became the damaged asset:
“(g)
Where the restoration of that damaged asset is not completed before the expiry of such time as the Commissioner considers reasonable, paragraph (e) shall, so far as it is applicable, apply in respect of that damaged asset, the insurance payment made in respect of the loss of that asset, and the expenditure incurred in the restoration of it, as if that restoration were completed on the day on which that time expired and as if no expenditure in the restoration of that damaged asset were incurred by that company after that day:
“(h)
In any case where paragraph (g) applies in respect of that damaged asset, any expenditure incurred by that mining company, after the day referred to in that paragraph, in the restoration of that damaged asset shall, for the purposes of this section, be deemed to be expenditure of the same kind as the expenditure as a result of which that company acquired or became possessed of that damaged asset, and the amount of that expenditure so incurred after that day shall, for the purposes of paragraph (d), be deemed to be the amount of an excess of the kind referred to in paragraph (d):
“(i)
Where, after the commencement of operations for the purpose of the restoration of that damaged asset and before that restoration is completed,—
“(i)
That damaged asset is transferred from the mining operations of that company and is used by that company wholly or principally for the purpose of deriving gross income other than from mining; or
“(ii)
That damaged asset (not being the scrap of that asset) is sold or otherwise disposed of by that company; or
“(iii)
That company ceases to be a mining company,—
paragraph (e) shall, so far as it is applicable, apply in respect of that damaged asset, the insurance payment made in respect of the loss of that asset, and the expenditure incurred in the restoration of it, as if that restoration were completed on the day on which that transfer, or that sale, or that other disposal, or that cessation, occurred and as if no expenditure in the restoration of that damaged asset were incurred after that day.
“(15)
For the purposes of this section—
“(a)
Where a mining company has commenced or recommenced to use any asset for the purpose of deriving gross income from mining, being an asset which immediately before that commencement or that recommencement was being used by that company for the purpose of deriving gross income other than gross income from mining, the Commissioner may make such adjustments in respect of the income year in which that company commenced or, as the case may be, recommenced to use that asset for the purpose of deriving gross income from mining as the Commissioner considers equitable, having regard to any deductions allowed to that company by way of depreciation, or otherwise in respect of the cost, in relation to that asset and to any other matters which the Commissioner considers relevant:
“(b)
Where—
“(i)
Section 152 or section 153 of the Land and Income Tax Act 1954 (as in force before the commencement of section 153f of that Act) applied to a mining company in respect of the 1970–71 income year; and
“(ii)
That company has acquired, or has become possessed of, any asset as a result of any exploration expenditure or development expenditure referred to in section 27(3)(a) of the Land and Income Tax Amendment Act 1971—
the following provisions shall apply:
“(iii)
Subsection (8) shall, with any necessary modifications, apply to that company as if every reference to an asset in that subsection included a reference to an asset referred to in subparagraph (ii) of this paragraph, being an asset used by that company wholly or principally for the purpose of gaining or producing assessable income or deriving gross income other than assessable or gross income from mining in the 1971–72 or any subsequent income year:
“(iv)
Subsections (9) and (10) shall, with any necessary modifications, apply to that company as if every reference in subsection (9) to an asset and every reference in subsection (10) to an asset which is sold or otherwise disposed of included a reference to an asset referred to in subparagraph (ii) of this paragraph, being an asset which is sold or otherwise disposed of by that company in the 1971–72 or any subsequent income year:
“(v)
Subsection (12)(b) shall, with any necessary modifications, apply to any person who acquires from that company an asset referred to in subparagraph (ii) of this paragraph as if every reference in subsection (12)(b) to an asset included a reference to an asset referred to in subparagraph (ii) of this paragraph, being an asset acquired by that person in the 1971–72 or any subsequent income year.
“(16)
Where, for any reason, including the existence or the formation or the dissolution of a partnership or a variation in the constitution of a partnership or in the interests of the partners,—
“(a)
A mining company has acquired, or has become possessed of, a share or interest in an asset as a result of exploration expenditure or development expenditure (including exploration expenditure or development expenditure referred to in section 27(3)(a) of the Land and Income Tax Amendment Act 1971) incurred by that mining company; or
“(b)
A mining company has sold or otherwise disposed of the whole or part of such a share or interest; or
“(c)
An asset in which a mining company has such a share or interest is used for the purpose of deriving gross income other than gross income from mining—
this section shall, with any necessary modifications, apply as if every reference in this section to an asset included a reference to such a share or interest.
“(17)
For the purposes of this subsection and of subsection (16), a partner shall be deemed to have a share or interest in every single asset of the partnership in accordance with that partner’s interest in the aggregate of the assets of the partnership.
“DN 2 Amounts from sale of mining shares by companies
“(1)
For the purposes of this section, in calculating the amount of any deduction allowed to any company in relation to a mining share which is sold or otherwise disposed of, the Commissioner shall adopt as the cost of that mining share an amount equal to the difference between the following 2 sums:
“(a)
The aggregate of—
“(i)
The amount of the consideration given by the company in respect of the acquisition of that share; and
“(ii)
The amount of any capital subsequently contributed by the company in respect of that share:
“(b)
The aggregate of—
“(i)
The amount of any reinvestment profit of the company included in that consideration; and
“(ii)
The amount of any reinvestment profit of the company included in that capital.
“(2)
In any income year in which a mining company (‘the vendor company’) sells or otherwise disposes of a mining share for an amount that would in the absence of this section be gross income under section CD 3 or CD 4 and that exceeds the cost of the share, the amount shall be deemed not to be gross income of the vendor company to the extent to which the Commissioner is satisfied that—
“(a)
The amount received for that sale or other disposition (being a sale or other disposition to a mining holding company or to a mining company) consists of shares in that mining holding company or that mining company issued to the vendor company; or
“(b)
The amount received for that sale or other disposition is used, or is to be used, within the prescribed period for mining purposes.
“(3)
In any case where the Commissioner is satisfied that any part of any reinvestment profit of any company has, before the end of the prescribed period, been used for purposes other than mining purposes, and that it will not be used for mining purposes within the prescribed period, the amount of that part—
“(a)
Shall be included in the gross income derived by that company in the income year in which it was so used; and
“(b)
Shall no longer be reinvestment profit of the company.
“(4)
In any case where the Commissioner is satisfied that any part of any reinvestment profit of any company has not, before the end of the prescribed period, been used for mining purposes—
“(a)
The amount of that part shall be gross income derived by that company in the last income year included in that prescribed period; and
“(b)
The amount of that part shall no longer be reinvestment profit of the company.
“(5)
Where in any income year any amount is repaid in respect of any loan made by any company (in this subsection referred to as the ‘lender company’) to a mining holding company or to a mining company (being a loan which in the opinion of the Commissioner has been made wholly or partly out of reinvestment profit of the lender company), there shall, subject to subsection (6), be included in gross income derived by the lender company in that income year an amount calculated in accordance with the following formula:
_eqn02.JPG)
“where—
“a
is the amount of so much of the loan as, in the opinion of the Commissioner, was made out of reinvestment profit of the lender company; and
“b
is the amount of the loan; and
“c
is the amount repaid.
“(6)
Where an amount would otherwise be gross income derived by any company in any income year under subsection (5) in respect of any repayment of a loan, then, notwithstanding that subsection, that amount shall not be gross income derived by that company in that income year to the extent to which the Commissioner is satisfied that that repayment is used, or is to be used, within the prescribed period for mining purposes.
“(7)
In any case where the Commissioner is satisfied that any amount (not being an amount to which subsection (2) applies) is derived from any sale or other disposition of a mining share by a company in an income year, and that, in calculating the amount of any deduction allowed in relation to the cost of the mining share, any amount of reinvestment profit of the company was taken into account under subsection (1)(b), the company shall, subject to subsection (9), be deemed to derive gross income in that income year of an amount equal to the smaller of the following two amounts:
“(a)
The amount derived from the sale or other disposition less allowable deductions in relation to the cost of the mining share; and
“(b)
The amount of the reinvestment profit.
“(8)
For the purposes of this section,—
“(a)
Any share held in a mining holding company or in a mining company shall, on the liquidation of any such company, be deemed to have been sold to that company; and
“(b)
All distributions received on that liquidation in respect of that share shall be deemed to be an amount received for that sale; and
“(c)
That sale shall be deemed to be a sale to which subsection (7) applies.
“(9)
Where an amount would otherwise be gross income derived by any company (referred to in this subsection as the ‘vendor company’) in any income year under subsection (7) in respect of any sale or other disposition of a mining share, then, notwithstanding that subsection, that amount shall not be included in the gross income derived by the vendor company in that income year to the extent to which the Commissioner is satisfied that—
“(a)
The amount received for that sale or other disposition of a mining share (being a sale or other disposition to a mining holding company or to a mining company) consists of shares in that mining holding company, or in that mining company, issued to the vendor company; or
“(b)
The amount received for that sale or other disposition of a mining share (being a sale within the meaning of subsection (8)) consists of mining shares; or
“(c)
The amount received for that sale or other disposition is used, or is to be used, within the prescribed period for mining purposes.
“(10)
In this section—
“‘Mining purposes’ means—
“(a)
Subscribing for, or paying calls on, shares in any mining holding company or in any mining company; or
“(b)
Making loans to a mining company for the purposes of enabling the mining company to carry on mining operations or associated mining operations, or to finance exploration expenditure or development expenditure of the mining company; or
“(c)
Making loans to a mining holding company where the loans made are to be used to finance mining operations or associated mining operations to be carried out by a mining company or to finance exploration expenditure or development expenditure of a mining company:
“‘Mining share’ means a share in any mining holding company or in any mining company:
“‘Prescribed period’ means—
“(a)
In relation to any amount derived from a sale or other disposition of a mining share, the income year in which the sale or other disposition took place and the 6 income years immediately succeeding that income year:
“(b)
In relation to any amount repaid in respect of any loan made to any mining holding company or to any mining company, the income year in which that amount was repaid and the 6 income years immediately succeeding that income year.
“DN 3 Companies holding shares in mining companies
“(1)
Notwithstanding anything in this section, this section shall not apply to any loan to the extent to which, in the opinion of the Commissioner, the loan is made by a holding company (being a mining holding company) out of reinvestment profit of that company.
“(2)
Nothing in this section shall be construed to affect the assessment of any mining company.
“(3)
Notwithstanding anything in this Act, the amount written off in any income year from loans made by a holding company to a mining company shall be allowed as a deduction to the holding company for that year:
Provided that the amount allowed as a deduction under this subsection in respect of any holding company in any year shall not include any amount in respect of interest, and shall not exceed the smaller of the following amounts:
“(a)
50% of the amount which, but for this subsection, would be the net income of the holding company for that year:
“(b)
The prescribed proportion of the aggregate amount incurred by the mining company in exploration expenditure and development expenditure before the end of that year, reduced by the total of all amounts allowed to the holding company as deductions under this subsection in any earlier year or years:
Provided also that in respect of any amount written off from any loan which in the opinion of the Commissioner has been made by a holding company (being a mining holding company) wholly or partly out of payments received by that holding company (being payments in respect of which a deduction has been allowed to any taxpayer under section 159 of the Income Tax Act 1976 as that section was in force before its repeal by the Income Tax Amendment Act (No. 2) 1990), the deduction otherwise allowable under this subsection shall to that extent be reduced by one-third.
“(4)
Where any amount has been allowed to a holding company as a deduction under subsection (3) in any income year, and it appears to the Commissioner that in any subsequent income year the annual gross income of the mining company would exceed its annual allowable deductions if,—
“(a)
No deductions had been allowed in respect of any amounts of exploration expenditure or development expenditure of the mining company (being amounts allowed to any holding company as a deduction); and
“(b)
Where the mining company has, in that subsequent income year, sold or otherwise disposed of the whole or part of an asset (being an asset of the kind referred to in section DN 1(9) or DN 1(15)(b)(ii)), the amount taken into account as the amount received or receivable for the sale or other disposition of that asset or of that part of that asset were an amount determined in accordance with subsection (5),—
the prescribed proportion of the amount of the net income that would have so arisen shall, if the Commissioner so determines, be deemed to be a repayment, as far as it extends, of the amounts written off and allowed as a deduction under subsection (3).
“(5)
The amount to be taken into account under subsection (4)(b) as the value of the consideration received or receivable by the mining company for the sale or other disposition of an asset or of part of an asset shall be—
“(a)
Where, for the purposes of section DN 1, the amount received or receivable by the mining company for the sale or other disposition of that asset or of that part of that asset is determined under subsection (10)(c) of that section, the greater of—
“(i)
So much of the amount specified in the notice under that subsection (10)(c) as is in cash;
“(ii)
The total amount of all loans made, on or before the date of that sale or other disposition, to the mining company by all holding companies of the mining company, to the extent to which such loans relate, in the opinion of the Commissioner, to that asset (including, where a part only of that asset is sold or otherwise disposed of, the part not sold or otherwise disposed of) and to the extent to which such loans have been written off by any holding company and allowed as deductions under subsection (3) or under the corresponding provisions of any former Act and have not, on or before the date of that sale or disposition, been repaid or deemed to be repaid under subsection (4) or subsection (6) or the corresponding provisions of any former Act:
Provided that the amount determined under this paragraph as the amount received or receivable by the mining company for the sale or other disposition of that asset or of that part of that asset shall not exceed such amount as the Commissioner determines, in such manner as the Commissioner thinks fit, was the value of that asset or, as the case may be, of that part of that asset at the date of that sale or other disposition:
“(b)
In any other case, the amount received or receivable by the mining company for the sale or other disposition of that asset or of that part of that asset, as determined under and for the purposes of section DN 1.
“(6)
Where any amount has been allowed to a holding company as a deduction under subsection (3) in any year, and the holding company in any subsequent year disposes of any shares in the mining company, or any interest in any such shares, the amount by which the amount received by or on behalf of the holding company for those shares or that interest exceeds the amount paid up in cash on the shares shall be deemed to be a repayment, as far as it extends, of the amount written off by the holding company and allowed as a deduction under subsection (3).
“(7)
Where any amount written off by a holding company and allowed as a deduction under subsection (3) is repaid to that company or to any other person by the mining company, or is deemed to be repaid under subsection (4) or subsection (6), the Commissioner may at any time, notwithstanding the time bar, amend any assessment made on that first-mentioned company and reduce the amount allowed as a deduction by the amount so repaid or deemed to be repaid.
“(8)
Subsections (4), (6), and (7) shall, with any necessary modifications, apply with respect to deductions allowed to a holding company under the corresponding provisions of any former Act in the same manner as they apply with respect to deductions allowed to a holding company under subsection (3).
“(9)
For the purposes of this section—
“(a)
Every reference in this section to an asset shall be deemed to include a reference to a share or interest in an asset:
“(b)
Every member of a partnership and every member of any other association of persons in receipt of income jointly or carrying on activities jointly shall be deemed to have a snare or interest in every single asset of that partnership or of that association in accordance with the member’s interest in the aggregate of the assets of that partnership or of that association:
“(c)
Where any amount is deemed under subsection (4) to be a repayment of any amount written off by a holding company and allowed as a deduction, such repayment shall, in relation to any subsequent income year as referred to in that subsection, be deemed to have been made on the day immediately following the end of that subsequent income year.
“(10)
Where and to the extent that any loan made on or after 1 October 1978 by a holding company to a mining company was, in the opinion of the Commissioner, having regard to other loans made previously by the holding company and such other circumstances as the Commissioner considers relevant, excessive and made to obtain an unfair advantage for tax purposes, this section shall not apply to that loan.
“(11)
Where, but for the provisions, other than section 45(1), of the Income Tax Amendment Act 1979, any amount loaned on or before 31 March 1979 by a company to another company would have been a loan to which, or in relation to which, or subsequent to the writing off or the deduction or the repayment or the deemed repayment of which, the preceding provisions of this section would, so far as they were applicable, have applied, those provisions shall, notwithstanding anything in this Act, and so far as they are applicable, apply to, or in relation to, or subsequent to the writing off or the deduction or the repayment or the deemed repayment of, that amount loaned as if the Income Tax Amendment Act 1979 (except section 45 of that Act) had not been enacted.
“(12)
In this section—
“‘Loan’, in relation to a holding company and a mining company, means a loan made to the mining company by the holding company at a time when the holding company was a holding company of the mining company:
“‘Prescribed proportion’, in relation to a holding company and a mining company, means the proportion that the residue of the total of the loans made by the holding company to the mining company (after subtracting actual repayments) bears to the residue of the total of the loans made by all holding companies to the mining company (after subtracting actual repayments).
“DN 4 Resident mining operators
“(1)
For the purposes of this section, the gross income derived by a resident mining operator shall be divided into the following classes:
“(a)
Gross income from mining:
“(b)
Gross income other than from mining.
“(2)
In any income year in which a resident mining operator has a mining outgoing excess, the operator is allowed deductions for the expenditure or losses to which the mining outgoing excess is attributable only to the extent that the total amount of expenditure and losses does not exceed the prescribed amount in relation to that resident mining operator and to that income year.
“(3)
The total amount of any expenditure or losses of a resident mining operator for an income year that would have been allowed as deductions in that year but for subsection (2) shall for the purposes of sections IE 1, IF 1 and IH 1 be a net loss of that resident mining operator for that income year.
“(4)
A reference in the definitions of ‘development expenditure’, ‘exploration expenditure’, ‘gross income from mining’ and ‘mining operations’ to a mining company or to a company shall, in the application of those definitions to this section (and to section FF 19), be taken as a reference to a resident mining operator.
“(5)
Subsections (4), (5), (7) to (12), (15)(a), (16), and (17) of section DN 1 shall, with any necessary modifications, apply for the purposes of this section as if—
“(a)
Every reference in section DN 1(10) to a mining company and every reference in each of the other provisions to a mining company or company were a reference to a resident mining operator; and
“(b)
The reference in section DN 1(5) to DN 1(3) were a reference to subsection (2) of this section; and
“(c)
Every reference in section DN 1(7) to DN 1 were a reference to this section; and
“(d)
The reference in section DN 1(7)(b) to section 27 of the Land and Income Tax Amendment Act 1971 were a reference to section 31 of the Land and Income Tax Amendment Act (No. 2) 1972; and
“(e)
The reference in section DN 1(7)(c) to an asset acquired by a company, or of which a company has become possessed, as a result of any exploration expenditure or development expenditure referred to in section 27(3)(a) of the Land and Income Tax Amendment Act 1971 were a reference 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 (being an asset which a resident mining operator has acquired or become possessed of); and
“(f)
The reference in section DN 1(16)(a) to exploration expenditure or development expenditure referred to in section 27(3)(a) of the Land and Income Tax Amendment Act 1971 were a reference to exploration expenditure or development expenditure 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, being exploration expenditure or development expenditure incurred by a resident mining operator.
“(6)
For the purposes of this section, subparagraphs (iii) to (v) of section DN 1(15)(b) shall, with any necessary modifications, apply with respect to any 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 (being an asset which a resident mining operator has acquired or has become possessed of) as if—
“(a)
Every reference in those subparagraphs to a company were a reference to a resident mining operator; and
“(b)
Every reference in those subparagraphs to an asset referred to in section DN 1(15)(b)(ii) were a reference to an asset of the kind referred to in paragraph (i) of item ‘a’ of that formula (being an asset which a resident mining operator has acquired or has become possessed of).
“(7)
Subsections (13) and (14) of section DN 1 shall, with any necessary modifications, apply for the purposes of this section as if—
“(a)
Every reference in those subsections to a mining company and to a company were a reference to a resident mining operator; and
“(b)
The reference in section DN 1(13)(a)(i) and (14)(c)(ii) to section DN 1 were a reference to this section; and
“(c)
The reference in section DN 1(13)(a) to section 153f of the Land and Income Tax Act 1954 were a reference to section 153j of that Act and the reference in section DN 1(13)(a) to section 27 of the Land and Income Tax Amendment Act 1971 were a reference to section 31 of the Land and Income Tax Amendment Act (No. 2) 1972.
“DN 5 Non-resident mining operators
“(1)
A reference in the definitions of ‘development expenditure’, ‘exploration expenditure’, ‘gross income from mining’ and ‘mining operations’ to a mining company or to a company shall, in the application of those definitions to this section, be taken as a reference to a non-resident mining operator.
“(2)
In relation to a non-resident mining operator and to a mining venture carried on by that operator as a non-resident mining operator,—
“(a)
Subsections (5) to (12), (15)(a), (16), and (17) of section DN 1, and subsections (2) and (3) of section IH 4 shall, with any necessary modifications, apply for the purposes of this section as if—
“(i)
Every reference in sections DN 1(10), IH 4(2), and IH 4(3) to a mining company and every reference in each of the other provisions to a mining company or company were a reference to a non-resident mining operator; and
“(ii)
Every reference in subsections (5), (6), (8), (9), and (15)(a) of section DN 1 to gross income from mining were a reference to gross income from that mining venture; and
“(iii)
The words ‘and subsection (3) shall apply accordingly in respect of that amount’ were omitted from subsections (5) and (6)(a) of section DN 1; and
“(iv)
Every reference in section DN 1(7) to section DN 1 were a reference to this section; and
“(v)
The reference in section DN 1(7)(b) to section 27 of the Land and Income Tax Amendment Act 1971 were a reference to section 31 of the Land and Income Tax Amendment Act (No. 2) 1972; and
“(vi)
The reference in section DN 1(7)(c) to an asset acquired by a company or of which a company has become possessed as a result of any exploration expenditure or development expenditure referred to in section 27(3)(a) of the Land and Income Tax Amendment Act 1971 were a reference 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 (being an asset which a non-resident mining operator has acquired or has become possessed of); and
“(vii)
Every reference in subsections (8) and (15)(a) of section DN 1 to gross income other than gross income from mining were a reference to gross income other than gross income from a mining venture; and
“(viii)
The reference in section DN 1(10)(d)(i) to mining operations or associated mining operations were a reference to a mining venture; and
“(ix)
The reference in section DN 1(16)(a) to exploration expenditure or development expenditure referred to in section 27(3)(a) of the Land and Income Tax Amendment Act 1971 were a reference to exploration expenditure or development expenditure 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, being exploration expenditure or development expenditure incurred by a non-resident mining operator; and
“(b)
Subparagraphs (iii), (iv), and (v) of section DN 1(15)(b) shall, with any necessary modifications, apply with respect to any asset of the kind referred to in paragraph (i) of item ‘a’ of the formula referred to in paragraph (a)(ix) (being an asset which a non-resident mining operator has acquired or has become possessed of) as if—
“(i)
Every reference in those subparagraphs to a company were a reference to a non-resident mining operator; and
“(ii)
Every reference in those subparagraphs to an asset referred to in section DN 1(15)(b)(ii) were a reference to an asset of the kind referred to in paragraph (i) of item ‘a’ of that formula (being an asset which a non-resident mining operator has acquired or has become possessed of); and
“(iii)
The reference in that subparagraph (iii) to gross income other than gross income from mining were a reference to gross income other than gross income from a mining venture; and
“(c)
Subsections (13) and (14) of section DN 1 shall, with any necessary modifications, apply for the purposes of this section as if—
“(i)
Every reference in those subsections to a mining company and to a company were a reference to a non-resident mining operator; and
“(ii)
The reference in section DN 1(14)(e) to gross income from mining were a reference to gross income from that mining venture; and
“(iii)
The reference in subsections (13)(a)(i) and (14)(c)(ii) of section DN 1, to section DN 1 were a reference to this section; and
“(iv)
The reference in section DN 1(13)(a) to section 153f of the Land and Income Tax Act 1954 were a reference to section 153k of that Act, and the reference to section 27 of the Land and Income Tax Amendment Act 1971 were a reference to section 31 of the Land and Income Tax Amendment Act (No. 2) 1972; and
“(v)
The reference in section DN 1(14)(i) to gross income other than from mining were a reference to gross income other than gross income from a mining venture.”.
131 Certain deductions not allowed—racing bloodstock
Section DO 1 is replaced by:
“DO 1
Except as expressly provided in this Act, no deduction is allowed to a taxpayer in respect of any expenditure or loss to the extent to which the Commissioner is satisfied it is incurred in—
“(a)
Preparing any bloodstock for racing, other than any expenditure or loss incurred—
“(i)
In the course of preparing that bloodstock for sale by a taxpayer who is in the business of breeding bloodstock and who does not race that bloodstock; or
“(ii)
By a taxpayer in exchange for consideration which is gross income of that taxpayer; or
“(b)
Racing any bloodstock, or otherwise incurred in relation to the racing of any bloodstock.”.
132 Certain expenditure on land used for fanning or agricultural purposes
In section DO 3, the portion before paragraph (a) is replaced by:
“DO 3
Any taxpayer who in any income year is engaged in any farming or agricultural business on any land in New Zealand shall be allowed a deduction of the amount of any expenditure incurred by the taxpayer in that year, being expenditure that is not deductible otherwise than under this section or under section DO 4, in—”.
133 Expenditure on land improvements used for farming or agriculture
(1)
Section DO 4(1) and (2) are replaced by:
“DO 4
“(1)
Any taxpayer who carries on any farming or agricultural business on any land owned by that taxpayer in New Zealand shall in any income year other than the income year in which that taxpayer sells or otherwise disposes of that land, be allowed a deduction in respect of any expenditure of any of the kinds specified in Part A of Schedule 7 incurred by the taxpayer or by any other taxpayer in preparing or otherwise developing that land, and being expenditure which is of benefit to the business in that income year.
“(2)
Any taxpayer who carries on any farming or agricultural business on any land in New Zealand which is not owned by that taxpayer shall in any income year other than the income year in which that taxpayer ceases to carry on that farming or agricultural business on that land, be allowed a deduction in respect of any expenditure of any of the kinds specified in Part A of Schedule 7 incurred by that taxpayer in preparing or otherwise developing that land, and being expenditure which is of benefit to the business in that income year.”.
(2)
Section DO 4(4) is replaced by:
“(4)
The Commissioner may, in respect of any item of expenditure of a kind specified in clause 12 of Part A of Schedule 7, allow a deduction of an amount greater than that otherwise allowable under subsection (3) where the Commissioner is satisfied that the vines or trees have ceased to exist or have ceased to be used in the derivation of gross income:
Provided that this subsection shall not apply in respect of any vines or trees—
“(a)
That have ceased to exist before 16 December 1991; or
“(b)
In respect of which the Commissioner is satisfied that those vines or trees have ceased, before 16 December 1991, to be used in the derivation of gross income.”.
134 Expenditure on improvements in relation to aquaculture
Section DO 5(1) and (2) are replaced by:
“DO 5
“(1)
Any taxpayer who carries on any business of aquaculture in New Zealand shall, in any income year other than the income year in which that taxpayer ceases to carry on that business, be allowed a deduction in respect of any expenditure on improvements (being improvements owned by the taxpayer in that income year) of any of the kinds specified in any of Parts C to G of Schedule 7 incurred by the taxpayer or any other taxpayer, in preparing or otherwise developing the business, and being expenditure which is of benefit to the business in that income year.
“(2)
Any taxpayer who carries on any business of aquaculture in New Zealand shall, in any income year other than the income year in which that taxpayer ceases to carry on that business, be allowed a deduction in respect of any expenditure on improvements (being improvements which are not owned by that taxpayer in that income year) of any of the kinds specified in any of Parts C to G of Schedule 7 incurred by that taxpayer, in preparing or otherwise developing the business, and being expenditure which is of benefit to the business in that income year.”.
135 Deductions by lessor of land used for farming or agricultural purposes
Section DO 6 is replaced by:
“DO 6
Subject to section EG 19, where any taxpayer, being the owner of an estate in fee simple or of a leasehold estate in any land in New Zealand, has granted a lease or a sublease of the land to any person who carries on any farming or agricultural business on the land, the taxpayer shall, in any income year, be allowed deductions in respect of expenditure under section DO 3 or section DZ 3, being deductions which the taxpayer would be allowed if the taxpayer had personally carried on a farming or agricultural business on the land during the currency of the lease or sublease; and those sections as far as they are applicable and with any necessary modifications, shall apply accordingly as if the gross income of the taxpayer had been derived from carrying on a farming or agricultural business on the land during the income year and as if the persons employed in the business carried on by the lessee or sublessee had been employed by the taxpayer.’.
136 Farmers’ expenditure on tree planting
Section DO 7(1) is replaced by:
“DO 7
“(1)
The Commissioner may, in relation to any taxpayer carrying on any farming or agricultural business on land in New Zealand (that business being the principal business undertaken on that land), allow a deduction in respect of any expenditure, not being expenditure in respect of which a payment has been made or is to be made to the taxpayer under the Forestry Encouragement Grants Regulations 1981 or the Forestry Encouragement Grants Regulations 1983, or in respect of which a deduction is allowed under section DO 3, incurred by the taxpayer during any income year in planting or maintaining trees (not being trees planted under a forestry encouragement agreement under the Forestry Encouragement Act 1962 or trees planted primarily and principally for the production of fruit) on that land.”.
137 Amalgamated company entitled to deductions for farming, agriculture and aquaculture expenditure
In section DO 8, the portion after paragraph (d) is replaced by: “the deduction shall be allowed to the amalgamated company for the income year.”
.
138 New Subpart added
After Part DO, the following is added:
“SUBPART P—“Attributed Foreign Losses and Foreign Investment Fund Losses
“DP 1 Attributed foreign losses
“(1)
If a person has an attributed foreign loss in relation to an income interest in a controlled foreign company for an income year, the person is allowed as a deduction for that year an amount equal to the lesser of the attributed foreign loss and the total of—
“(a)
Any attributed foreign income of the person in the income year in respect of any other controlled foreign company resident in the same country or territory (referred to in this subsection as the ‘relevant country’) as that in which the first-mentioned controlled foreign company was resident in the accounting period during which the attributed foreign loss arose; and
“(b)
Any foreign investment fund income calculated under the branch equivalent method derived by the person in the income year in respect of any foreign investment fund resident in the relevant country.
“(2)
If in an income year an attributed foreign loss of a person exceeds the amount allowed as a deduction under subsection (1), that amount becomes an attributed foreign net loss of the person able to be offset under Part I against net income in a future income year or against net income of another company in the current or a future income year.
“(3)
A person may only take an amount of attributed foreign income or foreign investment fund income for an income year into account under subsection (1) to the extent that the person has not taken the amount into account in any other calculation under subsection (1) in respect of any other attributed foreign loss.
“DP 2 Foreign investment fund losses
“(1)
If a person has a foreign investment fund loss calculated under any calculation method other than the branch equivalent method for an income year, the person is allowed a deduction for that year of that foreign investment fund loss, to the extent that the foreign investment fund loss does not exceed the total of—
“(a)
Any foreign investment fund income calculated under any calculation method other than the branch equivalent method derived by that person in that income year; and
“(b)
The excess of the foreign investment fund loss over the foreign investment fund income referred to in paragraph (a) to the extent that the excess does not exceed the aggregate of foreign investment fund income calculated under any calculation method other than the branch equivalent method derived by the person in any previous income years.
“(2)
For the purposes of applying subsection (1)(b) on any subsequent occasion, the aggregate amount of the foreign investment fund income derived by the person in previous years shall be deemed to have been reduced by an amount equal to any amount allowed as a deduction under subsection (1) that would not have been allowed as a deduction in the absence of subsection (1)(b).
“(3)
If in an income year a foreign investment fund loss of a person exceeds the amount allowed as a deduction under subsection (1), that excess becomes a foreign investment fund net loss of the person able to be offset under Part I by the person against net income in a future income year or against net income of another company in the current or a future income year.
“(4)
If—
“(a)
A person has in an income year a foreign investment fund loss in respect of an interest in a fund calculated under any calculation method other than the branch equivalent method; and
“(b)
The person acquired the interest—
“(i)
As part of a business which comprises or includes dealing in such interests; or
“(ii)
For the purpose of deriving a gain on disposal of the interest; or
“(iii)
As part of an undertaking or scheme entered into or devised for the purpose of making a profit,—
the preceding provisions of this section and the provisions of section IG 5 shall not apply to the loss, which shall instead be deemed to be a loss incurred by the person in deriving the person’s gross income.
“DP 3 Branch equivalent method foreign investment fund losses
“(1)
If a person has a foreign investment fund loss calculated under the branch equivalent method for an income year, the person is allowed as a deduction for that year an amount calculated by applying section DP 1 in respect of the loss as if—
“(a)
The interest in the fund were an income interest in a controlled foreign company; and
“(b)
The foreign investment fund loss were an attributed foreign loss arising in respect of a branch equivalent loss; and
“(c)
References to the controlled foreign company were references to the fund.
“(2)
If in an income year a foreign investment fund loss calculated under the branch equivalent method of a person exceeds the amount allowed as a deduction under section DP 1, that excess becomes a foreign investment fund net loss of the person able to be offset under Part I against net income in a future income year or against net income of another company in the current or a future income year.”.
139 Premium paid in respect of leased machinery
Section DZ 1(1) is replaced by:
“DZ 1
“(1)
The Commissioner may allow such deduction as the Commissioner thinks fit in respect of any premium, fine, or foregift, or any consideration in the nature of a premium, fine, or foregift, paid by the taxpayer in respect of the lease before 1 April 1998 of any machinery used by the taxpayer in the derivation of gross income, or in respect of the renewal of any such lease before 1 April 1993, in respect of the assignment or transfer of any such lease.”.
140 Certain expenditure on land used for forestry purposes
(1)
In section DZ 2(1), the portion before paragraph (a) is replaced by:
“DZ 2
“(1)
Any taxpayer who carries on a forestry business on any land in New Zealand shall be allowed a deduction in relation to any expenditure incurred in that business in the 1990–91 or any earlier income year in—”.
(2)
Section DZ 2(5) is replaced by:
“(5)
Instead of claiming a deduction for the income year in which the expenditure is incurred of the total amount of the expenditure allowed as a deduction under subsection (1), any taxpayer to whom this subsection applies shall, if the taxpayer so elects by notice in accordance with subsection (6) (which election shall, subject to subsection (7), be irrevocable), be entitled to allocate, in such manner as the taxpayer specifies in the notice, the whole or any part of that total amount to any income year (being the 1999–2000 or any earlier income year in which the taxpayer continues to carry on that business) succeeding the income year in which the expenditure is incurred and to deduct the amount so allocated in that succeeding income year; and any amount so allocated shall not be allowed as a deduction to the taxpayer in the income year in which the expenditure is incurred.”.
(3)
Section DZ 2(7)(a) and (b) are replaced by:
“(a)
Be allowed as a deduction in the income year in which the taxpayer ceased to carry on that business; or
“(b)
Be allocated equally to the income year in which that total amount was incurred and the succeeding income years in which the taxpayer has continued to carry on that business, and any amount or additional amount so allocated to any such income year shall be allowed as a deduction, or a further deduction, in that last-mentioned income year.”.
141 Certain expenditure on land used for farming or agricultural purposes
(1)
In section DZ 3(1), the portion before paragraph (a) is replaced by:
“DZ 3
“(1)
Any taxpayer engaged in any farming or agricultural business on any land in New Zealand shall be allowed a deduction in relation to any expenditure incurred by the taxpayer in that business in the 1990–91 or any earlier income year, and not deductible otherwise than under this section or section DO 3 or section DO 4, in—”.
(2)
Section DZ 3(4) is replaced by:
“(4)
Instead of claiming a deduction for the income year in which the expenditure is incurred of the total amount of the expenditure allowed as a deduction under subsection (1), the taxpayer shall, if the taxpayer so elects by notice in accordance with subsection (5) (which election shall, subject to subsection (6), be irrevocable), be entitled to allocate, in such manner as the taxpayer specifies in the notice, the whole or any part of that total amount to any one of the 9 income years (being a year in which the taxpayer continues to carry on that business) next succeeding the income year in which the expenditure is incurred and to deduct the amount so allocated in that succeeding income year; and any amount so allocated shall not be allowed as a deduction in the income year in which the expenditure is incurred.”.
(3)
Section DZ 3(6)(a) and (b) are replaced by:
“(a)
Be allowed as a deduction in the income year in which the taxpayer ceased to carry on that business; or
“(b)
Be allocated equally to the income year in which that total amount was incurred and the succeeding income years in which the taxpayer has continued to carry on that business, and any amount or additional amount so allocated to any such income year shall be allowed as a deduction, or a further deduction, in that last-mentioned income year.”.
142 Deduction of certain expenditure incurred by persons engaged in aquaculture
(1)
In section DZ 4(1), the portion before paragraph (a) is replaced by:
“DZ 4
“(1)
Any taxpayer engaged in the business of aquaculture in New Zealand shall be allowed a deduction in relation to any expenditure incurred by the taxpayer in that business in the 1990–91 or any earlier income year, and not deductible otherwise than under this section or under section DO 5,—”.
(2)
Section DZ 4(4) is replaced by:
“(4)
Instead of claiming a deduction for the income year in which the expenditure is incurred of the total amount of the expenditure allowed as a deduction under subsection (1), any taxpayer to whom this subsection applies shall, if the taxpayer so elects by notice in accordance with subsection (5) (which election shall, subject to subsection (6), be irrevocable), be entitled to allocate, in such manner as the taxpayer specifies in the notice, the whole or any part of that total amount to any one of the 9 income years (being a year in which the taxpayer continues to carry on that business) next succeeding the income year in which the expenditure is incurred and to deduct the amount so allocated in that succeeding income year; and any amount so allocated shall not be allowed as a deduction in the income year in which the expenditure is incurred.”.
(3)
Section DZ 4(6)(a) and (b) are replaced by:
“(a)
Be allowed as a deduction in the income year in which the taxpayer ceased to carry on that business; or
“(b)
Be allocated equally to the income year in which that total amount was incurred and the succeeding income years in which the taxpayer has continued to carry on that business, and any amount or additional amount so allocated to any such income year shall be allowed as a deduction, or a further deduction, in that last-mentioned income year.”.
143 Companies engaged in exploring for, searching for, or mining petroleum
(1)
In section DZ 6(4), the portion before paragraph (a) is replaced by:
“(4)
Where in the 1990–91 or any earlier income year, a petroleum mining company has incurred any development expenditure (whether or not as consideration paid or payable for the acquisition of any asset) in respect of its petroleum mining operations or its associated petroleum mining operations carried on in association with those petroleum mining operations, the Commissioner shall, subject to subsection (7), allow a deduction to that company of an amount equal to the amount of that development expenditure as follows:”.
(2)
In section DZ 6(4), the provisos are replaced by:
“Provided that, instead of claiming the whole or any part of the amount of the deduction specified in subparagraph (i) or subparagraph (ii) of paragraph (a), or in subparagraph (i) or subparagraph (ii) of paragraph (b), for the income year in respect of that development expenditure, the petroleum mining company shall, if it so elects by notice in accordance with subsection (12)(b), be entitled to allocate, in such manner as it specifies in the notice, the whole or any part of that amount to any one or more income years (being in each case an income year subsequent to the income year in which the deduction is otherwise allowed under the preceding provisions of this subsection) and to deduct the amount so allocated to any such income year in that subsequent year or those subsequent years:
Provided also that where the petroleum mining company ceases in any income year (in this proviso referred to as the ‘year of cessation’) to be a petroleum mining company before an amount equal to the total amount of that development expenditure has been allowed as a deduction the company may, if it so elects by notice in accordance with subsection (12)(c), allocate so much of that total amount as has not previously been allowed as a deduction between the year of cessation and any number (not exceeding 4) of the immediately preceding years (not being income years preceding the income year in which that development expenditure was incurred) and any amount so allocated shall be allowed as a further deduction in the year to which it is so allocated:
Provided further that where any such development expenditure is expenditure incurred on restoration of the kind referred to in paragraph (a)(ii) of the definition of ‘development expenditure’, the Commissioner shall allow a deduction of that expenditure in the income year in which that expenditure is incurred and not in any other income year.”.
(3)
Section DZ 6(5)(c)(ii) is replaced by:
“(ii)
The elector company shall be entitled to claim in respect of any income year (being the year of election or any of the 4 income years immediately succeeding the year of election) that an amount be deducted in that income year, equal to the amount appropriated, in respect of that income year, by the elector company, within the time within which it is required to furnish a return of its income for that income year (or within such further time as the Commissioner, in the Commissioner’s discretion, may allow), to a special development reserve account of the elector company for the purposes of that specified development expenditure:”.
(4)
Section DZ 6(5)(e) is replaced by:
“(e)
The amount of any deduction claimed under paragraph (c)(ii) by the elector company in respect of any income year shall not exceed the amount of its net income for that income year calculated as if a deduction were not allowed under paragraph (c)(ii) in that income year or an amount equal to the amount remaining, in the development commitment account kept by the elector company, immediately before the claiming of that deduction, whichever is the less:”.
(5)
Section DZ 6(5)(g) and (h) are replaced by:
“(g)
Where a deduction (not being a deduction which has subsequently been disallowed pursuant to paragraph (j) or paragraph (k)) has been allowed under paragraph (c)(ii) in any income year to the elector company and the petroleum mining company ceases to be a petroleum mining company before it has used, for the purposes of the specified development expenditure, an amount equal to the amount so allowed as a deduction, or, as the case may be, the aggregate of all such amounts so allowed as a deduction in every income year to every elector company, the Commissioner may, to the extent of an amount which is, or amounts which in the aggregate are, equal to the amount so not used, disallow in such proportions as the Commissioner considers fair and equitable, the whole or any part of any such deduction and, notwithstanding the time bar, at any time alter any assessment accordingly:
“(h)
Where a deduction (not being a deduction which has subsequently been disallowed under paragraph (j) or paragraph (k)) has been allowed under paragraph (c)(ii) in any income year to the elector company and the amount so allowed as a deduction or, as the case may be, the aggregate of all such amounts so allowed as a deduction in every income year to every elector company, exceeds the amount of the specified development expenditure incurred by the petroleum mining company, for the purposes of which an amount equal to that amount, or the aggregate of those amounts, so allowed as a deduction was to be used, the Commissioner may, to the extent of an amount which is, or amounts which in the aggregate are, equal to the amount of that excess, disallow in such proportions as the Commissioner considers fair and equitable, the whole or any part of any such deduction and, notwithstanding the time bar, at any time alter any assessment accordingly:”.
(6)
In section DZ 6(5)(i), the portion before subparagraph (i) is replaced by:
“(i)
Where a deduction has been allowed under paragraph (c)(ii) of any amount in respect of the amount appropriated by the elector company, no other deduction shall be allowed under any other provision of this Act to the elector company or any other company—”.
(7)
In section DZ 6(5)(j), the portion before subparagraph (iii) is replaced by:
“(j)
Where a deduction has been allowed, under paragraph (c)(ii) in any income year to the elector company, and the petroleum mining company has not, on or before the last day of the period of the 4 income years immediately succeeding the year of election (that last day being referred to in this subsection as the ‘development day’), commenced to incur, in the performing of the specified development work with expedition and in accordance with good oil-field and gas-field practice, the specified development expenditure,—
“(i)
No deduction shall be allowed under this subsection to the elector company in any income year ending after the development day:
“(ii)
The Commissioner shall disallow any deduction which has been allowed under that paragraph to the elector company in the year of election, and for this purpose the Commissioner may, notwithstanding the time bar, at any time make a revised assessment in respect of the year of election:”.
(8)
Section DZ 6(5)(1)(ii) is replaced by:
“(ii)
No deduction shall be allowed under this subsection to the elector company in any income year commencing after the last day of the 5th income year immediately succeeding the income year which ended on the development day:”.
(9)
Section DZ 6(9)(e) is replaced by:
“(e)
In any case where the amount of the expenditure incurred by that company in the restoration of that damaged asset exceeds the amount of that insurance payment made to it in respect of the loss which has occurred in relation to that damaged asset, the amount of that excess shall be allowed as a deduction to that company in the income year in which that excess arises and not in any other income year:”.
(10)
Section DZ 6(9)(j)(i) is replaced by:
“(i)
That damaged asset is transferred from the petroleum exploration operations, petroleum mining operations, or associated petroleum mining operations of that company and is used by that company wholly or principally for the purpose of deriving gross income other than gross income from petroleum mining; or”.
(11)
Section DZ 6(10)(c) is replaced by:
“(c)
An asset in which a petroleum mining company has such a share or interest is used for the purpose of deriving gross income other than gross income from petroleum mining,—”.
(12)
Section DZ 6(12)(a) is replaced by:
“(a)
Made under the proviso to section 214b(5) of the Income Tax Act 1976 by which a proportion of the loss arising from the deduction of the exploration expenditure incurred in any income year by a petroleum mining company was to be allowed as a deduction to a taxpayer, being a company that is a shareholder of that petroleum mining company, shall be irrevocable:”.
(13)
Section DZ 6(12)(d) is replaced by:
“(d)
Under section IH 2 by which a proportion of the loss arising from the deduction of an amount in respect of development expenditure incurred by a petroleum mining company is to be deducted, being a company that is a shareholder of that petroleum mining company, shall be irrevocable and shall be in writing and shall be given to the Commissioner within the time within which the taxpayer is required to furnish a return of its income for the income year in which that loss arises:”.
(14)
Section DZ 6(13)(h) is replaced by:
“(h)
Used by that company wholly or principally for the purpose of deriving its gross income, other than gross income from petroleum mining, derived in that income year; or”.
Amendments to Part E
144 Amounts credited in account or otherwise dealt with
(1)
Section EB 1(1) is replaced by:
“EB 1
“(1)
For the purposes of this Act an amount shall be deemed to have been derived by a person although it has not been actually paid to or received by the person, or already become due or receivable, but has been credited in account, or reinvested, or accumulated, or capitalised, or carried to any reserve, sinking, or insurance fund, or otherwise dealt with in the person’s interest or on the person’s behalf.”.
(2)
In section EB 1(3), the portion before paragraph (a) is replaced by:
“(3)
Notwithstanding anything in subsection (1), where a deduction is allowed to a company for an income year in respect of expenditure incurred by way of monetary remuneration paid or payable to a person who in relation to the company is a shareholder-employee, the shareholder-employee shall for the purposes of tins Act be deemed to have derived the monetary remuneration—”.
145 Allocation of gross income received in anticipation
Section EB 2 is replaced by:
“EB 2
“(1)
When gross income is derived by any person in any year by way of fines, premiums, or payment for goodwill on the grant of a lease, or in any other like manner by way of anticipation, the Commissioner may, at the request of that person during the next succeeding year, allocate that gross income between the income year and any number of subsequent years not exceeding 5, and the part so allocated to each of those years shall be deemed to have been derived in that year.
“(2)
Any such allocation may be at any time cancelled by the Commissioner, and where it is cancelled the gross income allocated to the year of cancellation and future income years shall be deemed to be derived during the year preceding that in which the allocation was so cancelled.”.
146 Capitalisation of mortgage interest
Section EB 3(1) and (2) are replaced by:
“EB 3
“(1)
Where at any time (but not earlier than 1 October 1936, being the date of the passing of the Mortgagors and Lessees Rehabilitation Act 1936) any interest payable under any mortgage of real or personal property has been capitalised (whether under that Act or otherwise), the Commissioner may determine the year or years in which it became payable, and the interest allocated to any year by any such determination of the Commissioner shall be deemed for the purposes of section EB 1 to have been derived in that year.
“(2)
Where it is proved to the satisfaction of the Commissioner that any interest that has been capitalised as mentioned in subsection (1) has become a bad debt and has in any income year been actually written off as a bad debt by the person by whom it is deemed to have been derived, the amount so written off shall be allowed as a deduction to that person in that income year:
Provided that all amounts at any time received on account of any such bad debt shall be gross income derived in the year in which they are received.”.
147 Interest from inflation-indexed instruments
Section EB 4(1) is replaced by:
“EB 4
“(1)
The purpose of this section is to deem the inflation-linked component of any inflation-indexed debt instrument to be credited to the account of the holder on an annual basis.”.
148 Adjustment for incorrect accounting practice in previous years
Section EC 1 is replaced by:
“EC 1
“(1)
This section applies if in respect of an income year (that income year being referred to in this section as the ‘year of adjustment’) the Commissioner is satisfied that the gross income or allowable deductions of a person in respect of a business for any income year or income years (that income year or those income years being referred to in this section as the ‘preceding period’) preceding the year of adjustment have been understated or overstated by reason of the whole or any part of that gross income or those allowable deductions having been calculated—
“(a)
By reference to cash receipts or outgoings and without taking into account amounts owing to or by the taxpayer at the beginning or end of any income year in the preceding period; or
“(b)
By taking into account provisions or reserves which are not allowed as deductions; or
“(c)
Without taking into account provisions or reserves which are allowed as deductions; or
“(d)
By including as gross income for an income year in the preceding period an incorrect proportion of any amount received by the taxpayer in respect of transactions not completed at the end of the income year.
“(2)
The Commissioner may, with respect to a taxpayer to whom this section applies and to a year of adjustment, deem the following amounts to be gross income derived by the taxpayer in that year—
“(a)
Where subsection (1)(a) applies, the total of the amounts owing to the taxpayer at the end of the preceding period; and
“(b)
The total amount of any provisions or reserves to which subsection (1)(b) refers; and
“(c)
The total of any amounts to which paragraph (d) refers that are in respect of transactions not completed at the end of the preceding period and that had not been included in annual gross income for any income year in the preceding period.
“(3)
The Commissioner may, with respect to a taxpayer to whom this section applies and to a year of adjustment, deem the following amounts to be allowable deductions incurred by the taxpayer in that year—
“(a)
Where subsection (1)(a) applies, the total of the amounts owed by the taxpayer at the end of the preceding period; and
“(b)
The total amount of any provisions or reserves to which subsection (1)(c) refers; and
“(c)
The total of any amounts to which subsection (1)(d) refers that are in respect of transactions not completed at the end of the preceding period and that had been incorrectly included in annual gross income for any income year in the preceding period.
“(4)
If the net effect of all adjustments made in accordance with subsections (2) and (3) (referred to in this subsection as the ‘net adjustment amount’) would, in the absence of this subsection, be to increase a taxpayer’s net income for a year of adjustment by more than $1,000, the Commissioner shall notify the taxpayer accordingly, and the taxpayer shall, if the taxpayer elects by notice in accordance with subsection (5) (which election shall be irrevocable), be entitled to reduce the amount of gross income allocated to the year of adjustment by an amount equal to the net adjustment amount, and—
“(a)
To allocate that gross income equally between the year of adjustment and any number of the immediately preceding income years not exceeding 3; or
“(b)
Where the taxpayer continues to carry on business, to allocate that gross income equally between the year of adjustment and any number of subsequent income years not exceeding 3:
Provided that any allocation of gross income made in accordance with paragraph (b) may be at any time cancelled by the Commissioner, and where it is cancelled the amount of gross income so allocated, to the extent to which it has not been allocated to any earlier income year, shall be allocated to the income year in which the allocation was cancelled.
“(5)
Every notice of election under subsection (4) shall be in writing, and shall be given to the Commissioner within one month after the Commissioner has given notice to the taxpayer in accordance with subsection (4), or within such further period as the Commissioner allows in any case or class of cases.”.
149 Year in which accident compensation levy and employer premium, etc., deductible
Section ED 1(1), (2) and (3) are replaced by:
“ED 1
“(1)
Any amount of accident compensation levy that becomes due from and payable by the taxpayer in an income year is deemed to be expenditure incurred by the taxpayer in that income year and in no other income year, and the deduction (if any) allowable in respect of the levy under section BD 2 shall be computed accordingly.
“(2)
Any amount of premium from employers or premium from other earners that becomes due from and payable by the taxpayer in an income year is deemed to be expenditure incurred by the taxpayer in that income year and in no other income year, and the deduction (if any) allowable in respect of the premium under section BD 2 shall be computed accordingly.
“(3)
Notwithstanding subsection (1) or subsection (2), where—
“(a)
Any amount of accident compensation levy or premium from employers or premium from other earners has been allowed as a deduction in any income year preceding the income year in which that amount became due and payable by the taxpayer; and
“(b)
By reason of the time bar or otherwise, the Commissioner cannot lawfully alter the assessment for that income year,—
that amount of levy or premium shall be deemed to be expenditure incurred by the taxpayer in the income year in which it was allowed as a deduction, and not in any other income year.”.
150 Year in which fringe benefit tax deductible
Section ED 2 is replaced by:
“ED 2
Any amount of fringe benefit tax that becomes due and payable by a taxpayer in respect of fringe benefits provided or granted in an income year is deemed to be expenditure incurred by the taxpayer in that income year and in no other income year, and the deduction (if any) allowable in respect of the fringe benefit tax under section BD 2 shall be computed accordingly.”.
151 Year in which specified superannuation contribution withholding tax deductible
Section ED 3 is replaced by:
“ED 3
Any amount of specified superannuation contribution withholding tax that becomes due and payable by a taxpayer in respect of specified superannuation contributions made by the taxpayer in an income year is deemed to be expenditure incurred by the taxpayer in that income year and in no other income year, and the deduction (if any) allowable in respect of that withholding tax under section BD 2 shall be computed accordingly.”.
152 Accounting for goods and services tax
Section ED 4(2) and (3) are replaced by:
“(2)
Subject to subsection (3), no deduction shall be allowed to a person for—
“(a)
Any amount of input tax charged, levied or calculated in relation to the supply of goods and services to that person;
“(b)
Any amount of goods and services tax payable by that person to the Commissioner.
“(3)
Notwithstanding anything in subsections (1) and (2),—
“(a)
A person shall be allowed a deduction for any amount of output tax charged in respect of a supply of goods and services deemed to be made by that person under section 21(1) or section 21(3) of the Goods and Services Tax Act 1985;
“(b)
A person’s gross income shall include any amount calculated in accordance with section 21(5) of the Goods and Services Tax Act 1985, in respect of the application of any goods and services, and allowed as a deduction under section 20(3)(e) of that Act:
Provided that this subsection shall only apply—
“(c)
To the extent that expenditure incurred by that person in the acquisition or production of those goods and services is allowed as a deduction to a person under this Act; or
“(d)
To the extent that a deduction by way of depreciation is allowed under section EG 1(1) in respect of those goods and services:
Provided further that this subsection shall not apply to any amount which relates to the application of any capital asset—
“(e)
For the principal purpose of making taxable supplies, where that asset was acquired or produced other than for the principal purpose of making taxable supplies; or
“(f)
Other than for the principal purpose of making taxable supplies, where that asset was acquired or produced for the principal purpose of making taxable supplies; or
“(g)
For a purpose other than the purpose of deriving gross income of that person.”.
153 Nature of interest under Part VII of Tax Administration Act 1994
Section ED 5 is replaced by:
“ED 5
Interest payable under Part VII of the Tax Administration Act 1994 is gross income for the purposes of this Act, except for the purposes of the accruals rules.”.
154 Treatment of interest under Part VII of Tax Administration Act 1994
(1)
In section ED 6(1), the portion before paragraph (a) is replaced by:
“ED 6
“(1)
Interest payable to the Commissioner by a taxpayer under Part VII of the Tax Administration Act 1994 in respect of a tax liability is expenditure incurred by the taxpayer—”.
(2)
In section ED 6(2), the portion before paragraph (a) is replaced by:
“(2)
Interest payable by the Commissioner to a taxpayer under Part VII of the Tax Administration Act 1994 after the assessment of a tax liability (if any) of the taxpayer is gross income of the taxpayer, derived—’.
155 Reassessments
(1)
Section ED 7(1) is replaced by:
“ED 7
“(1)
If the Commissioner reassesses a taxpayer’s liability,—
“(a)
Any interest payable by the taxpayer under Part VII of the Tax Administration Act 1994 in respect of the tax liability, as a result of the reassessment, is expenditure incurred in the income year immediately after the income year in which the Commissioner issues the notice of reassessment (referred to in this section as the ‘reassessment year’); and
“(b)
Any interest payable by the Commissioner under Part VII of the Tax Administration Act 1994 in respect of the tax liability, as a result of the reassessment, is gross income derived in the income year immediately after the reassessment year; and
“(c)
Any interest already paid by the taxpayer under Part VII of the Tax Administration Act 1994 in respect of the tax liability that is repayable to the taxpayer by the Commissioner as a result of the reassessment is gross income derived in the income year immediately after the reassessment year; and
“(d)
Any interest already paid by the Commissioner under Part VII of the Tax Administration Act 1994 in respect of the tax liability that is repayable to the Commissioner as a result of the reassessment is expenditure incurred in the income year immediately after the reassessment year; and
“(e)
Section ED 5 continues to apply to the amount of interest that, before the reassessment, was gross income, as if that amount were at all times the correct amount of interest calculated under Part VII of the Tax Administration Act 1994.”.
(2)
Section ED 7(3) is replaced by:
“(3)
Subsection (1)(a) and (d) shall not apply in relation to a taxpayer, if—
“(a)
The taxpayer’s executor or other representative so requests the Commissioner; and
“(b)
The interest or other payment is allowed as a deduction in the reassessment year; and
“(c)
The application of subsection (1)(a) or subsection (d) results in interest or another amount payable by a taxpayer being expenditure incurred within an income year; and
“(d)
The amount is allowed as a deduction; and
“(e)
The taxpayer dies, goes into liquidation, or otherwise ceases to exist before the income year immediately after the reassessment year.”.
156 Different income years
Section ED 8 is replaced by:
“ED 8
Sections ED 6 and ED 7 shall each apply even though the income tax liability giving rise to an obligation to pay interest, and the interest period for the interest payment, may fall in whole or in part in a different income year to the one in which the interest is incurred or derived under those sections.”.
157 Valuation of trading stock, including livestock
(1)
Section EE 1(1) is replaced by:
“EE 1
“(1)
Where any taxpayer owns or carries on any business, the value of the taxpayer’s trading stock at the beginning and at the end of every income year shall be taken into account in calculating the taxpayer’s net income or net loss for that year.”.
(2)
Section EE 1(5)(e)(ii) is replaced by:
“(ii)
Where the taxpayer and the group company have different balance dates, the Commissioner has, on the application of the taxpayer or the group company in such form as the Commissioner may allow, determined that this difference is necessary in order to avoid a material distortion of the net income calculated under this Act of either that would arise if they had income years or non-standard accounting years ending with the same balance date by causing gross income and allowable deductions for a single business cycle to be reported in different income years,—
the taxpayer may elect, by filing accordingly its return of income for the income year, to value the trading stock at the end of the income year in accordance with this section as if it and the group company were one company.”.
(3)
Section EE 1(9) is replaced by:
“(9)
An amount equal to the value of the trading stock of any taxpayer at the beginning of any income year shall be allowed as a deduction to the taxpayer for that income year.”.
158 Insurance receipts to be gross income
Section EE 2(2) is replaced by:
“(2)
The gross income of a taxpayer for any income year is deemed to include the amount of any insurance, indemnity, compensation or damages received in that income year by the taxpayer in respect of the loss or destruction of, or damage to, any asset in respect of which this section applies, if the cost of that asset has in any income year been allowed as a deduction to the taxpayer (other than by way of a deduction in respect of the depreciation of that asset).”.
159 Accrual expenditure
(1)
Section EF 1(1) and (2) are replaced by:
“EF 1
“(1)
Where any person has incurred any accrual expenditure—
“(a)
That expenditure is allowed as a deduction when it is incurred in accordance with this Act; and
“(b)
The unexpired portion of that expenditure at the end of an income year shall be included in the gross income of the person for that income year and shall be allowed as a deduction in the following income year.”.
(2)
Section EF 1(3)(d) is replaced by:
“(d)
Whether, in respect of that person or class of persons and the item or items of accrual expenditure, the difference between expenditure that is determined under this section (other than this subsection) and expenditure that would be allowed as a deduction if the discretion given to the Commissioner under this subsection were exercised, is not a material amount.”.
(3)
Section EF 1(5)(a) is replaced by:
“(a)
Where the expenditure relates to the purchase of goods, the amount of expenditure incurred on goods not used in deriving gross income:”.
160 Matching regime for cost of revenue account property
After section EF 1, the following is added:
“EF 2
“(1)
Subject to subsection (2), a taxpayer must allocate an allowable deduction in respect of the cost of any revenue account property to the later of—
“(a)
The income year in which the property is disposed of by the taxpayer; and
“(b)
The income year (or years) in which the gross income is derived by the taxpayer in respect of the disposition of the property.
“(2)
This section does not apply if—
“(a)
The property is trading stock of the taxpayer required to be taken into account under section EE 1; or
“(b)
The unexpired portion of an amount of accrual expenditure in relation to the property is included in the gross income of the taxpayer under section EF 1; or
“(c)
The property is a financial arrangement; or
“(d)
The property is a specified lease or a lease to which section EO 2 applies.
“(3)
If subsection (1)(b) applies and the gross income of the taxpayer in respect of the disposition of the property is derived in two or more income years, the taxpayer must allocate under subsection (1)(b) to each income year that proportion of the allowable deduction which the gross income derived in that income year represents as a proportion of the total gross income in respect of the disposition.
“(4)
If a taxpayer, when performing the allocation required by subsection (3), cannot identify the amount of total gross income in respect of the disposition of the property, the taxpayer must use in the allocation the amount of total gross income that the taxpayer reasonably expects to derive from the disposition.”.
161 Annual depreciation deduction
Section EG 1 is replaced by:
“EG 1
“(1)
Subject to this Act, a taxpayer is allowed a deduction in an income year for an amount on account of depreciation for any depreciable property owned by that taxpayer at any time during that income year.
“(2)
No depreciation deduction shall be allowed in respect of any property for the income year in which the property is sold or otherwise disposed of, except in the case of property that is—
“(a)
A building; or
“(b)
Schedule depreciable property.”.
162 Formula for calculating depreciation deduction
(1)
In section EG 2(1), the portion before paragraph (a) is replaced by:
“EG 2
“(1)
Subject to this Act and to subsection (2), the deduction allowed to a taxpayer for any income year on account of depreciation under section EG 1 for any depreciable property shall be the smallest of the following amounts:”.
(2)
Section EG 2(2)(a) is replaced by:
“(a)
The amount on account of depreciation allowed as a deduction under section EG 1 in that income year in respect of all such property within a pool shall be equal to the aggregate of all deductions calculated in accordance with section EG 11 in respect of that income year; and”.
163 Depreciation method
(1)
In section EG 3(1), the portion before paragraph (a) is replaced by:
“EG 3
“(1)
In calculating for any income year the deduction allowed on account of depreciation for any depreciable property other than fixed life intangible property, a taxpayer may elect to use—”.
(2)
Section EG 3(2) is replaced by:
“(2)
In calculating for any income year the deduction allowed on account of depreciation for any fixed life intangible property, a taxpayer shall use only the straight-line method.”.
(3)
Section EG 3(6) is replaced by:
“(6)
Where a taxpayer elects for any income year to change the method of calculating the deduction allowed on account of depreciation in relation to any item of depreciable property from the diminishing value method to the straight-line method, the adjusted tax value of the property at the end of that income year (before any deduction for depreciation in that income year has been made) shall be treated as the cost of the property for the purposes of calculating the deduction in accordance with the straight-line method.”.
164 Special and provisional economic rates
Section EG 10(11)(b) is replaced by:
“(b)
In all the circumstances, it can reasonably be concluded that the taxpayer purported to change from the special economic rate to the general economic rate or the provisional economic rate for the purpose, or for purposes including the purpose, of enabling the taxpayer to defer the deduction allowed for the decline in value of that depreciable property which occurred in that subsequent income year.”.
165 Pool method of depreciation
(1)
In section EG 11(1), the portion before the formula is replaced by:
“EG 11
“(1)
The deduction allowed to a taxpayer for any income year on account of depreciation in respect of any pool of depreciable property shall be calculated in accordance with the following formula.”.
(2)
Section EG 11(2) is replaced by:
“(2)
Any deduction allowed to a taxpayer for any income year on account of depreciation in respect of a pool shall be subtracted from the adjusted tax value of the pool as at the last day of that income year.”.
(3)
Section EG 11(4)(c)(i) is replaced by:
“(i)
An amount equal to the adjusted tax value of that pool shall be allowed as a deduction to the taxpayer in that income year; and”.
166 Depreciation of depreciable property that can no longer be used
(1)
Section EG 12(1) and (2) are replaced by:
“EG 12
“(1)
The deduction allowed to a taxpayer for any income year on account of depreciation in respect of any depreciable property that can no longer be used (other than a building or property that has been depreciated using the pool depreciation method) shall be, if the Commissioner so determines, an amount equal to the adjusted tax value of that property.
“(2)
The deduction allowed under subsection (1) shall be an amount equal to the adjusted tax value of the property at the beginning of that income year.”.
(2)
In section EG 12(3), the portion before paragraph (a) is replaced by:
“(3)
Where a deduction is allowed under subsection (1) in respect of any depreciable property,—”.
167 Additional depreciation in respect of certain new assets acquired or improvements made between 16 December 1991 and 1 April 1994
(1)
Section EG 15(3)(a) is replaced by:
“(a)
A deduction shall be allowed to the transferee company under subsection (1) in respect of any period occurring after the time of the sale or other disposal of the asset to the transferee company as if the transferee company were the same taxpayer as the transferor company; but”.
(2)
Section EG 15(4) is replaced by:
“(4)
Where any person—
“(a)
Has derived only exempt income under this Act, but in any income year commences to derive gross income under this Act; and
“(b)
Would, but for having derived only exempt income at the time the person acquired an asset or made an improvement to an asset, be allowed a deduction under subsection (1) in respect of that asset and any income year in which the person is taxable,—
that person shall be treated for the purposes of the definitions of the terms ‘qualifying asset’, ‘qualifying improvement’, ‘new asset’ and ‘New Zealand-new asset’ in section OB 1, and of the term ‘qualifying capital value’ in subsection (5) of this section, as having been a taxpayer at the time the person acquired the asset or made the improvement, and the qualifying capital value of any asset owned by the person shall be determined as if the person had been allowed any deduction by way of depreciation under this Act in respect of any income year or period during which the person derived only exempt income.”.
168 Low value asset write-off
Section EG 16(1) is replaced by:
“EG 16
“(1)
The cost of any low value property that is—
“(a)
Acquired or created by the taxpayer in an income year for the purpose of deriving gross income, or of carrying on a business for the purpose of deriving gross income; and
“(b)
Primarily and principally used or available for use in that income year for such purpose,—
shall be allowed as a deduction to the taxpayer in that income year.”.
169 Supplementary depreciation allowance for plant and machinery used in 2 and 3 shift industries
(1)
Section EG 18(3) is replaced by:
“(3)
Where the Commissioner is satisfied that any taxpayer engaged in any business in New Zealand has incurred expenditure of a capital nature in acquiring or installing or extending any plant and machinery to be used as 2 shift plant and machinery or 3 shift plant and machinery wholly for the purposes of any business carried on in New Zealand, the Commissioner may, subject to this section and section EG 19, allow a deduction in accordance with this section by way of supplementary depreciation in respect of that plant and machinery.”.
(2)
Section EG 18(4)(b) is replaced by:
“(b)
Be in addition to any deduction allowed by way of depreciation in respect of that plant and machinery under section EG 1.”.
170 Disposition of depreciable property
(1)
Section EG 19(3) and (4) are replaced by:
“(3)
Subject to subsection (4), where in any income year any depreciable property (other than a building) is disposed of by a taxpayer for a consideration that is less than its adjusted tax value at the time of disposition, the amount by which the adjusted tax value of the property as at the date of disposition exceeds the consideration derived by the taxpayer from the disposition shall be allowed as a deduction to the taxpayer in the income year in which the sale or disposition occurs.
“(4)
Where any property of a taxpayer—
“(a)
Was, at any time during the time it was owned by that taxpayer, subject to paragraph (d) or paragraph (e) of section EG 2(1) of this Act, or to paragraph (d) or paragraph (e) of section 108a(1) of the Income Tax Act 1976; or
“(b)
Was, in the 1992–93 income year or any earlier income year, property on which the deduction on account of depreciation allowed to the taxpayer by the Commissioner under section 108 of the Income Tax Act 1976 (as that section was then in force) was less than the deduction that the Commissioner would have allowed the taxpayer if the taxpayer had used the property wholly in deriving gross income or in carrying on a business for the purpose of deriving gross income on account of the property not being wholly so used,—
the amount of any—
“(c)
Gross income derived under subsection (2) where the property is disposed of for a consideration that is less than or equal to the cost of the property to the taxpayer; or
“(d)
Deduction allowed under subsection (3),—
shall be calculated in accordance with the following formula:
_eqn03.JPG)
“where—
“a
is the total of all deductions actually taken in each of the income years in which the taxpayer owned the property in accordance with section EG 1 of this Act or section 108 of the Income Tax Act 1976; and
“b
is the cost of the property to that taxpayer; and
“c
is the adjusted tax value of the property on the day on which the property is disposed of; and
“d
is the amount calculated in accordance with subsection (2)(b) or the allowable deduction calculated in accordance with subsection (3).”.
(2)
Section EG 19(6) is replaced by:
“(6)
Where the adjusted tax value of any depreciable property of a taxpayer becomes negative in any income year as a consequence of the application of subsection (5), an amount equal to that negative amount shall be gross income derived by the taxpayer in that income year.”.
(3)
After section EG 19(10), the following is added:
“(11)
The amount of gross income derived by a life insurer by virtue of the application of subsection (4) on sale or other disposal of an asset shall be calculated on the basis that the value to which that asset has or would have been reduced by the deductions allowed in respect of the depreciation of that asset, shall be equal to the cost price or acquisition value of that asset less all such deductions.”.
171 Accruals in relation to gross income and expenditure in respect of financial arrangements
(1)
Section EH 1(2) and (3) are replaced by:
“(2)
Subject to this section, where any person is a holder or an issuer of a financial arrangement the amount that shall be deemed to be gross income or expenditure of that person in respect of the financial arrangement in any income year shall be an amount calculated using the yield to maturity method so as to result in the allocation to each income year of an amount that is fair and reasonable, and such amount so allocated to each income year shall be gross income deemed to be derived by or expenditure deemed to be incurred by the person in respect of the financial arrangement in the income year:
Provided that the Commissioner shall accept an alternative method to the yield to maturity method, that has regard to the principles of accrual accounting, and—
“(a)
Conforms with commercially acceptable practice; and
“(b)
Except to the extent that the Commissioner may otherwise allow under subsection (7), is adopted by the person and is or will be consistently applied in respect of all such financial arrangements for financial reporting purposes; and
“(c)
Results in the allocation to each income year of amounts that are not materially different from amounts that would be calculated but for this proviso.
“(3)
Notwithstanding subsection (2), but subject to the other provisions of this section, where in any income year the total value of all financial arrangements of which a person is a holder or an issuer has on no day within that income year exceeded $1,000,000 or such greater amount as the Governor-General may by Order in Council declare for the purposes of this section,—
“(a)
The person may calculate gross income or expenditure for that income year in respect of those financial arrangements by using the straight-line method so as to result in the allocation to that income year and subsequent years of amounts that are fair and reasonable in respect of those arrangements; and
“(b)
Where the straight-line method is used under paragraph (a), that method shall be used by the person in respect of all financial arrangements of which the person was the holder or issuer during that income year; and
“(c)
Where the person has in accordance with this subsection calculated gross income or expenditure using the straight-line method in respect of a financial arrangement for any income year, the person shall, unless otherwise authorised in writing by the Commissioner, continue to use that method in respect of that financial arrangement for any subsequent year, until the maturity, remittance, sale, or other transfer of the arrangement, notwithstanding that the total value of all financial arrangements of which the person is holder or issuer may at any time in any such subsequent year exceed $1,000,000 or such other amount as may be declared for the purposes of this section,—
and any amount calculated in respect of a financial arrangement in accordance with this subsection shall be gross income deemed to be derived by or expenditure deemed to be incurred by the person in respect of the financial arrangement for the relevant income year.”.
(2)
Section EH 1(4)(b) is replaced by:
“(b)
In the first income year for which gross income or expenditure is calculated under subsection (3) in respect of a financial arrangement that—
“(i)
Was acquired or issued by the person in a previous income year; and
“(ii)
Continues to be held or issued by the person at the end of the first income year for which gross income or expenditure is calculated under subsection (3),—
the amount of gross income or expenditure of the person in respect of that financial arrangement for that first income year shall be an amount calculated in accordance with the following formula:
“a – b – c + d
“where—
“a
is the sum of all amounts that would have been gross income derived by the person in respect of the financial arrangement if the straight-line method referred to in subsection (3) had been applied to the financial arrangement from the date it was acquired or issued by the person until the end of that first income year; and
“b
is the sum of all amounts that would have been expenditure incurred by the person in respect of the financial arrangement if the straight-line method referred to in subsection (3) had been applied to the financial arrangement from the date it was acquired or issued by the person until the end of that first income year; and
“c
is the sum of all amounts of gross income deemed to have been derived by the person in respect of the financial arrangement before the commencement of that first income year; and
“d
is the sum of all amounts deemed to have been expenditure incurred by the person in respect of the financial arrangement before the commencement of that first income year,—
and any amount so calculated shall, if a positive amount, be deemed to be gross income derived by the person in that first income year and, if a negative amount, be deemed to be expenditure incurred by the person in that first income year.”.
(3)
In section EH 1(5), the portion before paragraph (a) is replaced by:
“(5)
Where it is not possible to calculate an amount that shall be deemed to be gross income or expenditure in respect of a financial arrangement using the yield to maturity method as provided for in subsection (2) or (in a case to which subsection 3) applies) the straight-line method as provided for in subsection (3), the amount that shall be deemed to be gross income or expenditure of the person in any income year shall be an amount calculated by the person—’.
(4)
In section EH 1(5), the portion after paragraph (b) is replaced by:
“and such amount of gross income or expenditure so allocated to each income year shall be gross income deemed to be derived or, as the case may be, expenditure deemed to be incurred by the person in the income year.”.
(5)
In section EH 1(6), the portion before paragraph (a) is replaced by:
“(6)
Notwithstanding subsections (2) and (5), the Commissioner shall accept an alternative method for calculating the amount that shall be deemed to be gross income or expenditure of the person, in respect of a financial arrangement, to the methods provided for under subsections (2) and (5), if the alternative method has regard to market valuation, and—”.
(6)
In section EH 1(6), the portion after paragraph (e) is replaced by:
“and such amount of gross income or expenditure so calculated shall be gross income deemed to be derived or, as the case may be, expenditure deemed to be incurred by the person in respect of the financial arrangement in the income year:
Provided that where gross income or expenditure in respect of a financial arrangement has been calculated by a person under this subsection, gross income or expenditure in respect of that financial arrangement shall, except as otherwise allowed under subsection (7), continue to be calculated on that basis by that person until the maturity, remittance, sale or other transfer of the arrangement.”.
(7)
Section EH 1(9)(c) is replaced by:
“(c)
Whether, in respect of that issuer or class of issuers and that class of financial arrangements, the application of the discretion given to the Commissioner under this subsection would result in a material difference in the amount of allowable deductions or gross income allocated to any income year, in relation to the amount that would have been allocated had the discretion not been exercised.”.
172 Excepted financial arrangement that is part of financial arrangement
Section EH 2 is replaced by:
“EH 2
The amount of the gross income deemed to be derived or the expenditure deemed to be incurred by a person in respect of a financial arrangement under the qualified accruals rules shall not include the amount of any income, gain or loss, or expenditure, that is solely attributable to an excepted financial arrangement that is part of the financial arrangement.”.
173 Cash basis holder
(1)
Section EH 3(1)(b) is replaced by:
“(b)
The difference between the following amounts does not exceed $20,000 (or such greater amount as the Governor-General may by Order in Council declare):
“(i)
The amount of gross income that would be calculated by the person for the income year—
“(A)
Using, at the option of the person, either the yield to maturity method or the straight-line method referred to in section EH 1(3) (regardless of whether or not the person is entitled or has opted to use that method) or, where it is not possible to calculate an amount of gross income or expenditure in respect of the financial arrangements by using either of those methods, an alternative method approved by the Commissioner; and
“(B)
Under section EH 4,—
in respect of financial arrangements held by the person at the end of the income year:
“(ii)
The amount of gross income that would be calculated by the person for the income year in respect of financial arrangements held by the person at the end of the income year if the person were a cash basis holder.”.
(2)
Section EH 3(3), (4), (5) and (6) are replaced by:
“(3)
In any income year where a person who was a cash basis holder in the previous income year ceases to be a cash basis holder, the person shall take into account, in calculating gross income or allowable deductions for the income year, an accruals basis adjustment, in respect of every financial arrangement (other than arrangements that are already dealt with according to section EH 1 or in respect of which the Commissioner has exercised the discretion given under subsection (2)(a)) acquired in a previous income year and held by the person at the end of the income year equal to an amount calculated in accordance with the following formula:
“a − b − c + d
“where—
“a
is the sum of all amounts which would have been gross income derived by the person in respect of the financial arrangement from the date it was acquired to the end of the income year if the person had not been a cash basis holder at any time during that period; and
“b
is the sum of all amounts that would have been allowable deductions of the person in respect of the financial arrangement from the date the financial arrangement was acquired to the end of the income year if the person had not been a cash basis holder at any time during the period; and
“c
is the sum of all amounts of gross income of the person in respect of the financial arrangement since it was acquired to the end of the previous income year; and
“d
is the sum of all amounts that have been allowable deductions of the person in respect of the financial arrangement since it was acquired to the end of the previous income year,—
and the person shall not take into account in the income year any other amount in respect of any such financial arrangement except those calculated under the accruals basis adjustment.
“(4)
In any income year where a person who was not a cash basis holder in the previous income year becomes a cash basis holder, that person may take into account, in calculating gross income or allowable deductions for the income year, a cash basis adjustment, in respect of every financial arrangement (other than arrangements already treated on a cash basis) acquired in a previous income year and held by the person at the end of the income year, equal to an amount calculated in accordance with the following formula:
“a − b − c + d
“where—
“a
is the sum of all amounts which would have been gross income derived by the person in respect of the financial arrangement from the date it was acquired to the end of the income year if the person had been a cash basis holder in respect of the financial arrangement for the whole of that period;
“b
is the sum of all amounts which would have been allowable deductions of the person in respect of the financial arrangement from the date the financial arrangement was acquired to the end of the income year if the person had been a cash basis holder in respect of the financial arrangement for the whole of the period;
“c
is the sum of all amounts treated as gross income of the person in respect of the financial arrangement since it was acquired to the end of the previous income year; and
“d
is the sum of all amounts that have been allowable deductions of the person in respect of the financial arrangement since it was acquired to the end of the previous income year,—
and, where the cash basis adjustment has been taken into account, the person shall not take into account any other amount in respect of any such financial arrangement in the year except those calculated under the cash basis adjustment:
Provided that the person shall be deemed not to be a cash basis holder in relation to any financial arrangement in respect of which the person does not take into account a cash basis adjustment.
“(5)
The amount of the accruals basis adjustment or the cash basis adjustment in respect of any financial arrangement and any income year shall,—
“(a)
Where it is a positive amount, be gross income deemed to be derived by the holder in the income year; and
“(b)
Where it is a negative amount, be deemed to be an allowable deduction of the holder in the income year.
“(6)
For the purposes of subsection (1), but subject to subsections (7) and (8),—
“(a)
All gross income in respect of financial arrangements that is trustee income or beneficiary income under the trust rules and sections HI 1 to HI 5 shall be disregarded, as shall the value of all such financial arrangements producing such gross income; and
“(b)
No person who holds such financial arrangements shall be a cash basis holder in relation to such financial arrangements.”.
174 Gross income and expenditure where financial arrangement redeemed or disposed of
(1)
In section EH 4(1), the definition of quantity “c”
is replaced by:
“c
is—
“(i)
In the case of a holder, all amounts that are gross income derived, less the aggregate of amounts of expenditure deemed to be incurred under section EH 1 or section EH 6 or deemed to be an allowable deduction under section EH 3 by the person in respect of the financial arrangement in all previous income years since the acquisition of the financial arrangement; and
“(ii)
In the case of an issuer, all amounts of expenditure incurred in respect of the financial arrangement in all previous income years since the issue of the financial arrangement, less the aggregate of—
“(A)
All amounts that are gross income deemed to be derived under section EH 1 or section EH 3 or section EH 6 by the person in respect of the financial arrangement in all previous income years since the issue of the financial arrangement; and
“(B)
All amounts that are dividends within the meaning of section CF 2(1)(b) or (being dividends which, if the transaction giving rise to the dividend had been effected with a shareholder of the relevant company, would have been dividends within the meaning of section CF 2(1)(b)) within the meaning of section CF 2(1)(k), that are derived by the person in respect of the financial arrangement; and
“(C)
All amounts that are gross income of the person under section DC 2(1) in respect of the financial arrangement.”.
(2)
Section EH 4(3) and (4) are replaced by:
“(3)
Subject to subsection (5), the amount of the base price adjustment in relation to any financial arrangement and any income year shall:
“(a)
In relation to a holder—
“(i)
Where it is a positive amount, be deemed to be gross income derived by the holder in the income year; and
“(ii)
Where it is a negative amount, be deemed to be an allowable deduction of the holder in the income year:
“(b)
In relation to an issuer—
“(i)
Where it is a positive amount, be deemed to be expenditure incurred by the issuer in the income year; and
“(ii)
Where it is a negative amount, be deemed to be gross income derived by the issuer in the income year.
“(4)
Subject to subsection (5), the amount of the cash base price adjustment in relation to any financial arrangement and any income year shall—
“(a)
Where it is a positive amount, be deemed to be gross income derived by the cash basis holder in the income year; and
“(b)
Where it is a negative amount, be deemed to be an allowable deduction of the cash basis holder in the income year.”.
(3)
In section EH 4(7), the portion after paragraph (a) is replaced by:
“(b)
That amount would, but for this subsection, be taken into account in determining the gross income derived by or expenditure incurred by that person under the qualified accruals rules,—
that amount shall, for the purpose of determining the gross income derived by or expenditure incurred by that person, and notwithstanding the qualified accruals rules (other than this subsection), be deemed to have been paid under that financial arrangement when the obligation to make payment has been so released.”.
175 Accrued income written off
Section EH 5 is replaced by:
“EH 5
“(1)
A deduction shall be allowed to a person for an amount written off by the person as a bad debt in respect of a financial arrangement where and to the extent that:
“(a)
The person derives gross income in respect of the financial arrangement under any of sections EH 1, EH 3(3), EH 4 and EH 6; and
“(b)
The amount written off is attributable to that gross income.
“(2)
A deduction shall be allowed to a person for an amount written off by the person as a bad debt in respect of a financial arrangement (not being an amount allowed as a deduction under subsection (1)) where—
“(a)
The person—
“(i)
Carries on a business which comprises holding or dealing in such financial arrangements; and
“(ii)
Is not associated with the person owing the amount written off; or
“(b)
The financial arrangement is a trade credit and the person carries on a business of dealing in the goods or services for which the trade credit is a debt.
“(3)
Where a person receives a security payment in relation to a loss and a deduction is not allowable to the person for the loss other than under this subsection, the person shall be allowed a deduction for the loss no greater than the amount of the security payment.
“(4)
A deduction for bad debts shall be allowed under this section only where the requirements of section DJ 1(a)(iii) and (iv) have been met.
“(5)
A deduction for a share loss (within the meaning of section DJ 1(b)) shall be allowed under subsection (3) of this section only where the requirements of section DJ 1(b) have been met.”.
176 Post facto adjustment
(1)
Section EH 6(3) is replaced by:
“(3)
In order to calculate the post facto adjustment, a person shall—
“(a)
Having regard to all amounts specified in section EH 1(1) which have been paid or are payable, in respect of the financial arrangement, since acquisition or issue of the financial arrangement by the person to the end of the income year in which the post facto adjustment applies, calculate amounts of gross income or expenditure from the arrangement for each income year using the yield to maturity method as prescribed in a determination made by the Commissioner for the purposes of section EH 1(2):
Provided that where the post facto adjustment is made at a time determined by subsection (2)(b) or subsection (2)(c), the person shall, for the purpose of the post facto adjustment calculation, be deemed to have transferred the financial arrangement for an amount equal to its market value on the last day of the income year or, where there is no such market value, for such amount as the Commissioner determines; and
“(b)
Recalculate the income tax liability for each income year using the amounts of gross income or expenditure calculated under paragraph (a) in substitution for the amounts of gross income or expenditure previously calculated in respect of the financial arrangement for each income year.”.
(2)
Section EH 6(5) is replaced by:
“(5)
Notwithstanding the time bar, the Commissioner shall reassess the person’s income tax liability for the income years to which the post facto adjustment relates in accordance with the alterations to that gross income or expenditure as calculated by the post facto adjustment.”.
177 Relationship with rest of Act
Section EH 8 is replaced by:
“EH 8
“(1)
Notwithstanding any other provision in this Act, gross income or expenditure in an income year in respect of a financial arrangement under the qualified accruals rules shall be calculated under those rules.
“(2)
Where—
“(a)
Property is transferred under a financial arrangement, and
“(b)
The property or the consideration given for the property is relevant under any provision of this Act other than the qualified accruals rules for the purpose of determining any amount of gross income or allowable deduction of a person,—
the property shall be treated for the purpose of that provision as having been transferred under the financial arrangement for an amount equal to the acquisition price of the property.”.
178 Application of accruals rules
Section EH 9(f) is replaced by:
“(f)
In relation to a financial arrangement to the extent that the gross income or expenditure incurred by a person in respect of the financial arrangement consists of interest payable to or by the Commissioner under Part VII of the Tax Administration Act 1994, being interest payable in relation to the income tax liability of the taxpayer in respect of the 1994–95 income year or any subsequent year.”.
179 Deposits to be allowed as deduction
Section EI 3 is replaced by:
“EI 3
Where any taxpayer makes any payments by way of deposits under section EI 1 in respect of any accounting year in respect of the taxpayer’s farming, agriculture, or fishing business or in respect of the taxpayer’s gross income from forestry, the Commissioner shall allow as a deduction in that year the aggregate amount of those payments or the amount of the taxpayer’s maximum deposit in respect of that accounting year, whichever amount is the smaller.”.
180 General provisions as to refunds
(1)
Section EI 10(3)(a) is replaced by:
“(a)
Gross income derived by any taxpayer in any accounting year includes any qualifying refunds made under sections EI 4 to EI 9 (not being refunds or parts of refunds that are, in accordance with subsection (1), attributable to deposits or parts of deposits made in respect of that accounting year); and”.
(2)
Section EI 10(4)(a) and (b) are replaced by:
“(a)
The term ‘additional tax’, in respect of the aggregate amount of qualifying refunds made to any taxpayer under sections EI 4 to EI 9 in respect of any accounting year and included in the gross income derived by the taxpayer in that accounting year (not being refunds or parts of refunds that are, in accordance with subsection (1), attributable to deposits or parts of deposits made in respect of that accounting year), means the amount by which the income tax liability of the taxpayer is greater than the income tax liability that would have arisen but for the inclusion of that aggregate amount of those qualifying refunds;
“(b)
The term ‘tax saving’, in respect of the aggregate amount of deposits made by any taxpayer under section EI 1 in respect of any accounting year (not being deposits or parts of deposits to which any refunds or parts of refunds made in respect of that accounting year are attributable in accordance with subsection (1)), being an aggregate amount in respect of which a deduction has been allowed under section EI 3, means the amount by which the income tax liability of the taxpayer for that accounting year is less than the income tax liability that would have arisen but for the allowance of that deduction in respect of that aggregate amount of deposits;”.
(3)
Section EI 10(5)(b) is replaced by:
“(b)
The amount by which the taxpayer’s taxable income was reduced in a previous accounting year by the amount of the deposits to which those refunds are applicable in accordance with subsection (1).”.
181 Deposits to be allowed as deduction
Section EI 13 is replaced by:
“EI 13
Where a taxpayer makes any payments by way of deposits under section EI 11 for any accounting year in respect of the taxpayer’s farming or agricultural business, the Commissioner shall allow as a deduction the aggregate amount of those payments or the amount of the taxpayer’s maximum deposit in respect of that accounting year, whichever is the smaller.”.
182 Deposits by forestry companies in respect of gross receipts from thinning operations
In section EI 17(4), the first definition is replaced by:
“‘Gross receipts from carrying out thinning operations’, in relation to an accounting year and to a company carrying on a forestry business on any land in New Zealand, means the gross income that was derived by the company during that accounting year from carrying out thinning operations on the land.”.
183 Spreading of gross income derived and allowable deductions incurred in sale or other disposition of timber
Section EJ 1 is replaced by:
“EJ 1
“(1)
Where a taxpayer derives gross income in any income year under section CE 2 or section CJ 1 from the sale or other disposition of any timber or right to take timber, the Commissioner may, upon application made in writing by or on behalf of the taxpayer not later than 12 months after the end of that income year, allocate that gross income between that income year and any number of preceding income years, not exceeding 3.
“(2)
If gross income of a taxpayer is allocated to 2 or more income years under subsection (1), the taxpayer must also allocate to each relevant income year the proportion of any deduction allowed for the cost of the timber that the gross income allocated to that income year represents as a proportion of the total gross income.”.
184 Compensation in connection with outbreak of scrapie
In section EJ 2, the portion before paragraph (a) is replaced by:
“EJ 2
For the purpose of calculating the income tax liability of any person to whom compensation is payable under paragraph (a) or paragraph (b) of section 43(1) of the Animals Act 1967—”.
185 Apportionment of expenditure incurred in purchase of fertiliser and lime and application to land used for farming or agricultural purposes
(1)
Section EK 1(1) is replaced by:
“EK 1
“(1)
Any taxpayer engaged in any farming or agricultural business on any land in New Zealand who has in any income year incurred in that business any expenditure (being expenditure that is allowed as a deduction under this Act) in purchasing or in applying to the whole or any part of that land fertiliser within the meaning of the Fertilisers Act 1960 or lime shall, if the taxpayer so elects by notice in accordance with subsection (2) (which election shall, subject to subsection (3), be irrevocable), instead of claiming a deduction for the income year in which the expenditure is incurred of the total amount of that expenditure, be entitled to allocate, in such manner as the taxpayer specifies in the notice, the whole or any part of that total amount to any one or more of the 4 income years (being a year or years in which the taxpayer continues to carry on that business) next succeeding the income year in which the expenditure is incurred and to deduct the amount so allocated to any such income year in that income year; and any amount so allocated shall not be allowed as a deduction in the income year in which the expenditure is incurred.”.
(2)
In section EK 1(2), the proviso is replaced by:
“Provided that where any part of the total amount of the expenditure is not claimed as a deduction for the year in which the expenditure is incurred and is not allocated to any one or more of the 3 immediately succeeding years by an election under that subsection, that part shall be allowed as a deduction in the 4th income year following the year in which the expenditure was incurred.”.
(3)
Section EK 1(3)(a) and (b) are replaced by:
“(a)
Be allowed as a deduction in the income year in which the taxpayer ceased to carry on that business; or
“(b)
Be allocated equally to the income year in which that total amount was incurred and the succeeding income years in which the taxpayer has continued to carry on that business, and any amount or additional amount so allocated to any such year shall be allowed as a deduction, or a further deduction, in that last-mentioned year.”.
186 Valuation of livestock generally
(1)
Section EL 1(2)(b) is replaced by:
“(b)
More than 50% of the property of the new partnership is, at the end of that income year, owned by any persons who at any time in that income year or in the income year immediately preceding that income year owned all of the property of any other partnership that derived gross income in that income year or in that immediately preceding income year, from specified livestock of the same type as specified livestock owned by the new partnership; and”.
(2)
Section EL 1(3) and (4) are replaced by:
“(3)
Notwithstanding anything in this section and in section EE 1, the executor or administrator of any deceased taxpayer who at the date of death was deriving gross income from livestock shall, in the return of income for the period ending with the date of death of the deceased taxpayer, adopt as the value of any livestock on hand at that date the market value of that livestock.
“(4)
In any case where a deceased taxpayer was at the date of death a member of a partnership deriving gross income from livestock, and the executor or administrator of that deceased taxpayer carries on the business in partnership with the surviving partner or partners, subsection (3) shall, with any necessary modifications, apply for the purpose of determining the gross income derived, or expenditure incurred, from the partnership by the deceased taxpayer or by the executor or administrator of the deceased taxpayer.”.
187 Herd scheme for specified livestock
Section EL 5(6)(a) is replaced by:
“(a)
A taxpayer ceases to derive gross income from specified livestock or dies in any income year; and”.
188 Valuation of non-specified livestock
Section EL 9(4) is replaced by:
“(4)
In this section, ‘new or expanded production’, in relation to any taxpayer and any income year, means, subject to section FF 10(1) and (2), the situation where—
“(a)
The taxpayer commences or recommences during that income year to derive gross income from non-specified livestock; or
“(b)
The taxpayer, being a person who in the income year derives gross income from non-specified livestock,—
“(i)
Brings into production or substantially increased production any land for the purpose of deriving gross income from non-specified livestock; or
“(ii)
Acquires any additional land for that purpose.”.
189 Replacement breeding stock
(1)
Section EM 3(1) is replaced by:
“EM 3
“(1)
Where any breeding stock of any taxpayer is sold or otherwise disposed of by the taxpayer in any income year, the Commissioner, upon application made in writing by or on behalf of the taxpayer not later than 6 months after the end of that income year, or within such further period as the Commissioner may allow in any case or class of cases, may permit an amount which would otherwise be included in the gross income derived by the taxpayer, or such portion of the amount as the Commissioner thinks fit, to be applied in reduction of the cost of any bloodstock which the Commissioner is satisfied has, before the making of the application, been acquired by the taxpayer to replace that breeding stock:
Provided that the maximum amount that the Commissioner may allow as a reduction of the cost of any bloodstock is the net gain.”.
(2)
Section EM 3(2)(a) is replaced by:
“(a)
May, upon application made in writing by or on behalf of the taxpayer not later than 6 months after the end of that income year, or within such further period as the Commissioner may allow in any case or class of cases, permit an amount which would otherwise be included in the gross income derived by the taxpayer, or such portion of the amount as the Commissioner thinks fit, to be applied in reduction of the cost of any bloodstock which the Commissioner is satisfied has, before the making of the application, been acquired by the taxpayer to replace that breeding stock:
Provided that the maximum amount that the Commissioner may allow as a reduction of the cost of any bloodstock is the net gain.”.
(3)
In section EM 3(2)(b), the portion after subparagraph (ii) is replaced by:
“upon application made in writing by or on behalf of the taxpayer, within the time prescribed in subparagraph (ii) or within such further time as the Commissioner may allow in any case or class of cases, refund an amount equal to the income tax liability of the taxpayer calculated as if the only gross income of the taxpayer were the gross proceeds and the only deductions allowed were the value of the breeding stock and the net gain shall be applied in reduction of the cost of the replacement bloodstock.”.
(4)
In section EM 3(3), the definition of “assessable gain”
is repealed.
(5)
In section EM 3(3), the following definitions are inserted after the definition of “breeding stock”
:
“‘Gross proceeds’ means the amount of the proceeds of sale or other disposition of any breeding stock or the amount of any payment by way of insurance, indemnity, compensation, or other damages in respect of any breeding stock:
“‘Net gain’ means an amount equal to the gross proceeds less the value of breeding stock:
“‘Value of breeding stock’ means the amount of the value of breeding stock to be taken into account by the taxpayer, in accordance with section EE 1(3), at the end of the income year immediately preceding the income year in which that breeding stock was sold or otherwise disposed of or, as the case may be, that breeding stock was lost, died, or otherwise suffered permanent injury.”.
190 Payments received for non-compliance with covenant to repair
Section EN 1(6) is replaced by:
“(6)
In any case where, in the income year in which the specified payment was received or any of the 4 income years immediately succeeding that income year, the taxpayer,—
“(a)
Does not use the land in respect of which the specified payment was received for the purposes of deriving gross income;
“(b)
Continues to own that land; and
“(c)
Incurs expenditure in maintaining that land or in making repairs (including repairs by way of painting or general maintenance) to any improvements on that land, being expenditure which is not allowed as a deduction otherwise than under this section but in respect of which the taxpayer would be allowed a deduction in that income year if the land had been used for the purpose of deriving gross income,—
the Commissioner shall, in that income year, allow a deduction to the taxpayer equal to the smaller of—
“(d)
The amount of that expenditure; and
“(e)
The amount of the specified payment that is deemed to be gross income derived by the taxpayer in that income year.”.
191 Sums received from sale of patent rights
Section EN 2(1), (2) and (3) are replaced by:
“EN 2
“(1)
Where any taxpayer sells any patent rights, any sum received by or owing to the taxpayer in respect of the sale shall be deemed to be gross income and shall be deemed to be derived by the taxpayer during the income year in which the sum is received by or becomes owing to the taxpayer:
Provided that the Commissioner may, upon application made in writing by or on behalf of the taxpayer not later than 12 months after the end of that income year or within such further period as the Commissioner allows, allocate that gross income between that income year and any number of subsequent years not exceeding 5, and in every such case the amount of gross income so allocated to any income year shall be deemed to have been derived in that year.
“(2)
Any allocation made under subsection (1) may be at any time cancelled by the Commissioner, and in every such case the whole of the gross income so allocated shall be deemed to have been derived in the income year immediately preceding the year in which the allocation is cancelled, except to the extent to which the gross income has been allocated to any earlier income year.
“(3)
A taxpayer who sells any patent rights is allowed a deduction in respect of the patent rights of the following amount:
“(a)
Where the taxpayer actually devised the invention to which the patent relates, the amount of the expenditure incurred by the taxpayer in connection with the devising of the invention (to the extent that a deduction for that expenditure has not already been allowed under section DJ 6(2)), or (where the sale does not include the whole of the patent rights in respect of the invention) such proportion of that expenditure as the Commissioner thinks just;
“(b)
Where the taxpayer acquired the patent rights before 1 April 1993, an amount bearing to the total cost of the patent rights to the taxpayer the same proportion as the unexpired term of the patent rights at the date of the sale bears to the unexpired term of the patent rights at the date of their acquisition by the taxpayer;
“(c)
Where the taxpayer acquired the patent rights on or after 1 April 1993, the total cost of the patent rights to the taxpayer.
“(3a)
The deduction allowed under subsection (3) shall be allocated:
“(a)
To the income year in which the sum in respect of the sale is received by or owing to the taxpayer; or
“(b)
Where there is an allocation of gross income from the sale under subsection (1), to the income years to which, and in the same proportions as, the gross income is allocated.”.
192 Spreading of income derived from assignment of or grant of interest in copyright
(1)
Section EN 3(2) and (3) are replaced by:
“(2)
To the extent that the consideration for the assignment or grant consists of a lump sum payment the whole amount of which would, but for this section, be included in the taxpayer’s gross income for any one income year, the Commissioner may, upon application made in writing by or on behalf of the taxpayer not later than 6 years after the end of that income year, allocate the amount of the payment equally between that income year and—
“(a)
The income year immediately preceding that income year, in any case where the period for which the taxpayer was engaged on the making of the work did not exceed 24 months;
“(b)
The 2 income years immediately preceding that income year, in any case where the period for which the taxpayer was engaged on the making of the work exceeded 24 months,—
and in every such case the amount so allocated to any such income year shall be deemed to have been derived in that year.
“(3)
To the extent that the consideration for the assignment or grant consists of any payments, being payments to which subsection (2) does not apply, of or on account of royalties or otherwise that have been received by the taxpayer within 2 years after the first publication of the work and the whole amount of which would, but for this section, be included in the taxpayer’s gross income for any one income year, the Commissioner may, upon application made in writing by or on behalf of the taxpayer not later than 8 years after the first publication of the work, allocate the amount of those payments equally between that income year and the income year immediately preceding that income year, and in every such case the amount so allocated to any such income year shall be deemed to have been derived in that year.”.
(2)
Section EN 3(5) is replaced by:
“(5)
This section shall, with any necessary modifications, apply with respect to any gross income derived by an author from the publication by the author of the author’s own work, being gross income that, in the opinion of the Commissioner, it is equitable to allocate, in the same manner as it applies with respect to any payments to which subsection (3) applies.”.
193 Spreading of income derived on acquisition of land by Crown
Section EN 4 is replaced by:
“EN 4
“(1)
Where a taxpayer derives gross income in any income year from the disposition to the Crown of any land owned by the taxpayer, whether the land is taken under the Public Works Act 1981 or otherwise acquired by the Crown, the Commissioner may, upon application made in writing by or on behalf of the taxpayer within 12 months after the end of that income year or within such further period as the Commissioner allows, and, if required by the Commissioner, upon the taxpayer making arrangements to the satisfaction of the Commissioner for the satisfaction of all income tax liabilities that have arisen or may arise in respect of that gross income, allocate that gross income between that income year and any number of subsequent years not exceeding 3.
“(2)
If the gross income derived by a taxpayer is allocated to 2 or more income years under subsection (1), the taxpayer must also allocate to each income year that proportion of any deduction allowed for the cost of the land which the gross income allocated to the income year represents as a proportion of the total gross income.
“(3)
Any allocation of gross income or allowable deduction under this section may be cancelled by the Commissioner at any time, and in every such case the gross income and allowable deduction so allocated shall be allocated to the income year immediately preceding the income year in which the allocation is cancelled, except to the extent to which the gross income has been allocated to any earlier income year.”.
194 Employer superannuation contributions
Section EO 1 is replaced by:
“EO 1
An employer who makes an employer superannuation contribution (being a contribution that would otherwise be allowed as a deduction under section DF 3 in the year in which it is made) may, where the contribution is made not more than 63 days after the end of the income year in respect of which—
“(a)
The contribution was required under the conditions of the scheme to be made; or
“(b)
The amount of the contribution was calculated, having regard to the amounts of the earnings paid by the employer to any employee who was during that income year a member of the scheme,—
elect, at any time before the employer files a return of income for that income year or within such further time as the Commissioner allows, that the amount of the contribution should be allowed as a deduction to the employer for that income year instead of the income year in which the contribution was made; and where an employer so elects the contribution shall accordingly be allowed as a deduction for that earlier income year and not for the later income year.”.
195 Deduction to lessee in non-specified lease
In section EO 2(2), the portion before the formula is replaced by:
“(2)
The amount allowed as a deduction to the lessee under section BD 2 or any other provision of this Act in respect of expenditure incurred in lease payments under a lease of personal property that is not a specified lease shall be calculated in accordance with the following formula:”.
196 Costs of acquiring any film or any right in any film
(1)
In section EO 3(1), the portion before the proviso is replaced by:
“EO 3
“(1)
Notwithstanding anything in any other section of this Act, other than sections DK 1, EO 4, and GD 12, where in any income year any person has, in relation to any film, incurred any expenditure consisting of the whole or any part of the cost of production, or any expenditure in acquiring any right and has, as a result, become possessed of that film or any right in that film, no deduction in respect of that expenditure shall be allowed to that person in any income year, except to the extent provided in this section:”.
(2)
Section EO 3(4), (5) and (6) are replaced by:
“(4)
Subject to sections EO 4 and GD 12, where in any income year any taxpayer who is or becomes in that income year a film owner, owns or becomes the owner of any completed feature film or any right in such a film and remains the owner of that film or right until the end of that income year, a deduction shall be allowed to the taxpayer in that income year of an amount that, in relation to that feature film, is equal to the lesser of—
“(a)
The amount of the specified deduction in relation to that income year;
“(b)
An amount equal to the residual value in relation to that income year:
Provided that in any case where the gross income derived by that taxpayer from the sale, use, rental, or other exploitation of that film or that right in that income year exceeds the specified deduction, in relation to that film, for that year, the taxpayer shall be allowed a deduction for such amount of the cost of acquisition of that film or of that right in that income year as is equal to the lesser of—
“(c)
The amount of the residual value of that film or of that right in relation to that income year;
“(d)
The gross income derived from the sale, use, rental, or other exploitation of that film or of that right which was derived during that income year.
“(5)
Subject to sections EO 4 and GD 12, where, at any time during an income year, a taxpayer becomes the owner of any completed film other than a feature film, or of any right in any completed film other than a feature film, that taxpayer shall be allowed a deduction for the cost of acquisition of that film or of that right (to the extent that cost of acquisition was incurred by that taxpayer during that income year) in that income year and in the immediately succeeding income year in the following proportions,—
“(a)
50% in the income year in which that film or that right was acquired; and
“(b)
The balance in the income year immediately succeeding the income year in which that film or that right was acquired,—
Provided that in any case where the gross income derived from the sale, use, rental, or other exploitation of that film or of that right, in the income year in which that film or that right was acquired exceeds 50% of the cost of acquisition of that film or that right which was incurred by that taxpayer prior to the end of that income year, that taxpayer shall be allowed a deduction in that income year of an amount equal to the lesser of—
“(c)
The cost of acquisition of that film or that right which was incurred by that taxpayer prior to the end of that income year;
“(d)
The gross income from the sale, use, rental, or other exploitation of that film or that right which was derived during that income year,—
and the amount of the deduction that would, but for this proviso, have been allowed in the next succeeding income year shall be reduced to an amount equal to the amount (if any) which remains after subtracting from the total cost of acquisition of that film or of that right the gross income derived from that film or from that right in that income year.
“(6)
Subject to sections EO 4 and GD 12, where, in any income year, any taxpayer, being the owner of a film or any right in any film, or being the owner of a film and of any right in that film, ceases to own that film or every right in that film, or, as the case may be, ceases to own that film and every right in that film which that taxpayer possessed at any time during that income year, the balance of any cost of acquiring that film or that right or, as the case may be, any cost of acquiring that film and that right or, where that film is a feature film the balance of the residual value in relation to that feature film, which has not been allowed as a deduction in any income year, shall be allowed as a deduction in the income year in which that taxpayer ceases to own that film or that right.”.
(3)
Section EO 3(8) is replaced by:
“(8)
Where any amount by way of depreciation loss has been included in the cost of acquisition of any film or any right in a film or in any part of that cost of acquisition, and any cost of acquisition has been allowed as a deduction in any income year, and the asset in relation to which that depreciation loss was calculated is sold or otherwise disposed of or used otherwise than in producing the film to which that cost of acquisition relates, the Commissioner shall, to the extent of an amount which is, or amounts which in the aggregate are, not greater than that amount of depreciation loss, make such adjustments as the Commissioner considers fair and equitable.”.
(4)
In section EO 3(9), the second definition is replaced by:
“‘Residual value’, in relation to a film and to any right in relation to a film, and to any taxpayer, and to any income year, means the amount of the cost of acquisition of the film or the right in relation to a film incurred prior to the end of the income year, reduced by so much of the amount as has been allowed as a deduction to the taxpayer in any income year preceding that income year:”.
197 Cost of producing films
Section EO 4(4), (5), (6), (7) and (8) are replaced by:
“(4)
Where,—
“(a)
In any income year any taxpayer has incurred any film production expenditure in relation to a film in relation to which the taxpayer is a film owner; and
“(b)
That film has, by means of a final certificate issued by the New Zealand Film Commission, been certified as a New Zealand film,—
the taxpayer shall be allowed a deduction for an amount equal to the amount of that film production expenditure in the later of—
“(c)
The income year in which that New Zealand film is completed;
“(d)
The income year in which that film production expenditure is incurred.
“(5)
Where in any income year any film other than a New Zealand film is completed, and any taxpayer who is a film owner in relation to that film has, whether in that income year or in any income year preceding that income year, incurred any film production expenditure in relation to that film, that taxpayer shall be allowed a deduction, in the following proportions and in the following income years, for the amount or the aggregate of the amounts of the film production expenditure,—
“(a)
The income year first mentioned in this subsection, 50%, and
“(b)
The income year immediately succeeding that first-mentioned income year, 50%:
Provided that in any case where the amount (if any) received or receivable, by or on behalf of the taxpayer from the sale, use, rental, or other exploitation of that film or of any right in that film, in the income year in which that film is completed exceeds the amount of the film production expenditure that, but for this proviso, would be allowable as a deduction to the taxpayer in that income year, that taxpayer shall be allowed a deduction in that income year for such amount as is equal to the lesser of—
“(i)
The aggregate of the amounts of the film production expenditure incurred by the taxpayer, in relation to that film, in every income year ending on or before the last day of the income year in which that film is completed;
“(ii)
The amount so received or receivable, by the taxpayer or on the taxpayer’s behalf, from that sale, use, rental, or other exploitation,—
and the amount of the deduction that, but for this proviso, would have been allowable to the taxpayer in the income year immediately succeeding the income year first mentioned in this proviso, shall be reduced to only so much as is equal to the amount that remains after subtracting from the aggregate referred to in paragraph (i) of this proviso an amount equal to the amount referred to in paragraph (ii) of this proviso, and only that reduced amount shall be so allowable as a deduction.
“(6)
Where, in any income year succeeding the income year in which a film is completed, any taxpayer (being a taxpayer who, in relation to that film, is a film owner) incurs any film production expenditure in relation to that film, that taxpayer shall be allowed a deduction in that income year for an amount equal to the amount of that film production expenditure.
“(7)
Where, in the income year in which any film other than a New Zealand film is completed, any taxpayer, being the owner of that film or any right in that film, ceases to own that film or every right in that film or, as the case may be, ceases to own that film and every right in it which the taxpayer possessed at any time during that income year, the taxpayer shall be allowed a deduction in that income year for an amount equal to the total of the film production expenditure incurred by the taxpayer in relation to that film.
“(8)
Where any amount by way of depreciation loss (being a depreciation loss that is film production expenditure) has been allowed as a deduction under this section, and the asset in relation to which that depreciation loss was calculated is sold or otherwise disposed of or used otherwise than in producing the film to which that film production expenditure relates, the Commissioner shall, to the extent of an amount which is, or amounts which in the aggregate are, not greater than that amount of depreciation loss, make such adjustments as the Commissioner considers fair and equitable.”.
198 Payment for non-compliance with covenant to repair
Section EO 5(1) and (2) are replaced by:
“EO 5
“(1)
Subject to this section, where—
“(a)
Any taxpayer is or was the lessee of land used by the taxpayer for the purpose of deriving gross income for any income year; and
“(b)
Under the lease the taxpayer is or was under an obligation to maintain that land or to make repairs (including repairs by way of painting and general maintenance) to any improvements on that land; and
“(c)
By reason of the failure of the taxpayer to perform that obligation the taxpayer has become liable to pay the lessor of that land a sum of money by way of indemnity, compensation, or damages; and
“(d)
That sum or any part of that sum is paid to or recovered by the lessor from the taxpayer—
the Commissioner shall, for the income year in which that sum or any part of that sum was paid or recovered, allow the taxpayer a deduction of the amount so paid or recovered to the extent that the Commissioner is satisfied that the amount was in respect of maintenance or repairs, expenditure on which, if it had been incurred by the taxpayer during the term of the lease, would have been allowed as a deduction.
“(2)
Instead of claiming a deduction for the income year in which any amount was paid or recovered in accordance with subsection (1), the taxpayer may, if the taxpayer so elects by notice in accordance with subsection (3), which election shall be irrevocable, be entitled to allocate, in such manner as the taxpayer specifies in the notice, the whole or any part of that amount to any one or more of the 3 income years (being a year or years in which the land was used by the taxpayer for the purpose of deriving gross income) immediately preceding the income year in which that amount was so paid or recovered, and on receipt of the notice the Commissioner shall allow the amount so allocated to any such income year as a deduction to the taxpayer in that income year and shall, notwithstanding the time bar, make or amend any assessment in respect of that income year accordingly. Any amount so allocated to any such income year shall not be allowed as a deduction to the taxpayer in the income year in which the amount was so paid or recovered.”.
199 Option to use foreign tax balance date
Section EP 1 is replaced by:
“EP 1
“(1)
A taxpayer may elect under this section to allocate foreign source income and foreign expenditure that, but for this section, would be allocated to the base year, to the year of election where—
“(a)
The year of election is the taxpayer’s income year in which the taxpayer’s relevant annual income tax balance date in the relevant foreign country or territory falls; and
“(b)
The base year is the taxpayer’s income year immediately preceding the year of election.
“(2)
The election will apply only to foreign source income and foreign expenditure which—
“(a)
Is taken into account in determining income tax payable by the taxpayer (and not merely withholding tax) in a foreign country or territory; and
“(b)
Has been included in one of the taxpayer’s annual returns of income in the country or territory; and
“(c)
In the case of foreign source income, is foreign source income which, but for this section, would be allocated to the base year; and
“(d)
In the case of foreign expenditure, is an amount which, but for this section, would be allowed as a deduction in the base year if the only gross income of the taxpayer were foreign source income to which paragraphs (a) to (c) apply.
“(3)
The foreign source income and foreign expenditure to which an election applies will be allocated by the taxpayer to the year of election, unless the taxpayer has previously included the foreign source income and foreign expenditure in the taxpayer’s annual return for the base year.
“(4)
A taxpayer makes an election under this section by completing the taxpayer’s annual return of income accordingly.
“(5)
If a taxpayer makes an election, it will apply for the year of election and all subsequent income years, unless the Commissioner agrees in writing to allow the taxpayer to revoke the election or the limit detailed in subsection (8) is exceeded.
“(6)
If a taxpayer makes an election, it will apply to all the taxpayer’s foreign source income and foreign expenditure to which subsection (2) applies except for—
“(a)
Interest or gross income derived or deemed to be derived under the qualified accruals rules, unless the Commissioner consents in writing; or
“(b)
Dividends, unless the Commissioner consents in writing and the taxpayer is not a company; or
“(c)
Attributed foreign income; or
“(d)
Foreign investment fund income or gross income derived from an interest in a foreign investment fund; or
“(e)
In the case of foreign expenditure, foreign expenditure that would be allowed as a deduction if the only gross income of the taxpayer were gross income to which paragraphs (a) to (d) apply.
“(7)
In deciding whether to consent to an election applying to interest, gross income derived or deemed to be derived, or expenditure incurred or deemed to be incurred, under the qualified accruals rules, or dividends, the Commissioner will consider—
“(a)
Whether the taxpayer will incur significant compliance costs unless the election applies; and
“(b)
The risk to the revenue if the election applies; and
“(c)
Any other factors the Commissioner considers relevant.
“(8)
A taxpayer’s election will not apply in a year of election if, for that income year, the taxpayer’s net income for the year, but for this subsection, would exceed $100,000 if the only gross income of the taxpayer were foreign source income.
“(9)
If subsection (8) applies, the taxpayer must—
“(a)
Allocate all foreign source income and foreign expenditure to the year of election in accordance with this Act; and
“(b)
If necessary, allocate in accordance with this Act, gross income and foreign expenditure to the previous year to which the election would have applied but for subsection (8).
“(10)
If a taxpayer ceases to be or becomes resident in New Zealand, this section will apply in the same way as for other taxpayers except that—
“(a)
It will not apply to gross income or expenditure that is allocated other than by virtue of this section, to a period when the taxpayer was not resident in New Zealand; and
“(b)
If it allocates foreign source income or foreign expenditure incurred while the taxpayer was resident in New Zealand to a period after the taxpayer has ceased to be resident in New Zealand, that foreign source income is gross income, and the foreign expenditure is allowed as a deduction, in the year in which the foreign source income and foreign expenditure is allocated under this section, notwithstanding section BD 1(2)(c).
“(11)
In this section—
“‘Annual income tax balance date’ includes a date which, in the opinion of the Commissioner, is substantially equivalent to an annual income tax balance date:
“‘Foreign source income’ means gross income which is not derived from New Zealand:
“‘Foreign expenditure’ means expenditure which is incurred in deriving foreign source income.”.
200 Spreading of liquor revaluation income
Section EZ 2(1) is replaced by:
“EZ 2
“(1)
Where any liquor licence holder derives liquor revaluation income from specified trading stock during the 1988–89 income year, the liquor licence holder may, by notice in writing to the Commissioner within the time in which the liquor licence holder is required to furnish a return of income for that income year, or within such further time as the Commissioner may allow, elect to either—
“(a)
Apportion that liquor revaluation income between that income year and all or any of the 8 income years immediately succeeding that income year, and in every such case the amount of income so apportioned shall be deemed to have been income or gross income derived by the liquor licence holder in the income year to which it is apportioned; or
“(b)
Claim a deduction for that income year amounting to one-half of the liquor revaluation income of that liquor licence holder.”.
201 Purchase of patent rights
Section EZ 5(1), (2) and (3) are replaced by:
“EZ 5
“(1)
The Commissioner may for any income year allow such deduction as the Commissioner thinks fit in respect of any sum expended by the taxpayer on the purchase before 1 April 1993 of any patent rights used by the taxpayer in deriving the taxpayer’s gross income for that income year.
“(2)
In ascertaining the amount that may be allowed as a deduction under this section in respect of any income year, the total amount payable by the taxpayer in respect of the purchase of any patent rights shall be allocated by the Commissioner over the term of the patent rights unexpired at the date of the purchase, and the amount allowed as a deduction in respect of any income year shall not in any case exceed the amount allocated to that year.
“(3)
Where, at any time before the expiry of any patent rights purchased by a taxpayer, the patent rights have come to an end without being subsequently revived or have been sold by the taxpayer, an amount bearing to the total sum expended by the taxpayer on the purchase of the patent rights the same proportion as the unexpired term of the patent rights at the date of their so coming to an end or being sold bears to their unexpired term at the date of their purchase by the taxpayer (so far as that amount has not been otherwise allowed as a deduction to the taxpayer) shall be allowed as a deduction during the income year in which the patent rights have so come to an end or been sold.”.
202 Premium paid in respect of lease of land
Section EZ 6(1) is replaced by:
“EZ 6
“(1)
Where any taxpayer is the lessee of land used by the taxpayer in deriving the taxpayer’s gross income in any income year, the Commissioner may allow a deduction of so much of any premium paid on the grant, or, as the case may be, the renewal of the lease, being a grant or renewal occurring before 1 April 1993, as would be allocated to that income year or, where the land was not so used by the taxpayer for the whole of the income year, the part of that income year for which the land was so used, if the amount of that premium were apportioned evenly over the term of the lease:
Provided that where the taxpayer is not the person to whom the lease or renewal of the lease was granted, the deduction allowed under this section shall not exceed so much of any premium paid by the taxpayer on the acquisition of the lease as would be allocated to that income year, or, where the land was not so used by the taxpayer for the whole of the income year, the part of the income year for which the land was so used, if the amount of that premium were apportioned evenly over the remaining term or the lease.”.
203 Unreturned retail profit in relation to goods sold on hire purchase
Section EZ 7(1), (2), (3) and (4) are replaced by:
“EZ 7
“(1)
Where any taxpayer is the vendor of goods sold under hire purchase agreements, any unreturned retail profit on the goods sold under hire purchase agreements entered into before 1 April 1993 is gross income of that taxpayer for that taxpayer’s year of adjustment.
“(2)
Where any taxpayer’s gross income is increased in the year of adjustment by $1,000 or more by additions made in accordance with subsection (1), the taxpayer shall notify the Commissioner in accordance with subsection (5).
“(3)
Where a taxpayer is required to notify the Commissioner under subsection (2) and that taxpayer is continuing to carry on business, that taxpayer may, to the extent that an increase in gross income arises from adjustments made under subsection (1), elect (by an election which shall be in writing and which shall be given to the Commissioner and which shall be irrevocable) to allocate that increase,—
“(a)
On a due and receivable basis to the year of adjustment and the 2 immediately subsequent income years; and
“(b)
As to the outstanding balance (if any), to the 3rd of the immediately subsequent income years,—
and in any such case the amount so allocated to any subsequent income year shall be deemed to be gross income derived in that income year, and be deemed not to be gross income derived in the year of adjustment:
Provided that any allocation made in accordance with this subsection may at any time be cancelled by the Commissioner, and the amount so allocated, to the extent to which it has not been allocated to and assessed for any earlier income year, shall be gross income derived in the income year in which the allocation was cancelled.
“(4)
If the amount allocated by a taxpayer on a due and receivable basis to the year of adjustment under subsection (3)(a) exceeds $1,000, the taxpayer may elect (by an election which shall be in writing and which shall be given to the Commissioner and which shall be irrevocable) to allocate that amount equally between the year of adjustment and any number of subsequent income years not exceeding 3, and the amount so allocated to any subsequent income year shall be deemed to be gross income derived in that income year and be deemed not to be gross income derived in the year of adjustment:
Provided that any allocation made in accordance with this subsection may at any time be cancelled by the Commissioner, and the amount so allocated, to the extent to which it has not been allocated to and assessed for any earlier income year, shall become gross income derived during the income year in which the allocation was cancelled.”.
Amendments to Part F
204 Apportionment of expenditure or loss
Section FB 1 is repealed.
205 Apportionment of income derived partly in New Zealand and partly elsewhere
Section FB 2 is replaced by:
“FB 2
“(1)
For the purposes of this Act generally, if—
“(a)
Any business of a taxpayer is carried on partly in New Zealand and partly outside New Zealand; or
“(b)
A contract is made in New Zealand and is wholly or partly performed by a taxpayer outside New Zealand, or is made outside New Zealand and is wholly or partly performed by a taxpayer in New Zealand,—
the gross amount of income from the business or contract, and expenditure incurred in deriving that income, will be apportioned to New Zealand in such a way and to such an extent as is necessary to produce an amount of net income or net loss for the purposes of this Act in respect of the business or contract which the taxpayer might be expected to have if the taxpayer’s activities in New Zealand in respect of the business or contract were carried out by the taxpayer as a separate and wholly independent person undertaking only those activities and dealing at arms length, and the gross amount of income, so far as so apportioned to New Zealand, shall be deemed to be derived from New Zealand.
“(1a)
For the purposes of Part L, if—
“(a)
Any business of a taxpayer is carried on partly in one country and partly in another country; or
“(b)
A contract is made in one country and wholly or partly performed by a taxpayer in another country, or is partly performed by a taxpayer in 2 or more countries,—
the gross amount of income from the business or contract, and expenditure incurred in deriving that income, will be apportioned between the countries in such a way and to such an extent as is necessary to produce an amount of net income or net loss, in respect of each country and the business or contract, which the taxpayer might be expected to have if the taxpayer’s activities in that country in respect of the business or contract were carried out by the taxpayer as a separate and wholly independent person undertaking only those activities and dealing at arm’s length.
“(2)
This section shall not be construed as applying with respect to—
“(a)
Income of any of the classes referred to in section OE 4(1) (except paragraphs (a) and (q)); or
“(b)
Income of any of the classes referred to in paragraph (a) or paragraph (q) of subsection (1) of section OE 4 to the extent that that income consists of income of any of the classes referred to in any of the other provisions of that subsection.”.
206 Disposal of trading stock
Section FB 3 is replaced by:
“FB 3
Where in any income year the whole or any part of the assets of a business owned or carried on by any taxpayer is sold or otherwise disposed of (whether by way of exchange, or gift, or distribution in terms of a will or on an intestacy, or otherwise, and whether or not in the ordinary course of the business of the taxpayer or for the purpose of putting an end to that business or any part of it), and the assets sold or otherwise disposed of consist of or include any trading stock, the consideration received or receivable for the trading stock or, as the case may be, the price which under this Act the trading stock is deemed to have realised shall be taken into account in determining the taxpayer’s gross income for that year, and the person acquiring the trading stock shall, for the purpose of calculating the person’s taxable income for that year or for any subsequent income year, be deemed to have purchased it at the amount of that consideration or price. This section shall, with any necessary modifications, apply in any case where a share or interest in any trading stock is sold or otherwise disposed of by any taxpayer.”.
207 Floating rate of interest on debentures
In section FC 1(1), the portion after paragraph (c) is replaced by:
“no deduction shall be allowed to the company, in respect of any interest payable under the debenture or of any expenditure or loss incurred in connection with the debenture or in borrowing the money secured by or owing under it.”.
208 Interest on debentures issued in substitution for shares
Section FC 2(1) is replaced by:
“FC 2
“(1)
Where a company has issued debentures to its shareholders or to any class of its shareholders, and the amount of the debenture or debentures issued to each shareholder of the company or of that class has been determined by reference to the number or to the available subscribed capital per share of, or by reference otherwise to, the shares in that company or in any other company (whether or not that other company is being or has been liquidated) that were held by or on behalf of the shareholder at the time the debentures were issued or at any earlier time, no deduction shall be allowed to the company, in respect of any interest payable under any debenture so issued or of any expenditure or loss incurred in connection with any such debenture or in borrowing the money secured by or owing under any such debenture.”.
209 Share dealing
(1)
In section FC 3(1), the portion after paragraph (b) is replaced by:
“shall be deemed to be received by the taxpayer as consideration or part consideration on sale of the shares, whether or not the shares have been or will be sold, and shall be gross income in the year in which the dividend is derived:
Provided that if, in relation to the transaction initiated by the acquisition of those shares in the income year in which the dividend is derived, the amount that would be the taxpayer’s net income if the taxpayer’s only gross income derived in that year were in respect of the transaction (including any amount deemed to be consideration under this subsection), is more than zero, the amount of the consideration that is treated as gross income under this subsection shall be reduced by the lesser of—
“(c)
The amount that would be the taxpayer’s net income so calculated; and
“(d)
The total of any dividends that have been treated as gross income under subsection (2) and that have not previously been applied in reduction of the amount of consideration under this paragraph.”.
(2)
Section FC 3(2) is replaced by:
“(2)
Notwithstanding anything in subsection (1), any dividend that is taken into account under that subsection in any income year shall remain and be a dividend derived by the taxpayer in that year, and the amount of that dividend shall be gross income of the taxpayer in that year.”.
210 Valuation adjustments where company acquires its shares
(1)
Section FC 4(c) is replaced by:
“(c)
Any consideration derived by the shareholder from the cancellation would be gross income of the shareholder under section CD 3 or CD 4 or any other provision of this Act (other than section CF 1 or section CF 2); and”.
(2)
Section FC 4(f)(iv) is replaced by:
“(iv)
In any case where the shares are not trading stock of the shareholder, excluded from the cost of the share acquired, redeemed, or otherwise cancelled, so that the shareholder is not allowed any deduction for that amount.”.
211 Revised assessments where assets purchased and resold after deduction of payments under lease
Section FC 5(1)(a) is replaced by:
“(a)
A taxpayer leased, rented, or hired any asset, being any plant or machinery (including a motor vehicle) or other equipment or a temporary building and the Commissioner has allowed a deduction to the taxpayer for the consideration paid or given in respect of that lease, rental, or hire; and”.
212 Effect of specified lease on lessor and lessee
Section FC 6(4) is replaced by:
“(4)
In any income year in which the lessor leases, under a specified lease, any lease asset to any lessee, no deduction by way of depreciation shall be allowed to the lessor in respect of that lease asset.”.
213 Income of lessor under specified lease—(1)
Section FC 7(1) is replaced by:
“FC 7
“(1)
For the purposes of this Act the income of any lessor derived under any specified lease shall be deemed to be interest.”.
(2)
In section FC 7(2), the portion before paragraph (a) is replaced by:
“(2)
The amount of interest so derived by any lessor shall be deemed to be—”.
(3)
Section FC 7(3) is replaced by:
“(3)
The interest so derived by any lessor shall, in relation to any income year, be deemed to be of an amount equal to the sum of such of the amounts (being amounts calculated in accordance with subsection (2)(a)), as are calculated in relation to the initial period (if any) and to each instalment period that ends in that income year.”.
214 Deduction to lessee under specified lease
In section FC 8, the portion before paragraph (b) is replaced by:
“FC 8
No deduction shall be allowed for any expenditure incurred by the lessee under a specified lease except to the extent that the expenditure—
“(a)
Would be allowed as a deduction to the lessee under section BD 2; and”.
215 Taxation of hire purchase agreements
(1)
Section FC 10(1)(c) is replaced by:
“(c)
Subject to sections EG 1 to EG 14, the lessee, but no other person, shall be allowed any deductions on account of depreciation of the hire purchase asset attributable to the period until the hire purchase agreement is terminated.”.
(2)
In section FC 10(3), the portion of the definition of quantity “a”
before subparagraph (i) is replaced by:
“a is an amount equal to the gross income which the lessor would have derived under section EH 1 in respect of the hire purchase payments payable under the hire purchase agreement if—”.
(3)
In section FC 10(3) the definition of quantity “b”
is replaced by:
“b is the sum of all amounts of gross income derived by the lessor in respect of the hire purchase payments paid under the hire purchase agreement.”.
(4)
Section FC 10(5)(c) and (d) are replaced by:
“(c)
The lessor shall not be allowed a deduction under section DJ 1(a) or section EH 5 for bad debts in relation to any amount owing or to become owing in respect of the hire purchase agreement, if the amount calculated for the lessor under subsection (2) and, if applicable, subsection (3) of this section in relation to the hire purchase agreement is taken into account by the lessor—
“(i)
As the acquisition price of trading stock of the lessor; or
“(ii)
For the purposes of calculating the net income of the lessor for any income year in any way not referred to in subparagraph (i); and
“(d)
Any amount paid at any time in an income year subsequent to the income year in which a hire purchase agreement is terminated or expires on account of any amount that, under the terms of the hire purchase agreement, the lessee or any person associated with the lessee is liable to pay to the lessor or any person associated with the lessor is gross income of the lessor in the year it is received by the lessor or associate of the lessor; and”.
(5)
In section FC 10(5), the portion after subparagraph (f)(ii) is replaced by:
“shall, in the year it is paid, be deemed to be gross income derived by the lessee if a deduction has been allowed to the lessee in respect of the hire purchase asset that is the subject of the agreement.”.
(6)
Section FC 10(8)(b) is replaced by:
“(b)
The amount of any expenditure or loss incurred by the lessee in preparing and installing the hire purchase asset for use (unless such expenditure or loss is allowed as a deduction to the lessee under any provision of this Act other than sections EG 1 to EG 15 and section EG 18).”.
216 Investors in category A group investment funds
Section FC 12(a) is replaced by:
“(a)
The interest of an investor in a group investment fund that derives category A income shall be deemed to be shares in the group investment fund; and”.
217 Interpretation
Section FD 2(1) is replaced by:
“FD 2
“(1)
For the purposes of the consolidation rules, any reference in those rules to—
“(a)
Gross income, net income or taxable income of a consolidated group; or
“(b)
An attributed foreign net loss or a foreign investment fund net loss, or a net loss of a consolidated group; or
“(c)
Tax payable by a consolidated group; or
“(d)
A tax credit available to a consolidated group,—
shall, unless the context otherwise requires, be interpreted as a reference to the gross income, net income, taxable income, attributed foreign net loss, foreign investment fund net loss, net loss, tax payable, or tax credit available determined in respect of that consolidated group on a single assessment basis in accordance with those rules as if the group were one company.”.
218 Part year accounts and part year net income allocation
(1)
Section FD 9(1)(b) is replaced by:
“(b)
Sufficiently detail in accordance with subsection (2) the gross income and allowable deductions (and where required the income tax liability), of the company in respect of any relevant part of the income year.”.
(2)
Section FD 9(2) is replaced by:
“(2)
The gross income, allowable deductions or income tax liability of a company attributable to a part of an income year referred to in subsection (1) shall be determined, to the extent fair and reasonable and with any necessary modifications, by treating that part year as a complete income year for the purposes of applying the provisions of this Act.”.
219 Special provisions relating to dispositions of property
(1)
In section FD 10(1), the portion before paragraph (c) is replaced by:
“FD 10
“(1)
Where any company (in this subsection referred to as the ‘transferor’) disposes of any property to another company (in this subsection referred to as the ‘transferee’) that is a member of the same consolidated group when the disposition takes place, being property that is—
“(a)
Depreciating property of the transferor; or
“(b)
Any property (being neither trading stock for either the transferor or the transferee, nor a financial arrangement to which the accruals rules apply) where, if the transferor or transferee were to dispose of that property, the consideration would (but for this section or section HB 2) be gross income of the transferor or transferee,—
then, for the purposes of determining gross income under section CD 1 or CD 4 or otherwise and allowable deductions under sections DJ 13 or DJ 14 or otherwise, in respect of any subsequent disposal of the property or in respect of depreciation or amortisation of the acquisition cost of the property under any of sections EG 1, EZ 5, and EZ 6 or any other amortisation provisions of this Act—”.
(2)
In section FD 10(1)(e)(i), the portion before subsubparagraph (A) is replaced by:
“(i)
Except where the property forms all or part of a pool of property that is depreciated by the transferor in accordance with section EG 11, the aggregate of the following amounts of expenditure incurred by the transferor in respect of the property before the disposition to the transferee in fact takes place, being in every case expenditure in respect of which no deduction has been allowed under this Act (other than by way of depreciation or amortisation of the acquisition cost of the property under any of sections EG 1, EZ 5, and EZ 6 or any other amortisation provisions of this Act):”.
(3)
Section FD 10(2) is replaced by:
“(2)
Where any company (in this subsection referred to as the ‘transferor’) disposes of any depreciating property (other than pooled property) to another company (m this subsection referred to as the ‘transferee’) that is a member of the same consolidated group when the disposition takes place, for the purposes of sections EG 1, EG 19, EZ 5, and EZ 6 and any other amortisation provisions of this Act in respect of the calculation of the net income of the transferee for any income year, the transferee shall be deemed to have been allowed deductions for depreciation or under section EZ 5 or section EZ 6 or any other amortisation provision of the same amounts as, in respect of or in relation to the property, have been allowed to the transferor.”.
(4)
Section FD 10(3)(b) is replaced by:
“(b)
But for this subsection, the disposal or cessation would prevent the transferor from being allowed a deduction under any of sections DL 2, DO 4, and DO 5; and”.
(5)
In section FD 10(3), the portion after paragraph (c) is replaced by:
“by another company which is a member of the same consolidated group as the transferor for the whole of the income year,—
the transferor shall not be prevented by the disposal or cessation from being allowed such a deduction.”.
(6)
Section FD 10(4)(a)(iv) is replaced by:
“(iv)
Neither the transferor nor the transferee is entitled, under section IE 1 or section IF 1, to claim to carry forward to the income year and offset any net loss of the company for any preceding income year (except where the whole of that net loss may be offset against net income of the consolidated group for the income year under section IG 6),—”.
(7)
Section FD 10(4)(a)(vi)(B) and (C) are replaced by:
“(B)
Incurred all other expenditure and derived all gross income incurred or derived by the transferor with respect to the financial arrangement before the disposition; and
“(C)
Included in its returns of income under the Tax Administration Act 1994 the same amounts of gross income and expenditure with respect to the financial arrangement as were included by the transferor; and”.
(8)
Section FD 10(8)(b) is replaced by:
“(b)
If that disposition were by way of sale, the consideration from the sale would be included in the transferor’s gross income (not being gross income not taken into account by virtue of section HB 2); and”.
220 Amalgamation of companies—purpose
Section FE 1(1)(b) is replaced by:
“(b)
In the case of qualifying amalgamation, to permit certain property to be transferred to an amalgamated company on a concessional taxation basis and an amalgamated company to succeed to net losses and imputation credit account and other credits of amalgamating companies, subject to tests of continuity and commonality of ownership being met; and”.
221 Deduction to amalgamated company for bad debts, expenditure, etc.
In section FE 3, the portion after paragraph (b) is replaced by:
“(c)
The amount of the bad debt, expenditure, loss, or depreciation would not be allowed as a deduction to the amalgamated company but for this subsection; and
“(d)
The amount would have been allowed as a deduction to the amalgamating company but for the amalgamation,—
the amount shall be allowed as a deduction to the amalgamated company for the period.”.
222 Amalgamated company to assume unexpired accrual expenditure, and gross income of amalgamating company
Section FE 4(b) is replaced by:
“(b)
Any amount derived by the amalgamated company at any time after the amalgamation which—
“(i)
Is derived by virtue of anything done or not done by the amalgamating company; and
“(ii)
Would have been gross income of the amalgamating company but for the amalgamation,—
shall be gross income at the time of the amalgamated company.”.
223 Acquisition of property by amalgamated company on qualifying amalgamation
(1)
Section FE 6(1a)(b) is replaced by:
“(b)
The amalgamating company shall be deemed not to derive any gross income or to have any allowable deductions in respect of that disposition under section EG 19.”.
(2)
Section FE 6(3a) is replaced by:
“(3a)
Subsection (3) does not apply where the property is land that is (or may be) revenue account property of the amalgamating company only by virtue of the 10 year rule in any of paragraphs (b)(ii), (c)(ii), (d)(ii), and (e) of section CD 1(2), but if the amalgamated company disposes of the property within 10 years after the date of its acquisition by the amalgamating company, any amount derived from the disposition will be gross income of the amalgamated company under the relevant paragraph of section CD 1(2) (subject to section CD 1(3) to (13))”.
(3)
Section FE 6(4) is replaced by:
“(4)
Where an amalgamated company, on a qualifying amalgamation, acquires property from an amalgamating company which was depreciating property (other than pooled property) of the amalgamating company, then for the purposes of sections EG 1, EG 19, EZ 5, and EZ 6 and any other amortisation provisions of this Act in respect of the calculation of the net income for any income year of the amalgamated company, the amalgamated company shall be deemed to have been allowed deductions for depreciation or under section EZ 5 or section EZ 6 of this Act or any other amortisation provision of the same amounts as, in respect of or in relation to the property, have been allowed to the amalgamating company.
(4)
Section FE 6(5)(a)(iv) is replaced by:
“(iv)
The amalgamating company is not entitled, under section IE 1 or section IF 1, to claim to carry forward to the income year and offset any net loss of that company for any preceding income year (except where the whole of such net loss may be offset against the net income of the amalgamated company for the income year under section IF 4),—”.
(5)
Section FE 6(5)(a)(vi)(B) and (C) are replaced by:
“(B)
Incurred all other expenditure and derived all gross income incurred or derived by the amalgamating company with respect to the financial arrangement before the amalgamation; and
“(C)
Included in its returns of income under this Act the same amounts of gross income and expenditure with respect to the financial arrangement as were included by the amalgamating company; and”.
224 Succession of obligations of amalgamating company under financial arrangement on amalgamation
(1)
Section FE 7(a)(iv) is replaced by:
“(iv)
The amalgamating company is not entitled, under section IE 1 or section IF 1, to claim to carry forward to the income year and offset any net loss of that company for any preceding income year (except where the whole of such net loss may be offset against the net income of the amalgamated company for the income year under section IF 4),—”.
(2)
Section FE 7(a)(vi)(B) is replaced by:
“(B)
Incurred all expenditure and derived all other gross income incurred or derived by the amalgamating company with respect to the financial arrangement before the succession; and”.
(3)
In section FE 7(b), “calculating income”
is replaced by “calculating gross income”
.
225 Amalgamation not to result in deemed gross income or remission of liabilities
Section FE 9 is replaced by:
“FE 9
Sections CE 4(1) and IE 1(4) will not apply merely by virtue of an amalgamated company succeeding to a liability of an amalgamating company on an amalgamation.”.
226 Business stock in hand
In section FF 3, “section BB 4(a)”
is replaced by “section CD 3”
.
227 Personal property
Wherever it occurs in section FF 4, “section BB 4(c)”
is replaced by “section CD 4”
.
228 Land
(1)
In section FF 6(1)(a), the portion before subparagraph (ii) is replaced by:
“(a)
For the purposes of section BD 2 and paragraphs (a) to (f) of section CD 1(2)—
“(i)
The transferor shall be deemed to have disposed of that land for a consideration equal to the total amount that would, if that land had been sold by the transferor on the date of the transfer, have been the cost price of the land to the transferor; and”.
(2)
Section FF 6(1)(a)(iv) is replaced by:
“(iv)
Where the transferor and the transferee are not associated persons and the transferee subsequently sells or otherwise disposes of that land section GD 9(1) shall have effect as if the transferor and the transferee were associated persons:”.
(3)
In section FF 6(1)(b), the portion before subparagraph (i) is replaced by:
“(b)
For the purposes of sections BD 2 and CD 1(2)(g),—”.
(4)
Section FF 6(1)(b)(iv) is replaced by:
“(iv)
Where the transferor and the transferee are not associated persons and the transferee subsequently sells or otherwise disposes of that land section GD 9(1) shall have effect as if the transferor and the transferee were associated persons.”.
229 Standing timber
Section FF 7(b) is replaced by:
“(b)
That amount shall be taken into account under those sections in determining the gross income of the transferor and in calculating the cost of the timber to the transferee:”.
230 Patent rights
Section FF 8(a) and (b) are replaced by:
“(a)
The transferor shall be deemed to have sold those patent rights in the income year of transfer for a consideration equal to the amount (if any) of the expenditure of the kind referred to in section EN 2(3)(a) or, as the case may be, of the total cost of the kind referred to in section EN 2(3)(b), that has not been allowed as a deduction to the transferor;
“(b)
No deduction of the amount first mentioned in paragraph (a) shall be allowed to the transferor in any income year;”.
231 Non-specified livestock
In section FF 10(1)(a), the portion after subparagraph (i) is replaced by:
“(ii)
By virtue of that transfer the transferee commences or recommences to derive gross income from non-specified livestock in that income year,—
the transferee shall, except for the purposes of determining whether any subsequent acquisition of livestock by the transferee constitutes the commencement or recommencement by the transferee of the deriving of gross income from non-specified livestock, be deemed not to have so commenced or recommenced to derive gross income from non-specified livestock by virtue of that transfer:”.
232 Leased assets
(1)
Section FF 14(a) is replaced by:
“(a)
Any person has leased, rented, or hired any asset, being any plant or machinery (including a motor vehicle) or other equipment or a temporary building, and the Commissioner has allowed a deduction to that person in any income year, for the consideration paid or given in respect of that lease, rental, or hire; and”.
(2)
In section FF 14, the portion after paragraph (d) is replaced by:
“the Commissioner may include in the gross income under section FC 5 of the transferee derived in the income year in which the asset is sold or otherwise disposed of by the transferee an amount equal to the excess or the total amount of the deductions so allowed to the person first mentioned in this section, whichever is the less.”.
233 Depreciable property
(1)
In section FF 16(1), the portion before paragraph (a) is replaced by:
“FF 16
“(1)
Notwithstanding section EG 17, where any asset is transferred in accordance with a matrimonial agreement from a transferor to whom a deduction is allowed in respect of the depreciation of that asset, whether or not any such deduction has been allowed to the transferor, then for the purposes of this Act sections DL 1, DO 2, EG 1 to EG 16, and EZ 3 shall apply, with any necessary modifications, in relation to any income year, as if—”.
(2)
Section FF 16(2)(b) is replaced by:
“(b)
The transferee shall be deemed to have been allowed a deduction (additional to any deduction for depreciation claimed in respect of that asset by the transferee) of an amount equal to the sum of all deductions claimed by the transferor in respect of the depreciation of the asset.”.
234 Mining assets
(1)
In section FF 19, the portion before paragraph (b) is replaced by:
“FF 19
For the purposes of this section and sections DN 4 and IH 5, and notwithstanding section DN 4(5), where any asset is transferred in accordance with a matrimonial agreement, the following provisions shall apply:
“(a)
Where the transferor is a resident mining operator and that asset is an asset that was used by the transferor immediately before that transfer, in deriving gross income from mining, the transferor shall be deemed to have sold or otherwise disposed of that asset on the date of transfer for a consideration equal to the lesser of—
“(i)
The amount of the expenditure incurred by the transferor in the acquisition of that asset:
“(ii)
Where any deduction by way of depreciation has been allowed to the transferor in respect of that asset, an amount equal to the value to which, at the commencement of the income year of transfer, that asset has been reduced by the allowance of all such deductions:
“(iii)
Where that asset is an asset acquired as a result of exploration expenditure or development expenditure incurred by the transferor in respect of which the Commissioner has allowed any deduction under sections DN 1(5) and DN 4(5), the amount of that exploration expenditure or that development expenditure reduced by an amount equal to the sum of the amounts of all such deductions:”.
(2)
Section FF 19(c)(ii) is replaced by:
“(ii)
That sale or other disposal shall be deemed to be a sale or other disposal to which, in relation to subsections (9), (10), and (11) of section DN 1, section DN 4(5) applies; and”.
(3)
Section FF 19(d)(iii) is replaced by:
“(iii)
Where that asset is an asset acquired as a result of exploration expenditure or development expenditure incurred by the transferor in respect of which the Commissioner has allowed any deduction under sections DN 1(5) and DN 4(5), the amount of that exploration expenditure or that development expenditure reduced by an amount equal to the sum of the amounts of all such deductions:”.
(4)
Section FF 19(e) is replaced by:
“(e)
Where, in any case where paragraph (d) applies, the transferee is deemed to have incurred expenditure in the acquisition of that asset of an amount calculated in accordance with subparagraph (iii) of that paragraph, the transferee shall, for the purposes of subsections (8), (9), (10), and (11) of section DN 1, be deemed to have acquired that asset as a result of exploration expenditure or development expenditure incurred by the transferee.”.
235 Circumstances in which apportionment required
Section FG 3 is replaced by:
“FG 3
Section FG 8 applies to require an apportionment of interest expenditure incurred during an income year if the taxpayer has a New Zealand group debt percentage for the income year that—
“(a)
Exceeds 75%; and
“(b)
If the taxpayer is a company or a trustee, also exceeds the worldwide group debt percentage of the taxpayer multiplied by 1.1.”.
236 Rules for calculating New Zealand group debt percentage
Section FG 4(2) is replaced by:
“(2)
Total debt means the aggregate of the outstanding balances on the relevant date chosen under subsection (5) of all financial arrangements issued by the taxpayer (or another group member) where—
“(a)
The financial arrangement provides funds to the issuer; and
“(b)
The financial arrangement gives rise to an amount which would be an allowable deduction to the issuer other than an amount that is solely attributable to a movement in currency exchange rates.”.
237 Apportionment of interest deductions
Section FG 8 is replaced by:
“FG 8
“(1)
Notwithstanding anything in section DD 1(b), if a taxpayer’s New Zealand group debt percentage for an income year fails the test in section FG 3, the amount that would in the absence of this section be allowed as a deduction to the taxpayer for the income year under section DD 1(b) will be reduced by an amount calculated in accordance with the following formula:
_eqn04.JPG)
“where—
“I
is the amount which would be allowed as a deduction to the taxpayer under section DD 1(b) but for this Subpart; and
“GI
is the amount allowed as a deduction to the taxpayer under section DD 1(b) in respect of amounts payable excluding any amount included in item IFD) to a company included in the taxpayer’s New Zealand group under section FG 4(12) or section FG 4(15); and
“IFD
is the amount allowed as a deduction to the taxpayer under section DD 1(b) in respect of financial arrangements excluded from total debt for the taxpayer’s New Zealand group by virtue of section FG 4(2); and
“TNZD
is the total debt of the taxpayer’s New Zealand group for the income year, calculated under section FG 4 before allowing for any adjustment under section FG 6; and
“NZDA
is the amount, if any, deducted under section FG 6 in calculating the total debt of the taxpayer’s New Zealand group for the income year (which amount must be averaged in circumstances where section FG 4(5)(a) or section FG 4(5)(b) applies); and
“NZDP
is the taxpayer’s New Zealand group debt percentage for the income year; and
“TDP
is—
“(a)
If the taxpayer is a company or a trustee, the greater of—
“(i)
75 percent; and
“(ii)
The taxpayer’s worldwide group debt percentage multiplied by 1.1; and
“(b)
If the taxpayer is an individual who is not a trustee, 75 percent.
“(2)
Notwithstanding subsection (1), if and to the extent that another member of the same wholly-owned group of companies—
“(a)
Elects that this subsection apply; and
“(b)
Would, in the absence of an election under paragraph (a) and after allowing for any other reductions under this subsection, be allowed a deduction under section DD 1(b) for an amount at least as large as the amount to which the election applies,—
the reduction will be made to the amount that would otherwise be allowed as a deduction to the other group member under section DD 1(b) for the income year instead of to the amount allowed as a deduction to the taxpayer.”.
238 Deduction for dividends paid on certain preference shares
Section FZ 1(4) is replaced by:
“(4)
Subject to this section, the Commissioner may allow as a deduction in any income year to any company to which this section applies, an amount equal to the dividends paid by the company in that income year in respect of specified preference shares of that company in any case where the Commissioner is satisfied that at all times in that income year the aggregate amount of the available subscribed capital per share of all the preference shares, including specified preference shares, of the company does not exceed 50% of the aggregate amount of the available subscribed capital per share of all the ordinary shares of the company.”.
239 Amounts owing under convertible notes deemed to be share capital and holders deemed to be shareholders
(1)
Section FZ 2(2)(a) is replaced by:
“(a)
No deduction shall be allowed to the company in respect of any interest payable under the convertible note or of any expenditure or loss incurred in connection with the convertible note or in borrowing any money in respect of which the convertible note is issued or given; and”.
(2)
In section FZ 2(4), the portion before paragraph (a) is replaced by:
“(4)
No deduction shall be allowed to any company in respect of—”.
Amendments to Part G
240 Agreements purporting to alter incidence of tax to be void
Section GB 1 is replaced by:
“GB 1
“(1)
Where an arrangement is void in accordance with section BG 1, the amounts of gross income, allowable deductions and available net losses included in calculating the taxable income of any person affected by that arrangement may be adjusted by the Commissioner in the manner the Commissioner thinks appropriate, so as to counteract any tax advantage obtained by that person from or under that arrangement, and, without limiting the generality of this subsection, the Commissioner may have regard to—
“(a)
Such amounts of gross income, allowable deductions and available net losses as, in the Commissioner’s opinion, that person would have, or might be expected to have, or would in all likelihood have, had if that arrangement had not been made or entered into; or
“(b)
Such amounts of gross income and allowable deductions as, in the Commissioner’s opinion, that person would have had if that person had been allowed the benefit of all amounts of gross income, or of such part of the gross income as the Commissioner considers proper, derived by any other person or persons as a result of that arrangement.
“(2)
Where any amount of gross income or allowable deduction is included in the calculation of taxable income of any person under subsection (1), then, for the purposes of this Act, that amount will not be included in the calculation of the taxable income of any other person.
“(3)
Without limiting the generality of the definitions of ‘arrangement’, ‘liability’, ‘tax avoidance’ or ‘tax avoidance arrangement’ in section OB 1, or of section BG 1 or subsections (1) and (2) of this section, where, in any income year, any person sells or otherwise disposes of any shares in any company under a tax avoidance arrangement under which that person receives, or is credited with, or there is dealt with on that person’s behalf, any consideration (whether in money or money’s worth) for that sale or other disposal, being consideration the whole or a part of which, in the opinion of the Commissioner, represents, or is equivalent to, or is in substitution for, any amount which, if that arrangement had not been made or entered into, that person would have derived or would derive, or might be expected to have derived or to derive, or in all likelihood would have derived or would derive, as dividends in that income year, or in any subsequent income year or years, whether in one sum in any of those years or in any other way, an amount equal to the value of that consideration, or of that part of that consideration, shall be deemed to be a dividend derived by that person in that first-mentioned income year.”.
241 Arrangements to defeat application of net loss carry forward provisions
In section GC 2, the portion before paragraph (a) is replaced by:
“GC 2
Where any company (in this section referred to as the ‘loss company’) claims to carry forward the whole or any part of any net loss for any income year to any later income year and—”.
242 Arrangement to defeat application of net loss offset provisions
In section GC 4, the portion before paragraph (a) is replaced by:
“GC 4
No offset shall be allowed under subsection (2) of section IG 2 in calculating the taxable income of any company for any income year where the Commissioner is of the opinion that any shares in that company or in any other company—”.
243 Variations in control or income interests in foreign companies
Section GC 9(4)(b) is replaced by:
“(b)
Is required to include as gross income any attributed foreign income which that person might derive; and”.
244 Films
Section GC 11(4) is replaced by:
“(4)
Where, in relation to any income year and to any taxpayer, the Commissioner is satisfied that arrangements have been made between the taxpayer and another person with a view to the affairs of the taxpayer and of that other person being so arranged or conducted that any of the provisions of section EO 3 would, but for this subsection, have effect more favourably in that income year in relation to that taxpayer than would otherwise have been the case, the amount of the deduction which is allowed to that taxpayer under this section in that income year shall not exceed the amount that the taxpayer would, in the opinion of the Commissioner, have been allowed if those arrangements had not been made.”.
245 Petroleum mining
(1)
Section GC 12(1) is replaced by:
“GC 12
“(1)
Without limiting the provisions of sections BG 1, GB 1, and GZ 1, where the Commissioner considers that any arrangement consisting of—
“(a)
A disposal of any petroleum mining asset on or after 1 July 1992, together with any related arrangements (if any); or
“(b)
The incurring of exploration expenditure on or after 1 July 1992, together with any related arrangements (if any); or
“(c)
A farm-out arrangement entered into on or after 16 December 1991, together with any related arrangements (if any),—
has the effect or has been entered into for a purpose of tax avoidance, the Commissioner may, in accordance with section GB 1, adjust the taxable income of any person affected by the arrangement so as to counteract any tax advantage obtained by that person.”.
(2)
Section GC 12(2)(d) and (e) are replaced by:
“(d)
An arrangement by which a petroleum miner disposes of a petroleum mining asset to an associated person on or after 1 July 1992 for the purpose, or for purposes including the purpose, of ensuring that the associated person secures the benefit of a greater deduction than that which would have been allowed if the asset had been disposed of for its market value:
“(e)
An arrangement by which a petroleum miner enters into a farm-out arrangement with an associated person on or after 16 December 1991 for the purpose, or for purposes including the purpose, of ensuring that the associated person receives the benefit of a greater deduction than would have been allowed if the farm-out arrangement had been entered into on substantially the same terms as those on which it would have been entered into with a person not associated with the petroleum miner.”.
246 Income assessable to beneficiaries
Section GC 14 is renumbered as section GC 14(1) and amended by adding:
“(2)
This section does not apply to a Maori authority or a Maori to whom Part HI applies.”.
247 Resident withholding tax
Section GC 19 is replaced by:.
“GC 19
Without limiting the generality of section NF 13, section GB 1(1) shall apply as if—
“(a)
The words ‘amounts of gross income, allowable deductions and available net losses included in calculating the taxable income’ in subsection (1), were replaced by the words ‘liability to resident withholding tax’; and
“(b)
The words ‘gross income, allowable deductions and available net losses’ in subsection (1)(a), were replaced by the words ‘resident withholding income’; and
“(c)
The words ‘gross income and allowable deductions as, in the Commissioner’s opinion, that person would have had, if that person had been allowed the benefit of all amounts of gross income, or of such part of the gross income’ in subsection (1)(b), were replaced by the words ‘resident withholding income as, in the Commissioner’s opinion that person would have had, if that person had been allowed the benefit of all amounts of resident withholding income, or such part of the resident withholding income’.”.
248 Imputation—dividend paid by another company
In section GC 23(2), the portion before paragraph (c) is replaced by:
“(2)
For the purposes of the imputation rules, the amount of any imputation credit attached to a dividend to which subsection (1) applies—
“(a)
Shall not constitute gross income of the shareholder or, as the case may be, the beneficiary or associated person;
“(b)
Shall not be treated as an imputation credit for the purposes of section LB 2;”.
249 Sale of trading stock for inadequate consideration
Section GD 1(1)(b) and (c) are replaced by:
“(b)
The price which under this section the trading stock is deemed to have realised shall be treated as gross income of the person selling or otherwise disposing of the trading stock;
“(c)
The person acquiring the trading stock shall be deemed to have purchased the trading stock at the price which under this section the trading stock is deemed to have realised.”.
250 Distribution of trading stock to shareholders of company
Section GD 2(1)(b) and (c) are replaced by:
“(b)
The amount equal to the price which under this section the trading stock is deemed to have realised shall be treated as gross income of the company;
“(c)
The shareholder or the associated person shall be deemed to have purchased the trading stock at the price which under this section the trading stock is deemed to have realised.”.
251 Payment of excessive salary or wages, or allocation of excessive share of profits or losses, to relative employed by or in partnership with taxpayer
In section GD 3(1), the portion after paragraph (c) is replaced by:
“and the Commissioner is of the opinion that the remuneration, salary or wages, share of profits, or other income payable to or for the benefit of that relative or that company, or the share of losses to be borne by that relative or that company, under the contract of service, employment, or engagement or the terms of the partnership exceeds such an amount as is reasonable having regard to the nature and extent of the services rendered, the value of the contributions made by the respective partners by way of services or capital or otherwise, and any other relevant matters, the Commissioner may for the purposes of this Act allocate the total profits, income or losses of the business or undertaking, without taking into account any amount payable to that relative or company, between the parties to the contract or the partners or any of them in such snares and proportions as the Commissioner considers reasonable, and the amounts so allocated shall be deemed to be income or losses of persons to whom those amounts are so allocated and of no other person.”.
252 Payments to taxpayer’s spouse
Section GD 4 is replaced by:
“GD 4
No deduction shall, except as expressly provided in this Act, be made in respect of any payments of any kind made by a taxpayer to his or her spouse:
Provided that, with the consent of the Commissioner granted before the deduction is claimed by the taxpayer, and subject to section GD 3, a deduction may be made in respect of any payment made by a taxpayer to his or her spouse where the Commissioner is satisfied that the payment is for services rendered (not being domestic services or services performed in connection with the home) or is otherwise a bona fide payment, and that the payment was exclusively incurred in the derivation of gross income of the taxpayer for the income year.”.
253 Excessive remuneration by close company to shareholder, director, or relative
In section GD 5, the portion before the proviso is replaced by:
“GD 5
Where any sum paid or credited by a close company, being or purporting to be remuneration for services rendered by any person who is a shareholder or director of the company or a relative of any such shareholder or director, exceeds such amount as in the opinion of the Commissioner is reasonable, the amount of the excess shall not be an allowable deduction of the company, and shall, for the purposes of this Act, be deemed to be a dividend paid by the company to that person and received by that person as a shareholder of the company:”.
254 Value of loans provided by superannuation fund deemed to be gross income of fund
Section GD 6(1) is replaced by:
“GD 6
“(1)
Where any superannuation fund in any income year has, directly or indirectly and whether by one transaction or by a series of transactions, provided to a member of that superannuation fund in that income year any loan that would be a fringe benefit if it were provided by an employer to an employee in respect of that employee’s employment, the value of the loan so provided shall be deemed to be gross income derived by the superannuation fund in that income year.”.
255 Land transferred between associated persons
Section GD 9(1) is replaced by:
“GD 9
“(1)
Where—
“(a)
Any land has been transferred from any person (the ‘transferor’) to any other person (the ‘transferee’), and
“(b)
The transferor and the transferee are associated persons; and
“(c)
The transferee subsequently sells or otherwise disposes of that land and the consideration from that sale or disposition exceeds the cost of the land to the transferee; and
“(d)
If, had the transferor not transferred the land to the transferee but instead had sold or otherwise disposed of the land for the consideration referred to in paragraph (c), that consideration would have been gross income of the transferor under section CD 1—
that consideration shall be deemed to be gross income of the transferee under section CD 1.”.
256 Leases for inadequate rent
Section GD 10(2) is replaced by:
“(2)
This section shall apply with respect to any leased property only if and to the extent that it is used by the lessee in the derivation of gross income or exempt income.”.
257 Accruals rules
Section GD 11(1) is replaced by:
“GD 11
“(1)
Where the Commissioner, having regard to any connection between the parties to the issue or transfer of a financial arrangement and to any other relevant circumstances, is satisfied that the parties were dealing with each other in relation to the issue or transfer in a manner that has the effect of defeating the intent and application of the qualified accruals rules, the Commissioner may, under section EH 1 or section EH 3 or section EH 4 or section EH 6, deem the consideration for the issue or transfer to be equal to the consideration that might reasonably be expected for the issue or transfer if the parties to the issue or transfer were independent parties dealing at arm’s length with each other in relation to the issue or transfer.”.
258 Cost of producing films
Section GD 12(2) is replaced by:
“(2)
Where, in relation to any income year and to any taxpayer, the Commissioner is satisfied that arrangements have been made between the taxpayer and another person with a view to the affairs of the taxpayer and of that other person being so arranged or conducted that any of the provisions of section EO 4 would, but for this subsection, have effect more favourably in that income year in relation to that taxpayer than would otherwise have been the case, the amount of the deduction allowed to that taxpayer under that section in that income year shall not exceed the amount which that taxpayer would, in the opinion of the Commissioner, have been allowed as a deduction if those arrangements had not been made.”.
259 Cross-border arrangement between associated persons
(1)
Section GD 13(3) is replaced by:
“(3)
If the amount of consideration payable by a taxpayer under such an arrangement exceeds the arm’s length amount, then for all purposes of the application of this Act in relation to the income tax liability for any income year of the taxpayer, an amount equal to the arm’s length amount will be deemed to be the amount payable by the taxpayer in substitution for the actual amount.”.
(2)
Section GD 13(5)(c) is replaced by:
“(c)
The amount is an allowable deduction of the other party.”.
(3)
In section GD 13(10), the portion after paragraph (c) is replaced by:
“then for all purposes of the application of this Act in relation to the income tax liability for any income year of the taxpayer (or, if the amount is receivable by the taxpayer, to the obligation of the taxpayer or any other person to make a withholding or deduction from the amount under Part N), an amount equal to the arm’s length amount will be deemed to be the amount payable (or receivable) by the taxpayer under the compensation adjustment arrangement in substitution for the actual amount.”.
(4)
Section GD 13(11)(e) is replaced by:
“(e)
Including, in any case where the other party is a controlled foreign company, the calculation of branch equivalent income or branch equivalent loss in respect of the other party and the resultant calculation of the attributed foreign income or attributed foreign loss or attributed foreign net loss of any person.”.
260 Pre-1974 agreements purporting to alter incidence of tax
(1)
In section GZ 1(a), “Sections BB 9 and GB 1”
is replaced by “Sections BG 1 and GB 1”
.
(2)
In section GZ 1(b), “Sections BB 9 and GB 1”
is replaced by “Sections BG 1 and GB 1”
.
Amendments to Part H
261 Returns, assessments, and liability of consolidated group
(1)
Section HB 1(1) is replaced by:
“HB 1
“(1)
Where and to the extent that any one or more companies are in any income year members of the same consolidated group,—
“(a)
The nominated company shall make a single return of income of those companies for that income year and those companies shall not make separate returns of income for that income year, except to the extent that any such company is not a member of the group for part of the income year;
“(b)
That single return of income shall, if the Commissioner so requires, include such form of accounts detailing the separate affairs of each of those companies as the Commissioner may specify;
“(c)
For the purposes of determining the availability under this Act of credits for set-off against the income tax liability of the consolidated group in respect of that income year, the group shall be treated as if it were a single company;
“(d)
The Commissioner shall make a single assessment of the taxable income of those companies for that income year as if the companies were a single taxpayer, and shall not make separate assessments of the taxable income of each company for that income year except to the extent that any such company is not a member of the group for part of the income year,—
and each of those companies shall, subject to this section, be jointly and severally liable for the amount of income tax assessed by the Commissioner in respect of that consolidated group and that income year, and that joint and several liability shall be in substitution for any income tax liability of those companies under this Act individually in respect of taxable income for that income year (to the extent that the taxable income relates to a period when the company is a member of the consolidated group).”.
(2)
Section HB 1(5)(a)(ii) is replaced by:
“(ii)
The Commissioner determines that the income tax liability of the consolidated group that is attributable to the taxable income of the other company is to be recovered from the other company;”.
262 Taxable income to be calculated generally as if group were single company
Section HB 2(1) is replaced
“HB 2
“(1)
Notwithstanding any other section of this Act, for the purposes of ensuring that a consolidated group is generally liable to income tax as if it were a single company, when calculating the taxable income for all or part of any income year of a company which is for that income year or part income year a member of the consolidated group (that year or part year being in this subsection referred to as the ‘relevant period’ and the relevant period for the purposes of this section being treated as if it were an income year) to be included in the group return of income under section HB 1,—
“(a)
An amount derived in the relevant period by the company that—
“(i)
Is derived from a transaction or other arrangement with any other company that is a member of the same consolidated group;
“(ii)
Would not be gross income if the company and the other company were one company,—
shall not be gross income except to the extent that—
“(iii)
It arises by virtue of a disposition of trading stock of the company; or
“(iv)
It arises under section EH 4 by virtue of a disposition of a financial arrangement to which the accruals rules apply; and
“(b)
Any expenditure or loss incurred in the relevant period by the company that—
“(i)
Is incurred by virtue of a payment or disposition to, or other transaction or arrangement with, any other company that is a member of the consolidated group;
“(ii)
Would not be allowed as a deduction if the company and the other company were one company,—
shall not be allowed as a deduction except—
“(iii)
To the extent that it arises by virtue of an acquisition of trading stock by the company; or
“(iv)
For the purposes of and in accordance with section FD 10;
“(c)
Where any expenditure or loss or depreciation incurred in the relevant period by the company (not being expenditure or loss that is not allowed as a deduction by virtue of paragraph (b))—
“(i)
Would not be allowed as a deduction but for this paragraph;
“(ii)
Would be allowed as a deduction if the consolidated group were one company by virtue of any connection between the incurring of that expenditure or loss or depreciation and the deriving of gross income or the carrying on of any business by any other member of the consolidated group,—
the expenditure or loss or depreciation shall be allowed as a deduction for the relevant period;
“(d)
Where any expenditure or loss or depreciation incurred in the relevant period by the company (not being expenditure or loss that is not allowed as a deduction by virtue of paragraph (b))—
“(i)
Would be allowed as a deduction but for this paragraph;
“(ii)
Would not be allowed as a deduction if the consolidated group were one company,—
the expenditure or loss or depreciation shall not be allowed as a deduction for the relevant period, except to the extent that it is interest in respect of money borrowed from a person that is not a member of the consolidated group, and—
“(iii)
Is allowed as a deduction under section DD 1(b)(iii); or
“(iv)
Would be allowed as a deduction under section DD 1(b)(iii) if the company were deemed for the purposes of that section to have used the money borrowed (to the extent of the actual acquisition cost) to acquire certain shares in fact acquired by another member of the consolidated group using (having regard to interposed intra-group borrowings) the money borrowed;
“(e)
Where any amount derived in the relevant period by the company—
“(i)
Would not be gross income but for this paragraph;
“(ii)
Would be gross income of the consolidated group if it were one company, by virtue of any purpose for which any property was acquired or any connection between that amount and the carrying on of a business by any other member of the consolidated group or otherwise,—
the amount shall be treated as gross income for the relevant period;
“(f)
In applying any provision of this Act (such as section EH 1(3)) whose application is dependent upon whether a specified limit is or is not exceeded, the consolidated group shall be treated as if it were a single company.”.
263 Special partnerships
(1)
Section HC 1(2), (3), (4) and (5) are replaced by:
“(2)
Notwithstanding anything in this Act, where in any income year a special partnership sustains a partnership loss,—
“(a)
No deduction shall be allowed to any partner for any outgoing of the partnership;
“(b)
The partnership gross income shall be deemed not to have been derived by the partners.
“(3)
A special partnership which has in any income year sustained a partnership loss (in this subsection referred to as the ‘loss’) shall, for the purposes of this section, be entitled to claim that,—
“(a)
The loss be carried forward to the income year immediately succeeding the income year in which the loss arose and offset against the partnership net income (if any) for that immediately succeeding income year so far as that income extends;
“(b)
So far as it cannot then be offset the loss be carried forward from that immediately succeeding year to the next succeeding income year and offset against the partnership net income (if any) for that next succeeding income year, and so on.
“(4)
Where partnership losses that arose in 2 or more income years are carried forward in accordance with the provisions of this section those losses shall be offset in the same order as those losses were incurred.
“(5)
If a special partnership claims, in accordance with subsection (3), to carry forward the whole or part of a partnership loss that arose in any income year to any later income year, the claim shall not be allowed unless the Commissioner is satisfied that, if at all times for the purposes of this Act,—
“(a)
The partnership had been a company; and
“(b)
The respective interests of partners in the partnership’s certified capital had been shares in that company held by those partners,—
that partnership loss or part loss could have been carried forward to that later income year in accordance with the provisions of sections IE 1 and IF 1.”.
(2)
Section HC 1(6) and (7) are replaced by:
“(6)
Where any partnership loss carried forward by a special partnership is offset against partnership net income for any income year, in accordance with subsection (3), each partner in the partnership shall be allowed as a deduction in that income year, an amount equal to each partner’s share of the amount of partnership loss so offset.
“(7)
Where the amount of any debt incurred by a special partnership has been taken into account in calculating any partnership loss of the special partnership in any income year, and subsequently the liability of the special partnership in respect of that debt has been remitted or cancelled in whole or in part, the offset available under subsection (3) shall be reduced by the amount so remitted or cancelled. For the purposes of giving effect to this subsection, the Commissioner may at any time alter any assessment, notwithstanding the time bar.”.
(3)
Section HC 1(10) is replaced by:
“(10)
Where a special partnership has furnished a return in respect of any income year and,—
“(a)
The return shows, or purports to show, that the partnership has sustained a partnership loss in the income year; or
“(b)
Notwithstanding that the return shows, or purports to show, that in the income year the partnership has not sustained a partnership loss in the income year, the Commissioner ascertains that the partnership sustained a partnership loss for the income year,—
the Commissioner shall determine the amount of the partnership loss of the partnership and, for the purposes of sections 92 and 111 of the Tax Administration Act 1994, that determination of loss shall be deemed to be a determination of net loss (within the meaning of those sections) as if the special partnership were a taxpayer.”.
(4)
Section HC 1(12) is replaced by:
“(12)
In this section:
“‘Additional capital’, in relation to a special partnership, means—
“(a)
Any capital contributed by a partner;
“(b)
Any capital used, or to be used, for the acquisition of any asset, other than trading stock, for use in the business of the partnership:
“‘Allowance’ means an amount for which a deduction is allowed under this Act, other than any amount of expenditure or loss:
“‘Outgoing’ means any expenditure, loss, or allowance:
“‘Partnership gross income’, in relation to a special partnership and an income year, means the gross income of the partners for the income year in respect of the business or businesses of the partnership:
“‘Partnership loss’, in relation to a special partnership and to an income year, means the amount that would be the net loss of the partnership for the income year if the partnership was a taxpayer resident in New Zealand deriving the gross income and incurring the outgoings of the partners in carrying on the business or businesses of the partnership:
“‘Partnership net income’, in relation to a special partnership and an income year, means the amount that would be the net income of the partnership for the income year if the partnership was a taxpayer resident in New Zealand deriving the gross income and incurring the outgoings of the partners in carrying on the business or businesses of the partnership:
“‘Registered’, in relation to a special partnership formed in a country or territory outside New Zealand, means registered in that country or territory by a procedure similar or equivalent to the registration of a special partnership under Part II of the Partnership Act 1908:
“‘Special partnership’ means—
“(a)
A special partnership registered under Part II of the Partnership Act 1908;
“(b)
An association of persons registered as a special partnership under Part II of the Partnership Act 1908;
“(c)
In relation to any country or territory outside New Zealand, a partnership or an association of persons formed in that country or territory which, if formed in New Zealand, would be registered as a special partnership under Part II of the Partnership Act 1908.”.
264 Assessment of partners, co-trustees, and joint venturers
Section HD 1 is replaced by:
“HD 1
“(1)
Where amounts are derived or incurred by 2 or more persons jointly, whether as partners, co-trustees, or otherwise,—
“(a)
In the case of co-trustees, they shall include such amounts that would be gross income or allowable deductions if the co-trustees were a single taxpayer resident in New Zealand in a joint calculation of taxable income and shall be jointly and severally liable for the resulting income tax liability:
“(b)
In the case of partners there shall be no joint assessment, but each partner shall, in calculating their taxable income, take into account their share of the gross income that they jointly derive from the firm:
“(c)
In any case other than that of co-trustees or partners, each person jointly deriving or incurring such amounts shall, in calculating their taxable income, take into account their share of the gross income that they jointly derive.
“(2)
This section shall not apply with respect to the gross income derived by, and allowable deductions allowed to, an airport operator from activities that, in relation to that airport operator, are activities as an airport operator.”.
265 Group investment funds
Section HE 2(1) is replaced by:
“HE 2
“(1)
The trustee of a group investment fund for any income year shall make separate returns of—
“(a)
Category A income of the group investment fund; and
“(b)
Category B income of the group investment fund.
“(1a)
Any gross income derived by the trustee of a group investment fund from the investments and funds of the group investment fund shall, to the extent that,—
“(a)
The gross income is category A income of the group investment fund, be deemed to be gross income to which the trustee of the group investment fund is beneficially entitled:
“(b)
The gross income is,—
“(i)
Gross income derived from the investments and funds of any designated group investment fund; or
“(ii)
Category B income of the group investment fund,—
be deemed to be gross income derived by a trustee and the trustee of the group investment fund shall make returns and be assessable accordingly in accordance with sections CL 2, DI 3, GC 14, HH 1 to HH 6, HK 14, and HZ 2.”.
266 Profits of mutual associations in respect of transactions with members
(1)
Section HF 1(1), (2), (3), (4) and (5) are replaced by:
“HF 1
“(1)
Where in any income year an association enters into transactions with its members, or with its members and other persons, any amounts derived in that income year from those transactions which would be gross income of the association if the transactions were not of a mutual character shall be deemed to be gross income of the association derived in that income year (such an association being referred to in this section as ‘an association to which this section applies’).
“(2)
Subject to subsection (3), the Commissioner shall in any income year allow a deduction to an association to which this section applies for the lesser of—
“(a)
The aggregate of the amounts of rebates, being rebates which—
“(i)
Are paid by the association to its members in respect of their transactions with the association in that income year, being transactions that are taken into account in determining the annual gross income of the association; and
“(ii)
Are calculated by reference to the amounts of those transactions, whether or not, in any case, any rebate is limited or reduced by reference to the amount of the share or interest of a member in the capital of the association;
“(b)
An amount calculated in accordance with the following formula—
“a – (b + c)
“where—
“a
is the gross income attributable to those transactions, as determined by the Commissioner:
“b
is the total of the allowable deductions to which the association is entitled other than under this subsection and which are determined by the Commissioner to be attributable to that gross income; and
“c
is the total of any amounts distributed to members in that income year by way of a cash distribution in respect of which a determination is made under section ME 35(1)(4
“(3)
Where an association to which this section applies is a statutory producer board,—
“(a)
Any amount allowed as a deduction under subsection (2) in respect of rebates paid by the producer board shall be the amount specified in subsection (2)(a), and nothing in subsection (2)(b) or subsection (4) or the proviso to subsection (5) shall apply in relation to any such deduction; and
“(b)
The statutory producer board may elect whether the amount shall be allowed as a deduction in the income year in which the rebates were paid, or for the income year in which occurred the transactions in respect of which the rebates were paid; and
“(c)
Where any member of the statutory producer board to whom such a rebate is paid is itself a mutual association to which this section applies, the amount of the rebate shall be deemed to be gross income of that association derived in the income year in which the rebate is allowed as a deduction to the statutory producer board in accordance with its election under paragraph (b).
“(4)
For the purpose of making a determination under subsection (2)(b), the Commissioner may apportion any expenditure or loss (being expenditure or loss that is allowed as a deduction under this Act) incurred by the association in the income year, in such manner as the Commissioner considers appropriate, between the transactions referred to in paragraph (a)(i) of that subsection and the transactions (being transactions that are taken into account in determining the annual gross income of the association) in that income year with persons other than its members.
“(5)
Where any rebate or part of a rebate paid to any member by an association to which this section applies is paid in respect of any transactions which are of such a nature that any payments in respect of those transactions by that member to the association, or by the association to that member, would be taken into account in determining the taxable income of that member, that rebate, or that part of a rebate, shall be gross income (otherwise than as a dividend) of that member:
Provided that where that rebate, or that part of a rebate, exceeds so much as is attributable to it of the deduction allowed under subsection (2), the amount of the excess shall be deemed to be a dividend within the meaning of section CF 2 derived by that member.”.
(2)
In section HF 1(8), the portion before paragraph (a) is replaced by:
“(8)
Every reference in this section to transactions as being transactions of an association with its members or transactions of members of an association with the association and as being, in either case, transactions that are taken into account in determining the annual gross income of the association shall be taken as a reference to transactions of any one or more of the following classes:”.
267 Qualifying company regime
Section HG 1(c) and (d) are replaced by:
“(c)
Make distributions to its shareholders of its gains in such a fashion that the distributed gains are treated for taxation purposes; and
“(d)
Where the company has only one class of shares, allocate its net losses to its shareholders in such a fashion that the net losses are treated for taxation purposes,—”.
268 Shareholder elections
(1)
Section HG 4(1)(b)(i) and (ii) are replaced by:
“(i)
The income tax liability for that income year of that company; and
“(ii)
Any income tax payable in respect of that income year in accordance with an election by the company under this section as a shareholder in another company,—”.
(2)
In section HG 4(2)(b), the portion before subparagraph (i) is replaced by:
“(b)
Elected to be personally (in the case of any such beneficiary or natural person (who may also be the trustee) assuming liability on behalf of beneficiaries) or to the extent of the net assets subject to the trust (in the case of the trustee), jointly and severally liable in respect of each income year during which the election is at any time in effect for such percentage of any income tax liability for that income year of the company and of any income tax for which the company may be liable in respect of that income year in accordance with an election by the company under this section as a shareholder in another company, as is equal to—”.
(3)
Section HG 4(3)(b)(ii) is replaced by:
“(ii)
Elected to be personally and (in the case of more than one majority shareholder) jointly and severally liable for each income year during which the election remains in effect for such percentage of any income tax liability for that income year of the company and of any income tax payable by the company in respect of that income year by virtue of an election by the company under this section as a shareholder in another company, as is equal to the minority shareholder’s effective interest in the company at the time of election and subsequently from time to time,—”.
269 Taxation of shareholders in qualifying companies
(1)
Section HG 9(2) and (3) are replaced by:
“(2)
Where for any income year a loss attributing qualifying company has a net loss, the provisions of sections HG 16 and HG 17 shall apply to the shareholders in the company in relation to that loss.
“(3)
Notwithstanding any other provision of this Act, where in any income year any shareholder in a qualifying company incurs any interest expenditure in respect of money borrowed to acquire shares in that company, no deduction shall be allowed under section DD 1 for that interest expenditure to the extent of the amount of any non-cash dividends (other than taxable bonus issues) which that shareholder, or any person associated with the shareholder, derives from that company in that income year.”.
(2)
Section HG 9(4) is replaced by:
“(4)
For the purpose only of determining whether a deduction is allowed under section DD 1 for interest expenditure incurred in respect of money borrowed to acquire shares in a qualifying company—
“(a)
Section HG 13 shall be treated as not deeming to be exempt income distributions from a qualifying company to a shareholder of that company; and
“(b)
Those distributions shall be treated as excluded from the definition of ‘dividends’ under section CF 2.”.
270 Taxation of qualifying company
Section HG 10 is replaced by:
“HG 10
Notwithstanding any other provision of this Act,—
“(a)
Section CB 10 shall not apply to treat as exempt income any dividend derived by a company which has been at any time before the date of derivation a qualifying company, except to the extent that the dividend is a dividend to which section CB 10(1) applies; and
“(b)
Section IG 2(2) shall not apply to permit any qualifying company to offset against its net income any amount on account of—
“(i)
The loss of any other company; or
“(ii)
A payment made to any other company,—
unless the other company is also a qualifying company.”.
271 Taxation on election to become qualifying company
(1)
In section HG 11(2), the definition of quantity “b”
is replaced by:
“b
is the aggregate of the gross income which would be derived by the company at the relevant time from taking the actions described in paragraphs (i) and (ii) of item ‘a’, reduced by all amounts of expenditure or loss incurred in taking such actions that would be allowed as a deduction under this Act; and”.
(2)
In section HG 11(2), the definition of quantity “d”
is replaced by:
“d
is the basic rate of income tax for companies, expressed as a decimal, stated in clause 5 of Part A of Schedule 1 and applying in the income year of the company in which the relevant time falls.”.
(3)
Section HG 11(3) is replaced by:
“(3)
Where in any income year (in this section referred to as the ‘relevant year’) any company not a qualifying company becomes a qualifying company, that company shall not be entitled by virtue of any of sections IE 1, IE 3, IE 4, IF 1, and IF 3 to carry forward any net losses of that company for income years before the relevant year to the relevant year or any later income year or years.”.
272 Payment of qualifying company election tax
The portion of section HG 12(2) before paragraph (a) is replaced by:
“(2)
Subject to this section, and to sections 94 and 139b of the Tax Administration Act 1994, the provisions of this Act and of the Tax Administration Act 1994, so far as they are applicable and with any necessary modifications, shall apply with respect to qualifying company election tax, and to any late payment penalty payable under section 139b of the Tax Administration Act 1994 in respect of that qualifying company election tax as if it were income tax imposed under section BB 1 of this Act, but nothing in this section shall be so construed as to include qualifying company election tax or any such late payment penalty in the expressions ‘income tax’ or ‘tax’ for the purposes of—”.
273 Dividends from qualifying company
(1)
In section HG 13(1)(a), the portion before subparagraph (i) is replaced by:
“(a)
That dividend shall be exempt income of the shareholder to the extent to which the dividend exceeds the aggregate of—”.
(2)
In section HG 13(1) in the definition of quantity “c”
in paragraph (a), “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
(3)
In section HG 13(1)(a), the portion after subparagraph (ii) is replaced by:
“and the amount of any such imputation credit or dividend withholding payment credit shall, for the purposes of this Act, be deemed to be attached to that part of the dividend which is not exempt income.”.
(4)
Section HG 13(1)(aa) is replaced by:
“(aa)
Section CB 10 shall not apply to treat that dividend as exempt income; and”.
(5)
Section HG 13(5)(c)(i) is replaced by:
“(i)
Detail the extent (if any) to which any of the dividends are gross income and the extent (if any) to which any of the dividends are exempt income by virtue of subsection (1) of this section; and”.
(6)
Section HG 13(5)(d)(i) is replaced by:
“(i)
Detail the extent (if any) to which any of the dividends are gross income and the extent (if any) to which any of the dividends are exempt income by virtue of subsection (1) of this section.’.
274 Net losses of loss attributing qualifying company to be attributed to shareholders
Section HG 16 is replaced by:
“HG 16
“(1)
Subject to section HG 17, where a loss attributing qualifying company has a net loss for any income year, then, for the purposes of this Act—
“(a)
Each shareholder who has an effective interest in the company for that income year shall be deemed to incur an amount of loss equal to the net loss of the company for that income year multiplied by the shareholder’s effective interest in the company for that income year; and
“(b)
Subject to subsection (2), the amount of loss deemed to be incurred by each shareholder shall be treated for the purposes of this Act as if it were a loss incurred by that shareholder in deriving gross income of that shareholder for that income year (except to the extent that the net loss of the company includes an attributed foreign loss or a foreign investment fund loss, in either of which cases the shareholder’s amount of attributed loss shall be treated for the purposes of this Act as if it were attributed foreign loss or foreign investment fund loss, as the case may be, of the shareholder); and
“(c)
The company shall not be entitled to carry that net loss forward in accordance with any of sections IE 1, IE 3, IE 4, and IF 1 to any income year succeeding that income year, but without prejudice to any right of the company under this Act to carry forward any other net loss.
“(2)
Where, in respect of any company, any shareholder in that company, and any income year,—
“(a)
Either the company, the shareholder, or both have a non-standard balance date for that income year; and
“(b)
The company has a later balance date for the income year than the shareholder; and
“(c)
By reason of the difference in balance dates it is not practicable for the shareholder to ascertain, within the time allowed in accordance with section 37 of the Tax Administration Act 1994 for the furnishing of the shareholder’s return of income for that income year, the amount of any net loss of the company attributable to the shareholder under this section in respect of that income year; and
“(d)
The shareholder elects that this subsection shall apply by applying accordingly the provisions of this Act,—
the amount of any net loss of the company so attributable to the shareholder in respect of that income year shall, notwithstanding section 38 of the Tax Administration Act 1994, be treated for the purposes of this Act as if it were incurred by the shareholder on the first day of the immediately succeeding income year of the shareholder.
“(3)
Notwithstanding subsections (1) and (2), where and to the extent that, in relation to any loss attributing qualifying company and any income year of that company,—
“(a)
Any shareholder has a part of that company’s net loss attributed to that shareholder in accordance with subsections (1) and (2); and
“(b)
That company’s net loss results in a reduction in the aggregate value of shares in that company; and
“(c)
That shareholder suffers no, or substantially no, part of such reduction, due to any factor or factors, including any right of the shareholder or any other person to sell any thing, or any right of any other person to require that shareholder or any other person to sell any thing,—
the shareholder shall, for the purposes of this Act in respect of that income year, be deemed to have no part of that company’s net loss attributed to that shareholder in accordance with this section.
“(4)
Where the attribution of any amount of a company’s net loss is denied to a shareholder under subsection (3), that amount—
“(a)
Shall not be attributed to any other shareholder; and
“(b)
May not be carried forward by the company under any of sections IE 1, IE 3, IE 4, and IF 1.”.
275 Attributed foreign losses and foreign investment fund losses
(1)
Section HG 17(1)(a) and (b) are replaced by:
“(a)
The amount of any attributed foreign loss and any foreign investment fund loss of the company for the income year shall not be included within any net loss attributed to and deemed to be incurred by shareholders under section HG 16(1)(a) and (b); and
“(b)
The company may carry that amount of attributed foreign loss or foreign investment fund loss forward to a succeeding income year subject to and in accordance with section IE 3 or section IE 4.”.
(2)
Section HG 17(4)(a) and (b) are replaced by:
“(a)
Has been carried forward under section IE 3 or section IE 4 to the income year in which the revocation takes effect; and
“(b)
Arose for the company in an earlier income year.”.
276 Interpretation
(1)
In section HH 1(6), the portion before paragraph (a) is replaced by:
“(6)
For the purposes of this section and the trust rules, no trust shall be a charitable trust in relation to any income year if, in that income year, a business is carried on by or on behalf of the trustees of that trust and, in the carrying on of that business, any benefit or advantage, whether or not in money or money’s worth, or any gross income of any of the kinds referred to in section CC 1, Subpart CD, and sections CE 1, CE 3, CF 1, CG 1, CH 1a, FF 3, and FF 4 is able to be afforded to, or received, gained, achieved, or derived by any person—”.
(2)
Section HH 1(6)(g) and (h) are replaced by:
“(g)
Gross income shall be deemed not to be derived by any person of any of the classes referred to in paragraphs (a) to (d) in any case where the income consists of interest on money lent that, in the opinion of the Commissioner, is payable at not more than current commercial rates, having regard to the nature and term of the loan;
“(h)
A person shall not, by reason only that the person renders professional services to any trust or company by which a business is carried on, be considered to be able to determine, or to materially influence the determination of, the nature or the amount of any benefit or advantage or gross income afforded to, or received, gained, achieved, or derived by that person or the circumstances in which it is or is to be so received, gained, achieved, afforded, or derived, in any case where that ability to so determine or to so materially influence results from the rendering by that person, in the course of and as part of the carrying on as a business of a professional public practice by that person, of professional services to the trust or company by which the business first mentioned in this paragraph is carried on; and, for the purposes of this paragraph, the Public Trustee, the Maori Trustee, and any trustee company within the meaning of the Trustee Companies Act 1967, shall each be deemed to be a person carrying on as a business a professional public practice.”.
(3)
Section HH 1(7) is replaced by:
“(7)
For the purposes of this section and the trust rules, where any property of the kinds described in paragraphs (a) to (d) of the definition of ‘corpus’ is settled on a trust, the property shall, unless this Act otherwise requires, be deemed to be gross income derived by a trustee of that trust in the income year in which it was settled on that trust.”.
277 Trusts settled by persons before becoming resident
(1)
Section HH 2(1) is replaced by:
“HH 2
“(1)
Where any settlor of a trust (being a natural person) becomes resident in New Zealand and had a distribution been made from that trust on the day immediately preceding the day on which the settlor became resident in New Zealand that trust would have been in relation to that distribution a foreign trust, any settlor, trustee, or beneficiary of the trust may, within 12 months of the day on which the settlor first became resident in New Zealand, elect under section HH 4(7) to satisfy the income tax liability in respect of the taxable income of the trustee of the trust.”.
(2)
In section HH 2(4), the portion before paragraph (a) is replaced by:
“(4)
For the purposes of subsections (2) and (3), the income, capital profits, or capital gains derived in the part of the income year before the election to pay tax was made or before the election expiry date, as the case may be, shall be calculated at the option of any trustee, settlor, or beneficiary of the trust who is required to satisfy the income tax liability in respect of the taxable income of the trustee of the trust as—”.
278 Gross income assessable to beneficiaries
Section HH 3 is replaced by:
“HH 3
“(1)
The gross income of any person in any income year includes any beneficiary income and any taxable distribution derived other than from a non-qualifying trust by that person in that income year.
“(2)
Where any beneficiary derives in any income year, beneficiary income or a taxable distribution, the trustee shall in respect of that beneficiary income or taxable distribution be required to satisfy the income tax liability of the beneficiary as agent of the beneficiary.
“(3)
Notwithstanding any other provision of this Act, where any person resident in New Zealand ceases to be resident in New Zealand and, within a period of not more than 5 years from the day upon which that person ceased to be resident, that person again becomes resident in New Zealand, for the purposes of this section that person shall be deemed to derive, on the day on which that person again becomes resident in New Zealand, any amount which would have been gross income of the person, if the person had during that period remained in New Zealand, as beneficiary income from a foreign trust or a non-qualifying trust or taxable distributions derived by that person during the period commencing with the day on which that person ceased to be resident in New Zealand and ending on the day on which that person again became resident in New Zealand:
Provided that this subsection shall not apply to beneficiary income or taxable distributions derived by that person prior to 16 December 1988 (being the date upon which the Income Tax Amendment Act (No. 5) 1988 received the Royal assent).
“(4)
Where any person derives in any income year any taxable distribution from a trust which is, in relation to that distribution, a non-qualifying trust, that taxable distribution shall not be included in the gross income of the person and the person shall be liable for tax by way of an income tax in respect of that taxable distribution at the rate specified in Schedule 1:
Provided that where in that income year the person has any net loss or net loss carried forward to which relief would be given under section IE 1 or section IF 1, that person shall be entitled to subtract from that taxable distribution, an amount calculated in accordance with the following formula:
_eqn05.JPG)
“where—
“a
is such part of the net loss or net loss carried forward as the person claims shall be taken into account by virtue of this proviso; and
“b
is the minimum rate specified in Schedule 1 for income tax on taxable income of trustees of trusts expressed as a decimal; and
“c
is the rate specified in Schedule 1 first mentioned in this subsection expressed as a decimal,—
and to the extent to which any net loss or net loss carried forward is taken into account by virtue of this proviso, the loss may not be offset by the person against the person’s net income or carried forward by the person.
“(5)
Distributions (not being beneficiary income) derived by any beneficiary in that beneficiary’s capacity as beneficiary in any income year from any trust that is in relation to that distribution a qualifying trust shall not be gross income of the beneficiary.
“(6)
This section does not apply to a Maori authority or a Maori to whom Part HI applies.”.
279 Trustee income
Section HH 4 is replaced by:
“HH 4
“(1)
Subject to this section and sections CL 2 and DI 3, a trustee is required to satisfy the income tax liability in respect of the taxable income of the trustee as if the trustee were an individual beneficially entitled to the trustee income.
“(2)
A trustee is not entitled—
“(a)
To any rebate of income tax or to any deduction by way of special exemption; or
“(b)
To be a cash basis holder under section EH 3 (otherwise than to the extent specified in subsection (8) of that section in relation to the estate of a deceased person).
“(3)
Subject to subsection (7) and section HH 2, if a trustee who is not resident in New Zealand derives in an income year any amount from outside New Zealand that would be gross income if derived by a resident of New Zealand, that amount is deemed to be gross income of the trustee if at any time in the income year—
“(a)
Any settlor of the trust is resident in New Zealand; or
“(b)
The trust is a superannuation fund; or
“(c)
Any trustee of the trust was resident in New Zealand and the trust is a testamentary trust or an inter vivos trust where any settlor of the trust died resident in New Zealand, whether in that income year or otherwise.
“(3a)
In calculating the taxable income of a trustee to whom subsection (3) applies, and for no other purpose, the trustee is deemed not to be a non-resident for the purposes of section BD 1(2)(c) and is deemed to be resident in New Zealand for the purposes of sections EH 9(e), LC 1 and MF 11, the FIF rules, and the international tax rules.
“(3b)
If a trustee resident in New Zealand derives in an income year any foreign sourced amount that amount is deemed not to be gross income if no settlor of the trust is resident in New Zealand at any time during the income year and that trust is neither—
“(a)
A superannuation fund; nor
“(b)
A testamentary trust or an inter vivos trust where any settlor of the trust died resident in New Zealand, whether in that income year or otherwise.
“(4)
Subject to subsection (5), where, in relation to any trust (not being a charitable trust) and any income year, a trustee of the trust derives trustee income, and a settlement was made to or for the benefit of the trust or on the terms of the trust by any person after 17 December 1987 (whether or not that person or any other person may have also made a settlement on the terms of that trust on or before 17 December 1987), any settlor of the trust who is resident in New Zealand at any time during that income year shall be liable as agent of the trustee for any income tax payable by the trustee (other than income tax payable by the trustee in the trustee’s capacity as agent) and, if there is more than one such settlor, those settlors shall, in respect of that income tax payable, be jointly and severally so liable.
“(5)
Subsection (4) shall not apply to—
“(a)
Any settlor of a trust in any income year where at all times during that income year (or, where a settlement is first made to or for the benefit of that trust or on the terms of that trust during that income year, at all times from the day of that settlement until the end of that income year) a trustee of that trust is resident in New Zealand; or
“(b)
Any settlor of a superannuation fund; or
“(c)
Any settlor of a trust (being a natural person) who was at the time of any settlement by that settlor on the trust not resident in New Zealand and who had not at the time of any settlement previously (at any time after 17 December 1987) been resident in New Zealand, unless the settlor elects to satisfy the income tax liability in respect of the taxable income of the trustee under subsection (7); or
“(d)
Any settlor of a trust to the extent to which that settlor can establish to the satisfaction of the Commissioner by making full disclosure of all relevant facts that the liability of that settlor to satisfy the income tax liability of the trustee exceeds the liability which that settlor should bear by comparison to other persons who have made a settlement to or for the benefit of the trust or on the terms of that trust having regard to the respective settlements made by that settlor and those other persons; or
“(e)
Any settlor of a trust to the extent to which the trustee income is derived by virtue of the application of the qualified accruals rules to any amounts remitted by the settlor under any financial arrangement where section EH 4 applies:
Provided that paragraph (d) shall not apply in determining the nature and extent of the obligations of the trustee of the trust and whether those obligations have been satisfied for the purposes of the definition of ‘qualifying trust’ and the application of that definition.
“(6)
Where in any income year an amount would be gross income under subsection (3) if not for the application of this subsection, and—
“(a)
Either—
“(i)
No settlement was made to or for the benefit of the trust or on the terms of the trust after 17 December 1987 and, where any election has been made under section HZ 2 to pay income tax on trustee income, that election has not been made by the trustee; or
“(ii)
The only settlements made to or for the benefit of the trust or on the terms of the trust have been made by settlors who, at the time of the settlement, were not resident in New Zealand nor had previously (at any time after 17 December 1987) been resident in New Zealand and, where an election has been made under section HZ 2 to pay income tax on trustee income, that election has not been made by the trustee; and
“(b)
The trustee is at all times during that income year resident outside New Zealand,—
the amount shall not be gross income under subsection (3):
Provided that this subsection shall not affect the income tax liability of any settlor of a trust under sections HH 1 and HH 2 and the trust rules:
Provided also that for the purpose of determining whether a trust is or remains a qualifying trust or is deemed to be a qualifying trust, and for the purpose of the application of the definition of ‘qualifying trust’, this subsection shall not apply in determining whether the trustee’s obligations in relation to that liability have been satisfied.
“(7)
In relation to any trust and any income year, any trustee, settlor, or beneficiary of a trust may furnish to the Commissioner within the prescribed period for furnishing an annual return of income for that income year, or within such other period as may be specified in section HH 2, an election to satisfy the income tax liability of the trustee for that income year or from the date of the election and, if an election is so made, the trustee, settlor or beneficiary shall be liable for any income tax payable by the trustee (other than income tax payable in the trustee’s capacity as agent) and that election shall apply in respect of that income year or from the date of the election, and in respect of all succeeding income years.
“(8)
This section does not apply to a Maori authority or a Maori to whom Part HI applies.”.
280 Existing trusts becoming subject to tax
Section HH 5 is replaced by:
“HH 5
Where, in relation to any trust and any income year, amounts derived by the trustee of that trust on or after any date in that income year are trustee income, but would not have been trustee income had they been derived immediately before that date (other than only as non-resident withholding income),—
“(a)
The cost for the purposes of this Act at that date of the premises, plant, machinery, equipment, and trading stock of that trust shall be deemed to be, at the option of any person who is liable for any income tax payable by the trustee,—
“(i)
The historical cost of the asset, less accumulated depreciation (if any), or other value at that date used for the purposes of income tax calculations in any country or territory in which there has been a liability to income tax in respect of the trustee income of the trust (being a value not higher than the market value at that date); or
“(ii)
The value which would be used for the purposes of this Act at that date calculated as if the trustee income of that trust had at all times been gross income under this Act (other than only as non-resident withholding income):
“(b)
The acquisition price for the purposes of this Act of any financial arrangement at that date shall be, at the option of any person who is liable for any income tax payable by the trustee,—
“(i)
The market value of the financial arrangement at that date; or
“(ii)
The adjusted base price, being in the case of the issuer of a financial arrangement, the acquisition price of that financial arrangement together with all deemed expenditure incurred by the issuer, less consideration paid by the issuer in relation to that financial arrangement prior to that date, and in the case of the holder of a financial arrangement, the acquisition price of that financial arrangement together with all deemed gross income derived by the holder, less consideration received by the holder in respect of that financial arrangement prior to that date.”.
281 Gross income received by trustee after death of deceased person
Section HH 8 is replaced by:
“HH 8
Any amount received in any income year by the trustee of the estate of a deceased person shall be deemed to be gross income derived by the trustee in that year if it does not represent gross income derived by the deceased person during that person’s lifetime, but would have been included in that person’s gross income if that person had been alive when it was received.”.
282 Distributions and income of Maori authorities
Section HI 1(2) and (3) are replaced by:
“(2)
Any amount distributed by a Maori authority to a Maori shall be deemed to be distributed out of income except to the extent to which the Commissioner determines that the amount does not represent income derived by the Maori authority:
Provided that, where the distribution is made in the course of the winding up or liquidation or termination of a trust or authority, the amount distributed shall be deemed to be distributed out of income to the extent only to which the Commissioner determines that the amount represents either income derived in the year in which the distribution is made or income derived in a previous year which has not been taken into account in the calculation of taxable income of the Maori authority.
“(3)
For the purposes of this Act, the gross income derived by a Maori authority that is a Maori incorporation shall be deemed to be derived in trust for its shareholders.”.
283 Maori authorities and Maori
Section HI 2 is repealed.
284 Tax in respect of Maori authorities with more than 20 beneficiaries
Section HI 3 is replaced by:
“HI 3
“(1)
This section shall apply where gross income is derived or held by a Maori authority in respect of any trust or authority during any income year in trust for or on behalf of or for the benefit of any number of Maori exceeding 20 at the end of the year.
“(2)
Any amount distributed by the Maori authority to any Maori during any income year out of income shall be deemed to be dividends derived by the Maori in that income year (whether it was derived by the Maori authority in that year or any previous year).
“(3)
A Maori authority is in any income year allowed a deduction in respect of all amounts (if any) distributed by the Maori authority to any Maori in that income year out of income.
“(4)
Where the amount distributed by the Maori authority to any Maori during any income year out of income exceeds the amount that would be the net income of the Maori authority for that year in the absence of this section, the amount of the excess may be allowed as a deduction to the Maori authority for any of the 4 immediately preceding income years and the income tax liability of the Maori authority shall be assessed or reassessed accordingly.”.
285 Tax in respect of Maori authorities with 20 or fewer beneficiaries
Section HI 4 is replaced by:
“HI 4
“(1)
Where gross income is derived by a Maori authority in respect of any trust or authority during any income year in trust for or on behalf of any number of Maori not exceeding 20 at the end of the year, this section shall apply with respect to income tax.
“(2)
The amount that would be the net income or net loss of the Maori authority if the sources of the gross income referred to in subclause (1) were its only sources of gross income shall be included in the calculation of taxable income of the Maori authority as trustee for the Maori and also included in the calculation of the taxable income of each Maori according to that Maori’s interest in the trust or authority as beneficiary income and section HH 3 shall apply accordingly. The Maori authority shall in respect of that income be deemed to be the agent of each Maori, and each Maori as principal as well as the Maori authority as that Maori’s agent shall be assessable and liable for income tax in respect of his or her interest in that income accordingly, and all the provisions of this Act and of the Tax Administration Act 1994 as to agents shall, so far as applicable, apply accordingly.”.
286 Adjustments where section HI 3 or section HI 4 ceases to apply by reason of change in number of beneficiaries
Section HI 5 is replaced by:
“HI 5
Where during any income year the number of Maori having a beneficial interest in the income of a Maori authority in respect of any trust or authority—
“(a)
Decreases so that at the end of the year section HI 3 does not apply; or
“(b)
Increases so that at the end of the year section HI 4 does not apply,—
the Commissioner may make such adjustments in the assessments of income tax as the Commissioner considers just and reasonable, having regard to all relevant circumstances.”.
287 Agent to make returns and be assessed as principal
Section HK 1 is replaced by:
“HK 1
Any person who is an agent for a principal shall, in the person’s capacity as agent for that principal, be deemed to be a separate taxpayer with respect to the income in respect of which the person is an agent and shall make returns and be assessable accordingly, save that the agent shall be entitled to no special exemption or rebate other than such exemption or rebate (if any) as the agent’s principal may be entitled to.”.
288 Rate and amount of tax payable by agent
Section HK 2 is replaced by:
“HK 2
Except where otherwise expressly provided by this Act, the rate of tax for which an agent shall be so assessed and liable shall be determined by reference to the taxable income of the principal, but it shall be charged and payable in the same proportion as the income subject to section HK 1 bears to the taxable income of the principal.”.
289 Agents to be personally liable for payment of tax
Section HK 7 is replaced by:
“HK 7
“(1)
Every person who is an agent shall be personally liable for the income tax liability of the person in respect of the person’s taxable income as agent.
“(2)
When the Commissioner is satisfied that an agent has no money of the agent’s principal with which the agent can pay the tax, and that the agent has not paid away any such money after notice of the assessment of the tax, and that immediate enforcement of payment by the agent would be a cause of hardship, the Commissioner may set a new due date for payment of the tax assessed as payable in the notice of assessment.”.
290 Company deemed agent of debenture holders
Section HK 12 is replaced by:
“HK 12
Save as otherwise provided in sections FC 1 and HK 13, every company which has issued debentures, whether charged on the property of the company or not, shall for the purposes of this Act and the Tax Administration Act 1994 be the agent of all debenture holders, whether absentees or not, in respect of all gross income derived by them from those debentures, and shall make returns and be assessable and liable for income tax accordingly.”.
291 Modification of agency provisions in respect of gross income from company debentures
Section HK 13 is replaced by:
“HK 13
“(1)
The duty to act as the agents of debenture holders imposed on companies by section HK 12 shall not apply with respect to debentures issued to any person resident in New Zealand if the company that has issued the debentures has supplied to the Commissioner, before it has been assessed in any year for the income tax liability in respect of taxable income calculated taking into account the gross income derived from those debentures, a certified list specifying the numbers of the debentures or other particulars sufficient to identify them, the names, addresses, and descriptions of the persons to whom the debentures have been issued, the interest derived or derivable from the debentures, and such other particulars as may be prescribed.
“(2)
Where any such list is supplied the person named in it as the holder of any debentures shall be personally responsible for the making of returns, and shall be assessable and liable for income tax (though not to the exclusion of any other person) accordingly, unless and until that person satisfies the Commissioner, before that person has been assessed for income tax in any year, that person has transferred or assigned the debentures, and has given notice to the Commissioner in the prescribed form of the name, address, and description of the transferee or assignee.
“(3)
Every person being the transferee or assignee of any debentures shall in like manner remain personally liable in respect of them (though not to the exclusion of any other person) unless and until the person has given notice to the Commissioner in the prescribed form of the transfer or assignment of the debentures.
“(4)
Any tax paid by the former holder of any debentures in respect of the taxable income calculated taking into account gross income derived from the debentures by a subsequent holder shall be deemed to be paid on behalf of that subsequent holder so far as it does not exceed the income tax liability which the subsequent holder might personally have had in respect of those debentures, and may be recovered by the former holder from the subsequent holder accordingly.”.
292 Rents, royalties, or interest derived by Maori Trustee and not distributed
Section HK 14 is replaced by:
“HK 14
If and so far as amounts of rents, royalties, or interest derived by the Maori Trustee in the Maori Trustee’s capacity as collecting and distribution agent for such amounts are not also beneficiary income, the Maori Trustee shall be assessable and liable for income tax in respect of taxable income calculated after taking into account those amounts as gross income as if the Maori Trustee were beneficially entitled to the amounts, except that the Maori Trustee shall not be entitled to any rebate of income tax under any of sections KC 1 to KC 4 or to any deduction by way of special exemption.”.
293 Recovery of tax payable in respect of alimony or maintenance
Section HK 15 is repealed.
294 Liability of agent of absentee principal for returns and tax
Section HK 16 is replaced by:
“HK 16
Every person who in New Zealand carries on any business for and on behalf of a principal who is an absentee shall for the purposes of this Act and the Tax Administration Act 1994 be the agent of that principal in respect of all gross income derived by the principal through the business so carried on in New Zealand by means of that agent, and the agent shall make returns and be assessable and liable for income tax in respect of taxable income calculated after taking into account that gross income accordingly, whether the gross income comes to the hands of the agent or not.”.
295 Partner of absentee deemed agent
Section HK 17 is replaced by:
“HK 17
Every person who in New Zealand carries on business in partnership with an absentee shall for the purposes of this Act and the Tax Administration Act 1994 be the agent of that absentee in respect of the absentee’s share of the amount that would be gross income of the business if the business were a person resident in New Zealand, and shall make returns and be assessable and liable for income tax accordingly.”.
296 Person having disposal of income deemed agent
Section HK 20 is replaced by:
“HK 20
Every person who in New Zealand has the receipt, control, or disposal of any gross income derived by a principal who is an absentee shall for the purposes of this Act and the Tax Administration Act 1994 be the agent of the principal in respect of that gross income, and shall make returns and be assessable and liable for income tax accordingly.”.
297 Company to be agent of absentee shareholders
Section HK 21 is replaced by:
“HK 21
A New Zealand company shall be the agent of all absentee shareholders and of all absentee holders of debentures to which section FC 1 or section FC 2 applies, and the company shall treat as gross income of the company and make returns in respect of all dividends paid or credited by the company to any such shareholder or debenture holder while that shareholder or debenture holder is an absentee.”.
298 Trustee of group investment fund to be agent of absentee investors
Section HK 22 is replaced by:
“HK 22
The trustee of any group investment fund shall be the agent of every investor in the group investment fund, being an investor who is an absentee, and shall treat as gross income of the trustee and make returns in respect of all dividends paid or credited by the group investment fund to any such investor while that investor is an absentee.”.
299 Banking company to be agent of absentee depositors
Section HK 23 is replaced by:
“HK 23
Every banking company, and every other company, local or public authority, or other person, who in the course of business receives or holds money by way of deposit and allows interest on the deposit shall, for the purposes of this Act and the Tax Administration Act 1994, be the agent of all depositors who are absentees, and shall treat as gross income of the person as agent and make returns in respect of any interest which is paid or credited to a depositor while the depositor is an absentee, if that interest exceeds $100 in any year.”.
300 Liability as agent of employer of non-resident taxpayer and employer’s agent
Section HK 24(1) is replaced by:
“HK 24
“(1)
The employer or the agent of the employer of every non-resident taxpayer shall, for the purposes of this Act and the Tax Administration Act 1994, be the agent of the non-resident taxpayer in respect of the salary, wages, or other emoluments received by the non-resident taxpayer, and shall make returns and be assessable and liable for income tax accordingly.”.
301 Agents in New Zealand of principals resident abroad
Section HK 26(1) is replaced by:
“HK 26
“(1)
Subject to this section, when any person in New Zealand, on behalf of a principal who is resident in a country or territory outside New Zealand and is not resident in New Zealand, is instrumental in procuring the purchase from that principal of goods or merchandise which are in New Zealand or are to be imported into New Zealand in pursuance of or in consequence of that purchase, whether the contract of purchase is made in New Zealand or elsewhere, the principal shall in respect of the sale by the principal of the goods or merchandise be deemed to be carrying on business in New Zealand through the agency of that person; and the income derived from that business shall be deemed to be derived from New Zealand, in the same manner and to the same extent as if the contract had been made in New Zealand, and the agent shall make returns and pay tax accordingly.”.
302 Trust distributions
Section HZ 1(b) is replaced by:
“(b)
That distribution shall not be gross income.”.
Amendments to Part I
303 New Part substituted
Part I is replaced by:
“PART I Treatment of Net Losses
“Subpart E—Net Losses
“IE 1 Net losses may be offset against future net income
“(1)
Subject always to the express provisions of this section and section IF 1, this section and section IF 1 are intended—
“(a)
To permit taxpayers to carry forward net losses that arise in one income year for offset against net income of the taxpayer in a later income year; but
“(b)
In the case of taxpayers who are companies, to limit the circumstances in which a net loss can be so carried forward and offset to those where the tax benefit arising from the offset is obtained (directly or indirectly), at least to the extent of 49%, only by the same natural persons holding (directly or indirectly) rights in relation to the company who, by virtue of holding such rights, effectively bore the net loss.
“(2)
Any taxpayer who satisfies the Commissioner that the taxpayer has a net loss for any income year shall, subject to this section and section IF 1, be entitled to claim that—
“(a)
The net loss be carried forward to the income year immediately succeeding that income year and be offset against the net income for that immediately succeeding income year, so far as that net income extends; and
“(b)
So far as it cannot then be offset, the net loss be carried forward from that immediately succeeding income year to the next succeeding income year and be offset against the net income for that next succeeding income year and so on.
“(3)
Where net losses for 2 or more income years are carried forward to an income year in accordance with the provisions of this section—
“(a)
The aggregate amount of those net losses that may be offset against net income for that year shall not exceed the amount of that net income; and
“(b)
Those net losses shall be offset in the order in which they arose.
“(4)
Where and to the extent that—
“(a)
A taxpayer has incurred any expenditure or loss which has been allowed as a deduction in an income year for which the taxpayer had a net loss; and
“(b)
The taxpayer did not during that income year make payment on account of the expenditure or loss but rather a debt remained outstanding; and
“(c)
The taxpayer is, in any subsequent income year,—
“(i)
Discharged from liability in respect of that debt without fully adequate consideration in money or money’s worth; or
“(ii)
Released from liability in respect of that debt by the operation of the Insolvency Act 1967 or the Companies Act 1955 or the Companies Act 1993 or the laws of any country or territory other than New Zealand,—
or the debt has, in any subsequent income year, become irrecoverable or unenforceable by action through lapse of time; and
“(d)
That discharge, release, irrecoverability, or unenforceability is neither—
“(i)
Required to be taken into account by the taxpayer under the qualified accruals rules; nor
“(ii)
A dividend derived by the taxpayer within the meaning of section CF 2(1)(b) or (being a dividend which, if the transaction giving rise to the dividend had been effected with a shareholder of the relevant company, would have been a dividend within the meaning of section CF 2(1)(b)) within the meaning of section CF 2(1)(k); and
“(e)
The allowance as a deduction of the expenditure or loss in calculating the net loss has given rise to or would, but for this subsection, give rise to the relief afforded by this section,—
the relief afforded by this section shall be reduced by the amount discharged, released, or become irrecoverable or unenforceable, and—
“(f)
For the purposes of giving effect to this subsection, the Commissioner may at any time alter any assessment notwithstanding the time bar; and
“(g)
Where and to the extent to which the relief afforded by this subsection has been reduced and the taxpayer pays an amount in respect of the debt previously discharged, released, or become irrecoverable or unenforceable, the amount paid shall, to the extent that it does not exceed the reduction in relief, be allowed as a deduction to the taxpayer in the income year in which payment is made.
“IE 2 Specified activity net losses
“(1)
Subject to this section, where in any income year any taxpayer, being an existing farmer, commences to conduct another specified activity that is different from the specified activity, or every one of the specified activities, by virtue of which the taxpayer is, immediately before that commencement, an existing farmer and the Commissioner is satisfied that that other specified activity is one that is usually conducted in association with and is complementary to the specified activity or any of the specified activities by virtue of which the taxpayer is, immediately before that commencement, an existing farmer, that other specified activity shall be deemed to be an activity related to the specified activity to which, the Commissioner is satisfied, it is complementary.
“(2)
Subject to this section, where in any income year any taxpayer, being an existing farmer, commences to conduct another specified activity that is different from the specified activity or every one of the specified activities by virtue of which the taxpayer is, immediately before that commencement, an existing farmer and that other specified activity is conducted on land that the taxpayer has owned, or has held under any lease, licence, or other agreement, throughout the period of 5 years ending on the date of that commencement, that other specified activity shall be deemed to be an activity related to (as the case may be)—
“(a)
The specified activity by virtue of which the taxpayer is, immediately before that commencement, an existing farmer; or
“(b)
Such one of the specified activities by virtue of which the taxpayer is, immediately before that commencement, an existing farmer—
“(i)
As the taxpayer elects by notice in writing (which notice shall be irrevocable) given to the Commissioner within the time within which the taxpayer is required to furnish a return of the taxpayer’s income for the income year in which the taxpayer commenced to conduct that other specified activity, or within such further time as the Commissioner may allow in any case or class of cases; or
“(ii)
Where the taxpayer does not so elect, as the Commissioner determines.
“(3)
For the purposes of subsections (4) to (7), any specified activity that is a related activity shall be deemed to be part of the specified activity in relation to which it is a related activity.
“(4)
Subsection (6) shall not apply in respect of any specified activity net loss for any income year of any taxpayer, who is an existing farmer, in the conduct of any established activity.
“(5)
Where, in relation to a taxpayer and to any income year, this section would have effect more favourably if the words ‘not being crops (other than flowers) in respect of which the preparation of the land, and the planting and cultivation of the tree or plant, and the harvesting of the crop is accomplished within a period of 12 months’ were omitted from paragraph (b)(ii) of the definition of ‘specified activity’, this section shall, in relation to the taxpayer and to the income year, apply as if those words were omitted.
“(5a)
Sections IE 1, IF 1 and IG 2 of this Act and section 92 of the Tax Administration Act 1994 shall, subject to subsection (6), apply to any specified activity net loss carried forward from a preceding income year as if it were a net loss carried forward from a preceding income year.
“(6)
Where in any income year (referred to in this subsection as the ‘year of offset’) any taxpayer has carried forward from the preceding income year any specified activity net loss, the following provisions shall apply:
“(a)
The amount of that specified activity net loss which may be offset against the net income of the taxpayer or another taxpayer for the year of offset is the lesser of the amount of that specified activity net loss, and—
“(i)
Where the offset is made against the net income of the taxpayer, the sum of the taxpayer’s specified activity net income for the year of offset from the conduct of the same specified activity as gave rise to the specified activity net loss and 10,000:
“(ii)
Where the offset is made against the net income of another taxpayer, $10,000:
“(b)
In any case where the specified activity was conducted in any income year by 2 or more persons, the preceding provisions of this subsection shall apply as if every reference in those provisions to a taxpayer and to the amount of a specified activity net loss of the taxpayer attributable to the conduct of the specified activity were a reference to each such person and to the amount of each such person’s share of the amount of any joint specified activity net loss for that income year:
“(c)
Where in the year of offset a taxpayer has carried forward from the preceding income year any specified activity net losses to which this subsection applies and which arise from the conduct of 2 or more specified activities, the aggregate amount of those specified activity net losses that may be offset against the taxpayers net income for the year of offset is the lesser of the sum of those specified activity net losses and the sum of—
“(i)
The sum of the taxpayer’s specified activity net income from each of those specified activities for the year of offset; and
“(ii)
$10,000:
“(d)
In any year of offset in which paragraph (c) applies, the taxpayer may elect, by notice in writing (which notice shall be irrevocable) given to the Commissioner within the time within which the taxpayer is required to furnish a return of the taxpayer’s income for the year of offset, or within such further time as the Commissioner may allow in any case or class of cases, that, of the aggregate of the amount of the losses referred to in paragraph (c), the amount that may be offset under that paragraph shall comprise such amount (if any) of each of those specified activity net losses as the taxpayer specifies in that notice.
“(7)
Notwithstanding anything in the preceding subsections of this section, in any case where in any income year any taxpayer—
“(a)
Is engaged (on average in respect of the whole of the income year) principally and personally in conducting any specified activity (not being a specified activity within the meaning of paragraph (j) of the definition of ‘specified activity’) which, in the opinion of the Commissioner, is the livelihood of the taxpayer or the taxpayer is in the course of establishing as the taxpayer’s livelihood; and
“(b)
Derives income from personal exertion, being income derived otherwise than from the conduct of that specified activity and being income which the taxpayer is compelled, by reason of circumstances that arise in the course of and as a result of the conduct of that specified activity, to derive; and
“(c)
Derives that income from personal exertion for the purposes of enabling the taxpayer to meet expenditure (whether or not the expenditure is required to meet losses suffered through any adverse event, happening, or cause) essential for the maintenance of the taxpayer and the taxpayer’s dependants, or for the continuance of that specified activity; and
“(d)
Would, in the opinion of the Commissioner, suffer hardship from the application of subsection (6),—
the Commissioner may determine that an amount of specified activity net loss greater than that authorised in subsection (6) (being a specified activity net loss arising from the conduct of the specified activity) may, subject to section IF 1(1), be offset against the taxpayer’s net income in such income year or income years as the Commissioner specifies.
“(8)
In this section—
“‘Established activity’ in relation to a taxpayer who is an existing farmer, means any specified activity or specified activities (not being a specified activity within the meaning of paragraph (j) of the definition of ‘specified activity’) that the taxpayer conducted on 11 October 1982, where, in the opinion of the Commissioner, the conduct of the specified activity or the specified activities constituted the livelihood of the taxpayer and the taxpayer’s sole or principal source of income:
“‘Income from personal exertion’ means income of any of the kinds referred to in sections CD 3 and CH 1a; but does not include income from any business of renting, or lending money, or making financial investments:
“‘Related activity’ in relation to a specified activity conducted by any taxpayer in any income year, means—
“(a)
Any other specified activity conducted by the taxpayer in the income year that is of the same kind as that specified activity, whether or not conducted on the same land as that on which that specified activity is conducted:
“(b)
Any other specified activity conducted by the taxpayer in the income year which is deemed, under subsection (1) or (2), to be an activity related to that specified activity:
“‘Specified activity net income’ means, in respect of a specified activity conducted by a taxpayer in an income year, the result of subtracting from the sum of the gross income of the taxpayer allocated to that activity and that income year the sum of the allowable deductions of the taxpayer allocated to that activity and that income year, if that result is a positive amount:
“‘Specified activity net loss’ means, in respect of a specified activity conducted by a taxpayer in an income year preceding, in the case of an activity referred to in paragraphs (a) to (i) of the definition of ‘specified activity’, the 1986–87 income year, and in the case of an activity referred to in paragraph (j) of that definition, the 1990–91 income year, a loss from that specified activity referred to in section 188a of the Income Tax Act 1976.
“IE 3 Attributed foreign net losses
“(1)
Subject to this section, section IE 1 of this Act and section 92 of the Tax Administration Act 1994 apply to any attributed foreign net loss as if it were a net loss.
“(2)
If a person has carried forward to an income year an attributed foreign net loss, the maximum amount of that loss that the person may offset against the person’s net income for that income year is an amount equal to the total of—
“(a)
Any attributed foreign income of the taxpayer for that income year in respect of—
“(i)
The controlled foreign company in respect of which the loss arose, where that company remains resident in the relevant country; and
“(ii)
Any other controlled foreign company resident in the relevant country; and
“(b)
Any foreign investment fund income calculated under the branch equivalent method, of the taxpayer derived in that income year in respect of any foreign investment fund resident in the relevant country.
“(3)
A person may only take an amount of attributed foreign income or an amount of foreign investment fund income into account under subsection (2) to the extent that the person has not taken the amount into account—
“(a)
In determining the person’s entitlement to a deduction under section DP 1 or DP 3; or
“(b)
In any other calculation under subsection (2) of this section in respect of any other attributed foreign net loss; or
“(c)
In determining the person’s entitlement to offset under sections IG 2 and IG 4.
“(4)
If in an income year—
“(a)
A person has an attributed foreign net loss in relation to an income interest in a controlled foreign company; and
“(b)
By virtue of section 38 of the Income Tax Amendment Act (No. 2) 1993 the income interest becomes an interest of the person in a foreign investment fund,—
with effect from that income year, the attributed foreign net loss shall be treated as a foreign investment fund net loss of the person (as if the controlled foreign company were the relevant fund) not calculated under the branch equivalent method, except where the person calculates the person’s foreign investment fund income or loss under the branch equivalent method with respect to the interest and the period commencing with the date upon which the income interest becomes an interest in a foreign investment fund.
“(5)
If a person is unable to offset any part of the maximum amount calculated under subsection (2) for an income year against net income for the year because there is insufficient net income, the excess shall be treated as if it were a net loss for the income year determined under section BC 6 and will cease to be part of the attributed foreign net loss available to the person.
“IE 4 Foreign investment fund net losses
“(1)
Subject to this section, section IE 1 of this Act and section 92 of the Tax Administration Act 1994 apply to any foreign investment fund net loss as if it were a net loss.
“(2)
If a person has carried forward to an income year a foreign investment fund net loss calculated under any calculation method other than the branch equivalent method, the maximum amount of that loss that the person may offset against the person’s net income for that income year is an amount equal to the total of foreign investment fund income calculated under any calculation method other than the branch equivalent method derived by that person in that income year.
“(3)
A person may only take an amount of foreign investment fund income for an income year into account under subsection (2) to the extent that the amount is not taken into account—
“(a)
In determining the person’s entitlement to an allowable deduction under section DP 2; or
“(b)
In any other calculation under subsection (2) of this section in respect of any other foreign investment fund net loss; or
“(c)
In determining the person’s entitlement to an offset under sections IG 2 and IG 5.
“(4)
If a person has carried forward to an income year a foreign investment fund net loss in respect of an interest in a fund calculated under the branch equivalent method, the maximum amount of that loss that the person may offset against the person’s net income for that income year is the amount that could be offset in respect of that loss under section IE 3 if—
“(a)
The interest in the fund were an income interest in a controlled foreign company; and
“(b)
The foreign investment fund net loss were an attributed foreign net loss arising in respect of a branch equivalent loss; and
“(c)
References to the controlled foreign company were references to the fund.
“(5)
Notwithstanding any other provision of this section, where—
“(a)
A person has carried forward to any income year a foreign investment fund net loss; and
“(b)
Section CG 15(2)(d) applies in respect of the person and the income year,—
the person may offset the foreign investment fund net loss against the person’s net income for the income year, to the extent that the foreign investment fund net loss does not exceed the person’s gross income in respect of interests that would be interests in a fund in the income year but for section CG 15(2)(d).
“(6)
If a person is unable to offset any part of the maximum amount of a foreign investment fund net loss calculated under subsection (2) or (3) for an income year against net income for the year because there is insufficient net income, the excess shall be treated as if it were a net loss for the year determined under section BC 6 and will cease to be part of the foreign investment fund net loss available to the person.
“Subpart F—Net Losses—Companies
“IF 1 Net losses may be offset against future net income
“(1)
Subject to the succeeding provisions of this section, no taxpayer being a company (in this subsection referred to as the ‘loss company’) may carry forward, in accordance with section IE 1(2), the whole or any part of a net loss for any income year (in this subsection referred to as the ‘year of loss’) to any later income year (in this subsection referred to as the ‘year of carry forward’), unless there is a group of persons—
“(a)
The aggregate of whose minimum voting interests in the loss company in the period from the beginning of the year of loss to the end of the year of carry forward (in this subsection referred to as the ‘continuity period’) is equal to or greater than 49%; and
“(b)
In any case where at any time during the continuity period a market value circumstance exists in respect of the loss company, the aggregate of whose minimum market value interests in the loss company in the continuity period is equal to or greater than 49%,—
and, for the purposes of this subsection, the minimum voting interest or minimum market value interest (as the case may be) of any person in the loss company in the continuity period shall be equal to the lowest voting interest or market value interest (as the case may be) in the loss company which that person has during the continuity period.
“(2)
Subsection (1) shall not apply to prevent any company from carrying forward, in accordance with section IE 1(2), the whole or part of any net loss for any income year (in this subsection referred to as the ‘year of loss’) where and to the extent that the Commissioner is satisfied that—
“(a)
Subsection (1) would not have applied to prevent carry forward if regard were had, for the purposes of applying that subsection (to the extent to which it requires regard to be had to the circumstances in the year of loss and without prejudice to the application of that subsection to the extent to which it requires regard to be had to later periods), to part only of the year of loss; and
“(b)
Adequate accounts have been prepared and furnished to the Commissioner by the company relating to that part of that year of loss which detail sufficiently that part of the net loss for the year of loss which was reasonably and fairly attributable to that part of that year of loss,—
in which event that claim for carry forward shall be allowed in respect of that part of the net loss for the year of loss as those accounts indicate was reasonably and fairly attributable to that part of that year of loss.
“(3)
Subsection (1) shall not apply to prevent any company from carrying forward, in accordance with section IE 1(2), the whole or part of any net loss for any income year (in this subsection referred to as the ‘year of loss’) to any later income year where and to the extent that the Commissioner is satisfied that—
“(a)
Subsection (1) would not have applied to prevent the carry forward if regard were had, for the purposes of applying such subsection (to the extent to which it requires regard to be had to the later income year and without prejudice to the application of such subsection to the extent to which it requires regard to be had to earlier periods), to part only of the later income year; and
“(b)
Adequate accounts have been prepared and furnished to the Commissioner by the company relating to that part of that later income year which detail sufficiently that part of the net income for the whole of the later income year which was reasonably and fairly attributable to that part of that later income year,—
in which event that claim for carry forward to the later income year shall be allowed in respect of the net loss for the year of loss to the extent to which it does not exceed that amount of net income as those accounts indicated was reasonably and fairly attributable to that part of that later income year.
“(4)
For the purposes of this section, where adequate accounts are required to be prepared and furnished to the Commissioner in respect of the net loss or net income of any company which is reasonably and fairly attributable to a period which is part only of an income year of that company, those accounts shall be prepared, to the extent to which reasonable and fair, by applying the provisions of this Act to that period as if it were an income year.
“(5)
Any taxpayer shall be entitled to claim to carry forward and offset against net income of the taxpayer in accordance with section IE 1(2), any net loss of the taxpayer for any income year prior to the 1977–78 income year if that taxpayer would have been entitled to claim to carry forward that net loss to that subsequent income year for the purpose of assessing income tax under section 137 of the Land and Income Tax Act 1954 if the Income Tax Act 1976 and this Act had not been passed.
“(6)
Where any taxpayer (being a company) claims, in accordance with section IE 1(2), to carry forward the whole or part of a net loss incurred by it in the 1991–92 income year or any earlier year (in this subsection referred to as the ‘pre-1993 year of loss’) to any later income year, the provisions of subsection (1) shall not preclude such claim where—
“(a)
The taxpayer would have been entitled to claim to carry forward the whole or part of the net loss to the later income year under section 188 of the Income Tax Act 1976, as that section applied before its repeal and replacement by section 22 of the Income Tax Amendment Act (No. 2) 1992, if that section 188 had continued to apply—
“(i)
As modified by section 188aa of the Income Tax Act 1976; and
“(ii)
As if the continuity percentage referred to in section 188(7) of the Income Tax Act 1976 were always 40%,—
in respect of the later income year; and
“(b)
In respect of the period commencing on the first day of the 1992–93 income year and ending with the last day of that later income year (referred to in this subsection as the ‘relevant period’), there is a group of persons—
“(i)
The aggregate of whose minimum voting interests in the taxpayer in the relevant period is equal to or greater than 49%; and
“(ii)
In any case where at any time during the relevant period a market value circumstance exists in respect of the taxpayer, the aggregate of whose minimum market value interests in the taxpayer in the relevant period is equal to or greater than 49%,—
and, for the purposes of this paragraph, the minimum voting interest or minimum market value interest (as the case may be) of any person in the taxpayer in the relevant period shall be equal to the lowest voting interest or market value interest (as the case may be) in the taxpayer which that person has during the relevant period.
“IF 2 Special provision in relation to net losses of companies for 1990–91 and 1991–92 income years
Where and to the extent that the Commissioner is satisfied that—
“(a)
A company (in this section referred to as the ‘loss company’) has a net loss for the 1990–91 income year or the 1991–92 income year (the relevant income year being referred to in this section as the ‘year of loss’); and
“(b)
Subsection (7b) of section 188 of the Income Tax Act 1976 (as inserted by section 7 of the Income Tax Amendment Act (No. 5) 1991 and in force before the repeal of section 188 by section 22 of the Income Tax Amendment Act (No. 2) 1992), would not have applied to prevent the loss company from carrying forward the whole or part of that net loss if regard were had, for the purposes of that subsection (7b) (to the extent to which it required regard to be had to that part of the period commencing with 8 pm New Zealand Standard Time on 80 July 1991 which falls within the year of loss (in this paragraph referred to as the ‘relevant part of the year of loss’), and without prejudice to the application of that subsection (7b) to the extent to which it required regard to be had to later periods), to part only of the relevant part of the year of loss (that part of the relevant part of the year of loss being in this section referred to as the ‘relevant continuity period’); and
“(c)
Adequate accounts have been prepared by the loss company and furnished to the Commissioner relating to the relevant continuity period which detail sufficiently that part of the net loss for the whole of the year of loss which was reasonably and fairly attributable to the relevant continuity period,—
that subsection (7b) shall not apply to prevent the loss company carrying forward, in accordance with section 188(2) (as in force before its repeal by section 22 of the Income Tax Amendment Act (No. 2) 1992), that part of the net loss as those accounts indicate was reasonably and fairly attributable to the relevant continuity period.
“IF 3 Attributed foreign net losses
For the purpose of sections IF 1 and IG 2 an attributed foreign net loss or a foreign investment fund net loss is deemed to arise on the last day of the income year in respect of which the loss is attributed.
“IF 4 Losses, attributed foreign net losses, and foreign investment fund net losses of amalgamating company
If—
“(a)
An amalgamating company ceases to exist on a qualifying amalgamation; and
“(b)
The amalgamating company, in respect of an income year, has a net loss, an attributed foreign net loss, or a foreign investment fund net loss; and
“(c)
The net loss, the attributed foreign net loss or the foreign investment fund net loss has not, under any of sections IE 1, IF 1, and IG 2, been offset against net income of the amalgamating company or any other company in any period prior to the amalgamation (including any part of the income year in which the amalgamation takes place); and
“(d)
Under section IG 2, the net loss, the attributed foreign net loss or the foreign investment fund net loss could have been offset against net income (if there was sufficient such income) of the amalgamated company (unless it is a company incorporated only on the amalgamation) and any company which has, at any time before or during the income year in respect of which the net loss, the attributed foreign net loss or the foreign investment fund net loss is offset under this section, amalgamated with the amalgamated company, that is attributable to that part of the income year of the relevant company which ends with the date of the amalgamation—
the net loss, the attributed foreign net loss or the foreign investment fund net loss (as the case may be) shall be attributed to the amalgamated company and may be offset against, under section IE 1 or IF 1, the net income of the amalgamated company in periods commencing on or after the amalgamation, but applying sections IE 1 and IF 1 (and any other provisions of this Act the application of which is dependent upon the application of either of those provisions) as if, with respect to all times prior to the amalgamation, the amalgamated company did not separately exist and was instead the amalgamating company with the same holders of shares and options over snares each holding the same number and class of shares and options over shares as they held at the time in the amalgamating company.
“IF 5 Ordering of losses of amalgamated company
Where net losses, attributed foreign net losses, or foreign investment fund net losses of 2 or more amalgamating companies are allowed under section IF 4 to be offset against the net income for an income year of the amalgamated company, those net losses, attributed foreign net losses or foreign investment fund net losses shall—
“(a)
If arising in 2 or more income years, be offset in the same order as they arose; and
“(b)
If arising in the same income year, be offset, so far as the net income extends,—
“(i)
In the order elected by the amalgamated company by notice to the Commissioner in such form as the Commissioner may allow; or
“(ii)
If no such election is made, on a pro rata basis.
“IF 6 Losses, attributed foreign net losses, and foreign investment fund net losses of amalgamated company
Where—
“(a)
An amalgamated company, in respect of an income year prior to the year in which the amalgamation takes place, has a net loss, an attributed foreign net loss, or a foreign investment fund net loss; and
“(b)
The net loss, the attributed foreign net loss or the foreign investment fund net loss has not, under any of sections IE 1, IF 1, and IG 2, been offset against net income of the amalgamated company or any other company in any period prior to the amalgamation (including any part of the income year in which the amalgamation takes place),—
the amalgamated company shall be entitled to carry forward the net loss, the attributed foreign net loss or the foreign investment fund net loss into the income year in which the amalgamation takes place or any subsequent income year only if—
“(c)
The amalgamated company satisfies the relevant requirements of sections IE 1 and IF 1; and
“(d)
Under section IG 2, the net loss, the attributed foreign net loss or the foreign investment fund net loss could have been offset against net income (if there was sufficient such income) attributable to that part of the income year of the relevant company which ends with the date of the amalgamation, by each amalgamating company.
“IF 7 Offsetting supplementary dividend against net income
If in an income year a section LE 3 holding company derives a supplementary dividend, the maximum amount that the company may offset against its net income for that income year under section IE 1 or IG 2 is the amount calculated in accordance with the following formula:
_eqn06.JPG)
“where—
“NI
is the net income of the company for the income year; and
“NRC
is the total amount of non-refundable credits that are available under Part L to be set off against the company’s income tax liability for the year; and
“CC
is the total amount of convertible credits that are available under Part L to be set off against the company’s income tax liability for the year; and
“SDD
is the total amount of supplementary dividends derived by the company in the income year; and
“T
is the applicable basic rate of income tax for the company for the income year.
“Subpart G—Net Losses—Groups of Companies
“IG 1 Companies included in group of companies—
“(1)
Subject always to the express provisions of this section and section IG 2, the provisions of this section and section IG 2 are intended to limit the circumstances in which a company that has a net loss for an income year, or that has a net loss able to be carried forward to that income year in accordance with section IE 1 or IF 1, may offset part or the whole of that net loss against the net income of another company to those circumstances where at all times during the income year in which the net loss arises and all succeeding income years (if any) up to and including the year in which the net loss is offset, the company which has the net loss and the other company are, at least to the extent of 66%, commonly owned (whether or not always during that period by the same group of persons).
“(2)
For the purposes of this Act, in relation to any 2 or more companies—
“(a)
Where at any time there is a group of persons—
“(i)
The aggregate of whose common voting interests is equal to or greater than 66%; and
“(ii)
In any case where at that time a market value circumstance exists in respect of any of the companies, the aggregate of whose common market value interests is equal to or greater than 66%,—
those companies shall be treated as a group of companies at that time; and
“(b)
Where, in relation to any income year or other period, there is at all times during that income year or other period a group of persons (whether or not always during that income year or other period the same group of persons)—
“(i)
The aggregate of whose common voting interests is equal to or greater than 66%; and
“(ii)
In any case where at any relevant time a market value circumstance exists in respect of any of the companies, the aggregate of whose common market value interests is equal to or greater than 66%,—
those companies shall be treated as a group of companies for that income year or other period.
“(3)
For the purposes of this Act, references to any 2 or more companies being at any time or for any period a wholly-owned group of companies shall mean any 2 or more companies which would be a group of companies at that time or for that period if—
“(a)
The references in subsection (2) to 66% were instead references to 100%; or
“(b)
The companies would be a wholly-owned group of companies under paragraph (a) if—
“(i)
Any nominal shareholding held by any person solely for the purpose of complying with the requirements of company law were disregarded; or
“(ii)
The shares in any such company held by the trustee of, or held by employees or former employees of the company as a consequence of the operation of, any employee share purchase scheme were disregarded to the extent that the shares so held by the trustee or employees or former employees—
“(A)
Represent no more than 3% of the voting interests in the company; and
“(B)
In any case where at that time or during that period a market value circumstance exists in respect of the company, represent no more than 3% of the market value interests in the company.
“(4)
Except as expressly provided in this Act, every company in a group of companies shall be assessable and liable for income tax in the same manner as if it were a company not included in a group of companies.
“(5)
For the purposes of this section, in relation to any 2 or more companies at any time,—
“(a)
The ‘common voting interest’ of any person who has or is treated as having a voting interest in each of those companies at that time by virtue of section OD 3 is that percentage which is equal to—
“(i)
The percentage voting interest of the person in each of the companies at that time, if those percentages are the same in the case of each company; or
“(ii)
The lowest of the percentage voting interests of the person in each of the companies at that time, if those percentages differ as between the companies; and
“(b)
The ‘common market value interest’ of any person who is treated as having a market value interest in each of those companies at that time by virtue of section OD 4 is that percentage which is equal to—
“(i)
The percentage market value interest of the person in each of the companies at that time, if those percentages are the same in the case of each company; or
“(ii)
The lowest of the percentage market value interests of the person in each of the companies at that time, if those percentages differ as between the companies.
“IG 2 Net loss offset between group companies
“(1)
For the purposes of this section continuity of ownership shall be treated as being maintained in respect of any company and any period where there is a group of persons—
“(a)
The aggregate of whose minimum voting interests in the company is equal to or greater than 49%; and
“(b)
In any case where at any time during the period a market value circumstance exists in respect of the company, the aggregate of whose minimum market value interests in the company is equal to or greater than 49%,—
and, for the purposes of this paragraph, the minimum voting interest or the minimum market value interest of any person in the company in the period shall be equal to the lowest voting interest or market value interest (as the case may be) in the company which that person has during the period.
“(2)
Subject to the succeeding subsections of this section, where in respect of any income year (in this subsection referred to as the ‘year of offset’)—
“(a)
A company (in this subsection referred to as the ‘loss company’) has—
“(i)
A net loss (not being a net loss which consists of a mining outgoing excess) for the year of offset; or
“(ii)
Carried forward under sections IE 1 and IF 1 such a net loss of the loss company which arose in a preceding income year (in this subsection referred to as the ‘preceding loss year’) to the year of offset; and
“(b)
The loss company either—
“(i)
Elects by notice in accordance with subsection (3) that the whole or part of the net loss be offset against the net income for the year of offset of another company; or
“(ii)
Receives a payment from another company under an agreement providing for the other company to bear or share in the net loss—
that other company being in this subsection referred to as the ‘profit company’; and
“(c)
The profit company is in the same group of companies as the loss company for—
“(i)
The year of offset of the loss company; and
“(ii)
In any case where the year of offset of the profit company ends on a date later than the last day of the year of offset of the loss company, the year of offset of the profit company; and
“(iii)
In the case of a net loss or part of a net loss of the loss company, for any preceding loss year that was the 1981–82 income year or any subsequent year, the preceding loss year of the loss company; and
“(iv)
In the case of a net loss or part of a net loss of the loss company, for any preceding loss year that was the 1991–92 income year or any subsequent year, all income years of the loss company (if any) falling between the preceding loss year of the loss company and the year of offset of the loss company; and
“(d)
The loss company is at all times in—
“(i)
The year of offset of the loss company; and
“(ii)
In the case of a net loss or part of a net loss of the loss company, for any preceding loss year,—
“(A)
The preceding loss year of the loss company; and
“(B)
In any case where the preceding loss year is the 1991–92 income year or a later income year, all income years of the loss company (if any) falling between the preceding loss year of the loss company and the year of offset of the loss company—
not a dual resident company and is at all times in those years either—
“(iii)
Incorporated in New Zealand; or
“(iv)
Carrying on business in New Zealand through a fixed establishment in New Zealand; and
“(e)
Continuity of ownership is maintained in respect of the loss company for—
“(i)
The year of offset of the loss company; and
“(ii)
In any case where the year of offset of the profit company ends on a date later than the last day of the year of offset of the loss company, the year of offset of the profit company; and
“(f)
The amount so elected to be offset or payment so received does not exceed the amount that would, were that offset not allowed or that payment not made, be the taxable income (after offsetting any net loss which is available to the profit company under this section, or other than under this section) of the profit company for the year of offset; and
“(g)
In the case of any payment made by the profit company,—
“(i)
The payment does not exceed the amount of the net loss; and
“(ii)
The payment is made not later than the 31 March that, in relation to the loss company and the year of offset, is the latest date to which the time for the furnishing of the return for that income year may be extended under section 37(5) of the Tax Administration Act 1994, or is made within such further time as the Commissioner may allow; and
“(iii)
The payment would not (otherwise than under this subsection) be taken into account in calculating the taxable income of either the loss company or the profit company; and
“(iv)
The loss company gives notice of the payment to the Commissioner in accordance with subsection (3),—
the amount so elected to be offset or the payment (as the case may be) shall—
“(h)
Be offset against net income of the profit company in the year of offset; and
“(i)
To the extent so offset, give rise to a reduction in the available net losses of the loss company (in the same order in which the losses arose); and
“(j)
In the case of any payment made by the profit company, to the extent so offset, not be treated as a dividend paid by the profit company to the loss company,—
and any election made in accordance with this subsection shall be irrevocable.
“(3)
Every notice under subsection (2) shall be in writing and shall be given to the Commissioner not later than the 31 March that, in relation to the loss company and the year of offset, is the latest date to which the time for the furnishing of the return of its income for the year of offset may be extended under section 37(5) of the Tax Administration Act 1994 or within such further time as the Commissioner may allow.
“(4)
Notwithstanding subsection (2), where and to the extent that—
“(a)
An offset under that subsection would not, but for the application of this subsection, be available to a company (in this subsection referred to as the ‘profit company’) in an income year (in this subsection referred to as the ‘year of offset’) in respect of all or part of a net loss of another company (in this subsection referred to as the ‘loss company’) for that income year because the requirements of either or both of paragraphs (c)(i), (c)(ii), and (e) of subsection (2) are not met; and
“(b)
An offset under the relevant subsection would be available if regard were had, for the purposes of applying subsections (2)(c) and (e) to a period (in this subsection referred to as the ‘loss company commonality period’) which is part only of the year of offset of the loss company; and
“(c)
Adequate accounts have been prepared by the loss company and furnished to the Commissioner which detail sufficiently that part of the net loss (in this subsection referred to as the ‘part-year loss’, and that net loss to be calculated after taking into account any amount that has been offset under this section against the net income of any company other than the profit company) as is reasonably and fairly attributable to the loss company commonality period; and
“(d)
Adequate accounts have been prepared by the profit company and furnished to the Commissioner which detail sufficiently that part of the amount (in this subsection referred to as the ‘part-year profit’) that would be the profit company’s taxable income if this subsection did not apply to that net loss for the whole of the year of offset of the profit company as is reasonably and fairly attributable to—
“(i)
In any case where the year of offset of the profit company is co-extensive with the year of offset of the loss company, the loss company commonality period (in this subsection in respect of that case referred to as the ‘profit company commonality period’); and
“(ii)
In any other case, that part of the year of offset of the profit company (in this subsection in respect of that case referred to as the ‘profit company commonality period’)—
“(A)
Which includes (but is not limited to) all or part of the loss company commonality period; and
“(B)
In which the profit company and the loss company are at all times members of the same group of companies; and
“(C)
In which continuity of ownership has been maintained in respect of the loss company,—
the loss company may, in any notice given to the Commissioner, in accordance with subsection (3) in respect of the net loss, the profit company, the loss company, and the year of offset, elect that regard shall be had in applying subsection (2) in respect of the net loss, the profit company, the loss company, and the year of offset only to the loss company commonality period, and, where that election is made, subsection (2) snail apply for the purposes of determining the amount able to be offset against the net income of the profit company in respect of the net loss and the year of offset as if—
“(e)
The year of offset of the loss company were co-extensive with the loss company commonality period and the net loss of the loss company for that deemed year were equal to the part-year loss; and
“(f)
The year of offset of the profit company were coextensive with the profit company commonality period and the taxable income of the profit company for that deemed year were equal to the part-year profit.
“(5)
Notwithstanding subsection (2), where and to the extent that—
“(a)
An offset under that subsection would not, but for the application of this subsection, be available to a company (in this subsection referred to as the ‘profit company’) in an income year (in this subsection referred to as the ‘year of offset’) in respect of all or part of a net loss of another company (in this subsection referred to as the ‘loss company’) for a preceding income year (in this subsection referred to as the ‘preceding loss year’) because the requirements of any one or more of—
“(i)
Paragraph (c)(i); or
“(ii)
Paragraph (c)(ii); or
“(iii)
In the case where the preceding loss year is the 1991–92 income year or a subsequent income year, paragraph (c)(iii); or
“(iv)
Paragraph (e)—
of subsection (2) are not met; and
“(b)
An offset under that subsection would be available if—
“(i)
In any case where paragraph (c)(i) or (c)(ii) or (e) of subsection (2) is not met,—
“(A)
Regard were had for the purposes of applying paragraphs (c)(i), (c)(ii), and (e) of subsection (2) to a period (in this subsection referred to as the ‘loss company commonality period’) which is part only of the year of offset of the loss company; and
“(B)
Section IF 1(3) were to apply as if the loss company had, in that part of the year of offset of the profit company which falls within the loss company commonality period, net income equal to that part of the profit company’s net income for the year of offset specified in paragraph (c); and
“(ii)
In any case where paragraph (c)(iii) of subsection (2) is not met in respect of a preceding loss year being the 1991–92 income year or a subsequent income year, regard were had for the purposes of applying that paragraph (c)(iii) to a period (in this subsection referred to as the ‘preceding year loss company commonality period’) which is part only of the preceding loss year; and
“(c)
In any case where paragraph (c)(i) or (c)(ii) or (e) of subsection (2) is not met, adequate accounts have been prepared by the profit company and furnished to the Commissioner which detail sufficiently that part of the amount that would, if this subsection did not apply to the net loss of the loss company, be the profit company’s taxable income (in this subsection referred to as the ‘part-year profit’) for the whole of the year of offset of the profit company as is reasonably and fairly attributable to—
“(i)
In any case where the year of offset of the profit company is co-extensive with the year of offset of the loss company, the loss company commonality period (in this subsection in respect of that case referred to as the ‘profit company commonality period’); and
“(ii)
In any other case, that part of the year of offset of the profit company (in this subsection in respect of that case referred to as the ‘profit company commonality period’)—
“(A)
Which includes (but is not limited to) all or part of the loss company commonality period; and
“(B)
In which the profit company and the loss company are members of the same group of companies; and
“(C)
In which continuity of ownership has been maintained in respect of the loss company; and
“(d)
In any case where paragraph (c)(iii) of subsection (2) is not met in respect of a preceding loss year being the 1991–92 income year or a subsequent income year, adequate accounts have been prepared by the loss company and furnished to the Commissioner which detail sufficiently that part of the net loss (in this subsection referred to as the ‘part-year loss’, and that net loss to be calculated after taking into account any amount that has been offset against net income by any company other than the profit company) as is reasonably and fairly attributable to the preceding year loss company commonality period,—
the loss company may, in any notice given to the Commissioner in accordance with subsection (3) in respect of the net loss, the profit company, the loss company, and the year of offset, elect that, in respect of the net loss, the profit company, the loss company, and the year of offset—
“(e)
In any case where paragraph (c)(i) or (c)(ii) or (e) of subsection (2) is not met, regard shall be had in applying those paragraphs only to the loss company commonality period, and, where such an election is made,—
“(i)
For the purposes of determining the amount able to be offset by the profit company in respect of the loss company’s net loss and the year of offset, subsection (2) shall apply as if the year of offset of the profit company were co-extensive with the profit company commonality period and the taxable income of the profit company for that deemed year were equal to the part-year profit; and
“(ii)
Where and to the extent that—
“(A)
The whole or part net loss of the loss company could only be carried forward by the loss company under section IE 1(2) to the year of offset by virtue of section IF 1(3); and
“(B)
By virtue of this subsection an offset is allowed to the profit company,—
section IF 1(3) shall apply as if the loss company has, in that part of the profit company commonality period which falls within the loss company commonality period, net income equal to the part-year profit; and
“(f)
In any case where paragraph (c)(iii) of subsection (2) is not met in respect of a preceding loss year being the 1991–92 income year or a subsequent income year, regard shall be had in applying that paragraph (c)(iii) only to the preceding year loss company commonality period, and, where such an election is made, for the purposes of determining the amount able to be offset by the profit company in respect of the loss company’s net loss and the year of offset, subsection (2) shall apply as if the preceding loss year were co-extensive with the preceding year loss company commonality period and the net loss of the loss company for such deemed year were equal to the part-year loss.
“(6)
Where—
“(a)
A company (referred to in this subsection as the ‘loss company’) has a net loss for any income year; and
“(b)
A deduction has been allowed under this Act or the Income Tax Act 1976, in the 1993–94 or any subsequent income year (referred to in this subsection as the ‘year of write off), to any company (referred to in this subsection as the ‘write-off company’) other than the loss company for—
“(i)
A bad debt; or
“(ii)
A decline in the value of any shares determined as follows:
“(A)
If the shares have not been disposed of, from a valuation made under section EE 1 or otherwise; or
“(B)
If the shares have been disposed of by the taxpayer, as the amount by which the gross income of the company in respect of the disposal is less than the deduction allowed to the company in respect of the cost of the shares; and
“(c)
The application by the loss company of an amount which—
“(i)
Gave rise to the debt; or
“(ii)
Was paid by any person for the subscription of the shares—
was taken into account in calculating the net loss,—
no offset shall be available in respect of the net loss under subsection (2) in the year of write off or in any income year succeeding the year of write off in calculating the net income of any company which is the write-off company or which is at any time in the income year in which the net loss arises in the same group of companies as the write-off company, except to the extent that the net loss exceeds the aggregate of the deductions referred to in paragraph (b).
“(7)
Where—
“(a)
An amount of net loss apparently arising for a company (in this subsection referred to as the ‘loss company) in an income year (in this subsection referred to as the ‘year of loss’) is offset by more than one company (in this subsection referred to as the ‘profit companies’) under subsection (2); and
“(b)
The actual net loss of the loss company for the year of loss is determined by the Commissioner to be less than the aggregate amounts offset in respect of the apparent net loss by the profit companies against their net income,—
then, notwithstanding any other provision of this section,—
“(c)
Where the loss company so elects by notice in writing in such form as the Commissioner may allow, given to the Commissioner within 6 months after the date upon which the Commissioner gave notice to the loss company of the determination of the reduced amount of the net loss or within such further time as the Commissioner may allow, the amount by which the actual net loss determined by the Commissioner is less than the aggregate of the amounts offset by the profit companies shall be allocated to the respective profit companies as a reduction in the amounts available to them for offset in the manner the loss company elects, but any election which provides that the amount of the reduction allocated to a company which at the time of the election is no longer a member of the same group of companies as the loss company exceeds the amount of reduction which would arise under paragraph (d) shall be deemed not to have been made; and
“(d)
In any other case, the amount available to each of the profit companies for offset against their net income shall be reduced by the same proportion as the proportion by which the apparent net loss was reduced to equal the actual net loss,—
and, where and to the extent that the reduction in an amount available for offset against the net income of any profit company results in any payment made under this section under an agreement for the profit company to bear or share in the net loss of the loss company being treated as a dividend, that dividend shall be deemed to be reduced to the extent to which the payment is refunded by the loss company to the profit company within the period of 6 months referred to in paragraph (c).
“(8)
For the purposes of subsections (2)(c)(iii) and (iv), a company shall be treated as being a member of the same group of companies as another company in respect of the 1991–92 income year or any earlier income year if those 2 companies were, in respect of that income year, members of the same group of companies for the purposes of section 191(5) and (7) of the Income Tax Act 1976 as in force before its repeal by section 25 of the Income Tax Amendment Act (No. 2) 1992 by virtue of the provisions of that section 191, as modified by section IG 3.
“(9)
Section IE 1(4) shall apply as if any deduction allowed under subsection (2) of this section were relief afforded by section IE 1.
“(10)
For the purposes of this section, where adequate accounts are required to be prepared and furnished to the Commissioner in respect of part of the net loss or taxable income for any income year of any company which is reasonably and fairly attributable to a period which is part only of that income year of that company, those accounts shall be prepared, to the extent to which reasonable and fair, by applying the provisions of this Act to that period as if it were an income year.
“(11)
In this section, ‘dual resident company’ means, in relation to any income year, any company which in that income year or any part of that income year is—
“(a)
Resident in New Zealand; and
“(b)
Either—
“(i)
Treated, under an agreement, as not being resident in New Zealand for the purposes of the agreement; or
“(ii)
Also, by the law of another country or territory, liable to income tax in that country or territory by reason of domicile, residence, or place of incorporation.
“IG 3 Special provisions in relation to group companies for 1991–92 income year
“(1)
Notwithstanding section 191(3a) of the Income Tax Act 1976 (as that provision was inserted by section 8 of the Income Tax Amendment Act (No. 5) 1991 and as in force before the repeal of section 191 of that Act by section 25 of the Income Tax Amendment Act (No. 2) 1992), where and to the extent that the Commissioner is satisfied that—
“(a)
A company (in this subsection referred to as the ‘loss company’) had a net loss for the 1991–92 income year; and
“(b)
The loss company and another company would have been treated, under that section 191(3a), as a group of companies or a specified group to which section 191(4) of the Income Tax Act 1976 (as also in force before its repeal) applied, had the period specified in that section 191(3a)(c) and (d) been, instead of the period so specified, part only of the period so specified; and
“(c)
Adequate accounts have been prepared by the loss company and furnished to the Commissioner relating to that part of that period which detail sufficiently such part of the net loss for the 1991–92 income year which was reasonably and fairly attributable to that part of that period,—
those 2 companies shall be treated, for the purposes of section 191(5) and (7) of the Income Tax Act 1976 (as so previously in force), but only with respect to that part of that net loss as those accounts indicate was reasonably and fairly attributable to that part of that period, as constituting a group of companies, specified group, or both (as the case may be).
“(2)
The references in section 191(7a) of the Income Tax Act 1976 (as in force before the repeal of section 191 by section 25 of the Income Tax Amendment Act (No. 2) 1992) to section 188 of the Income Tax Act 1976 shall be references to section 188 (as in force before its repeal by section 22 of the Income Tax Amendment Act (No. 2) 1992)—
“(a)
As modified by section 188aa of the Income Tax Act 1976; and
“(b)
As if the continuity percentage referred to in that section 188(7) were always 40%.
“IG 4 Group of companies attributed foreign net losses
“(1)
Subject to this section, if a company (in this section referred to as the ‘first company’) has an attributed foreign net loss for any income year, or has carried forward to any income year an attributed foreign net loss under sections IE 1 and IF 1, and the loss may not be offset by the first company in the income year in accordance with sections IE 1 and IE 3, sections IG 2 and GC 4 apply as if—
“(a)
The attributed foreign net loss were a net loss arising on the last day of the income year in respect of which it was attributed; and
“(b)
Each reference in those sections to a group of companies were a reference to a wholly-owned group of companies; and
“(c)
Section IG 2(4), (5) and (10) were omitted; and
“(d)
The reference in section IG 2(8) to ‘the same group of companies for the purposes of section 191(5) and (7) of the Income Tax Act 1976’ were a reference to ‘the same specified group in accordance with section 191(4) of the Income Tax Act 1976’.
“(2)
The maximum amount of the attributed foreign net loss that any other company may, under section IG 2 (as modified by this section), offset against its net income for that income year is an amount equal to the total of—
“(a)
Any attributed foreign income of the other company for that income year in respect of any controlled foreign company resident in the same country or territory (referred to in this section as the ‘relevant country’) as that in which the first-mentioned controlled foreign company was resident in the accounting period in respect of which the attributed foreign net loss arose; and
“(b)
Any foreign investment fund income of the other company that is calculated under the branch equivalent method and is derived in that income year in respect of an interest in a foreign investment fund resident in the relevant country.
“(3)
An amount of attributed foreign income or foreign investment fund income of the other company may only be taken into account under subsection (2) to the extent that the amount is not taken into account—
“(a)
In determining the other company’s entitlement to a deduction under section DP 1 or DP 3; or
“(b)
In determining the other company’s entitlement to an offset under section IE 3; or
“(c)
In determining the other company’s entitlement to an offset under section IG 2 in respect of any other attributed foreign net loss.
“(4)
If the first company is unable to offset any part of the maximum amount or attributed foreign net loss calculated under subsection (2) for the income year against net income of the other company for the year because there is insufficient net income, the excess shall be treated as if it were a net loss of the other company for the year determined under section BC 6 and will cease to be part of the attributed foreign net loss available to the first company.
“IG 5 Group of companies foreign investment fund net losses
“(1)
Subject to this section, if a company (in this section referred to as the ‘first company’) has a foreign investment fund net loss for an income year, or has carried forward to an income year a foreign investment fund net loss under sections IE 1 and IF 1, and that loss may not be offset by the first company in that income year in accordance with sections IE 1 and IE 4, sections IG 2 and GC 4 will apply as if—
“(a)
The foreign investment fund net loss were a net loss arising on the last day of the income year in respect of which it was attributed; and
“(b)
Each reference in those sections to a group of companies were a reference to a wholly-owned group of companies; and
“(c)
Section IG 2(4), (5) and (10) were omitted; and
“(d)
The reference in section IG 2(8) to ‘the same group of companies for the purposes of section 191(5) and (7) of the Income Tax Act 1976’ were a reference to ‘the same specified group in accordance with section 191(4) of the Income Tax Act 1976’.
“(2)
If the foreign investment fund net loss is calculated under any method other than the branch equivalent method, the maximum amount of the foreign investment fund net loss which may be offset against net income by another company under section IG 2 (as modified by this section) will be determined by applying sections IE 4(2) and (3) as if the foreign investment fund net loss were a carried forward foreign investment fund net loss of the other company.
“(3)
If the foreign investment fund net loss is calculated under the branch equivalent method, the maximum amount of the foreign investment fund net loss which may be offset against the net income of another company under section IG 2 (as modified by this section) will be determined by applying section IG 4 as if—
“(a)
The interest in the fund were an income interest in a controlled foreign company; and
“(b)
The foreign investment fund net loss were an attributed foreign net loss; and
“(c)
References to the first controlled foreign company referred to were references to the fund.
“(4)
If the first company is unable to offset any part of the maximum amount or the foreign investment fund net loss calculated under subsection (2) or (3) for the income year against net income of the other company for the year because there is insufficient net income, the excess shall be treated as if it were a net loss of the other company for the year determined under section BC 6 and will cease to be part of the foreign investment fund net loss available to the first company.
“IG 6 Loss carry forward and grouping by consolidated group and consolidated group members
“(1)
Subject to this section, sections IE 1, IE 2, IE 3, IE 4, IF 1, IF 2, and IH 1 shall apply, with any necessary modifications, in respect of a consolidated group as if the consolidated group were a single company, and the taxable income of the consolidated group snail be determined accordingly.
“(2)
Nothing in this section shall apply to any consolidated group whose members are mining companies.
“(3)
Where any consolidated group has a net loss for an income year, no part of that net loss shall be treated for the purposes of this Act as a net loss of any individual member company of that consolidated group.
“(4)
Where a company that is in an income year a member of a consolidated group is allowed under sections IE 1 and IF 1 to claim to carry forward to that income year and offset to the extent of net income for that year (in this subsection referred to as the ‘specified year’) any net loss of the company for any preceding income year,—
“(a)
That net loss shall, subject to subsections (5), (6), and (7), be offset against the net income (if any) for the specified year of the consolidated group so far as that net income extends; and
“(b)
Only so far as it has not been so offset, shall be eligible to be—
“(i)
Offset in accordance with sections IE 1 and IF 1 or this section against net income of the company or of any other consolidated group for the specified year; or
“(ii)
Carried forward by the company in accordance with sections IE 1 and IF 1 to any succeeding income year; or
“(iii)
Treated, for the purposes of section IG 2, as a net loss of the company carried forward to the specified year, in which event that net loss may be the subject of an election or agreement under section IG 2(2) in respect of the net income of any other company (other than the consolidated group).
“(5)
Where net losses of a consolidated group or of one or more member companies of the group are allowed under sections IE 1 and IF 1 or required under this section to be offset against the net income (if any) for an income year of a consolidated group, those net losses shall—
“(a)
If they arose in 2 or more income years, be offset in the same order as they arose; and
“(b)
If they arose in the same income year, be offset, so far as the net income extends,—
“(i)
In the order elected by the consolidated group by notice to the Commissioner in such form as the Commissioner may allow; or
“(ii)
If no such election is made, on a pro rata basis.
“(6)
In any case where—
“(a)
Subsection (4) would, except to the extent of the application of this subsection and subsection (7), require the whole or part of the net loss of any company for any income year (in this subsection referred to as the ‘preceding loss year’) to be offset against the net income (if any) of a consolidated group for a subsequent year (in this subsection referred to as the ‘subsequent year’); and
“(b)
The company was not a member of the same group of companies, for the preceding loss year or any income year falling between the preceding loss year and the subsequent year, as any one or more companies which are members of the consolidated group in the subsequent year,—
the amount of net loss offset under subsection (4) against the net income of the consolidated group for the subsequent year shall not exceed the aggregate of—
“(c)
The amount of the net loss that could be offset by the company in the subsequent year under sections IE 1 and IF 1 against its own net income (that net income being nevertheless calculated in accordance with section HB 2(1)) were it not in that subsequent year a member of a consolidated group; and
“(d)
The aggregate amount that could be offset under section IG 2 against their own net income (that net income being nevertheless calculated in accordance with section HB 2(1)) by companies (other than the company) which are members of the consolidated group in the subsequent year if—
“(i)
Neither the company nor those other companies were members of the consolidated group in the subsequent year; and
“(ii)
The company were to take all necessary steps under section IG 2 to permit that offset under that section by the other companies.
“(7)
In any case where—
“(a)
Subsection (4) would, except to the extent of the application of this subsection and subsection (6), require the whole or part of the net loss of any company for any income year (in this subsection referred to as the ‘preceding loss year’) to be offset against the net income (if any) of a consolidated group of companies for a subsequent year (in this subsection referred to as the ‘subsequent year’); and
“(b)
The company was a member of the consolidated group for part only of the subsequent year,—
the amount of net loss offset under subsection (4) against the net income of the consolidated group for the subsequent year shall not exceed the lesser of—
“(c)
The excess (if any) of the net loss of the company for the preceding loss year and required, but for the application of this subsection and subsection (6), to be offset against the net income of the consolidated group for the subsequent year over the aggregate of—
“(i)
Any net income for the subsequent income year of the company attributable to any period prior to the company being a member of the consolidated group, calculated by applying the provisions of section FD 9(2); and
“(ii)
Any part of the net loss required, under subsection (4), to be offset against the net income for the subsequent year of another consolidated group of companies of which the company was a member during the subsequent year and prior to the company being a member of the consolidated group; and
“(d)
The amount (if any) as shown in adequate and sufficiently detailed accounts furnished to the Commissioner with the consolidated group’s return of income for the income year, of the consolidated group’s net income for the income year as is reasonably and fairly attributable to the part of the income year during which the company was a member of the consolidated group.
“(8)
Where and to the extent that—
“(a)
A company is a member of a consolidated group for part only of an income year (in this subsection referred to as the ‘specified year’); and
“(b)
The company is entitled only by virtue of section IF 1(3) to claim to carry forward to the specified year and offset, to the extent of the amount of net income of the company attributable to part only of the specified year (that part being referred to in this subsection as the ‘continuity period’) any net loss of the company for any preceding year; and
“(c)
The company is a member of the consolidated group for the whole or part of the continuity period; and
“(d)
Adequate and sufficiently detailed accounts have been prepared and furnished to the Commissioner with the consolidated group’s return of income for the specified year, relating to that part of the continuity period during which the company was a member of the consolidated group, which detail sufficiently such part of the net income of the consolidated group (that part being referred to in this subsection as the ‘continuity period profit’) for the specified year as is reasonably and fairly attributable to that part of the continuity period; and
“(e)
The net loss of the company for the preceding year, to the extent able to be carried forward under sections IE 1 and IF 1 by virtue of this subsection, is, by virtue of this section, offset against the net income for the specified year of the consolidated group,—
section IF 1(3) shall apply as if the company had an amount of net income attributable to the continuity period equal to the continuity period profit.
“IG 7 Attributed foreign net losses and foreign investment fund net losses of consolidated group members
“(1)
Where any consolidated group has in respect of an income year—
“(a)
An attributed foreign net loss; or
“(b)
A foreign investment fund net loss,—
no part of that attributed foreign net loss or foreign investment fund net loss shall be treated for the purposes of this Act as an attributed foreign net loss or foreign investment fund net loss of any individual member company of that consolidated group.
“(2)
Where—
“(a)
Any company is a member of a consolidated group in an income year (in this subsection referred to as the ‘specified year’); and
“(b)
The company is entitled—
“(i)
In accordance with sections IE 1 and IE 3 to claim to carry forward to the specified year and offset against net income for that year any attributed foreign net loss of that company for any preceding income year; or
“(ii)
In accordance with sections IE 1 and IE 4 to claim to carry forward to the specified year and offset against net income for that year any foreign investment fund net loss of that company for any preceding income year,—
that loss shall, subject to subsections (3) and (4), be—
“(c)
In the case of such an attributed foreign net loss, offset against the net income of the consolidated group for the specified year, to the extent that it does not exceed the attributed foreign income (if any) derived in the specified year by the consolidated group in respect of any controlled foreign company or companies resident in the relevant country or territory; and
“(d)
In the case of such a foreign investment fund net loss, offset against the net income of the consolidated group for the specified year to the extent that it does not exceed the foreign investment fund income (if any) derived in the specified year by the consolidated group,—
and only so far as it cannot be so offset shall be eligible to be—
“(e)
Offset against the net income of the company or any other consolidated group in the specified year; or
“(f)
Carried forward by the company in accordance with sections IE 1 and IF 1 to any succeeding income year; or
“(g)
Offset against the net income of any other company (other than the consolidated group) subject to and in accordance with section IG 4 or IG 5.
“(3)
Where attributed foreign net losses or foreign investment fund net losses of a consolidated group or of one or more member companies of the group are allowed to be offset against net income of a consolidated group, those net losses shall—
“(a)
If resulting from net losses arising in 2 or more income years, be offset in the same order as the net losses arose; and
“(b)
If resulting from net losses arising in the same income year, be offset, so far as the relevant net income extends,—
“(i)
In the order elected by the consolidated group by notice to the Commissioner in such form as the Commissioner may allow; or
“(ii)
If no such election is made, on a pro rata basis.
“(4)
In any case where—
“(a)
Subsection (2) would, except to the extent of the application of this subsection, require the whole or part of any net loss of any company, arising in any income year (in this subsection referred to as the ‘preceding loss year’), to be offset against net income (if any) of a consolidated group of companies for a subsequent year (in this subsection referred to as the ‘subsequent year’); and
“(b)
The company was not a member of the same group of companies, for the preceding loss year or any income year falling between the preceding loss year and the subsequent year, as any one or more companies which are members of the consolidated group in the subsequent year,—
the amount of net loss offset under subsection (2) against the net income of the consolidated group in the subsequent year shall not exceed the aggregate of—
“(c)
The amount of the attributed foreign net loss or foreign investment fund net loss which could be offset by the company in the subsequent year in accordance with sections IE 1 and IF 1, and section IE 3 or IE 4 (as the case may be) against its own net income were it not in that subsequent year a member of a consolidated group of companies (that income being nevertheless calculated in accordance with section HB 2(1)); and
“(d)
The aggregate amount which could be offset against their own net income if that income were nevertheless calculated in accordance with section HB 2(1) and in accordance with sections IG 2 and IG 4 or section IG 5 by companies (other than the company) which are members of the consolidated group in the subsequent year if—
“(i)
Neither the company nor those other companies were members of the consolidated group in the subsequent year; and
“(ii)
The company were to take all necessary steps under sections IG 2 and IG 4 or section IG 5 to permit that offset by the other companies under the relevant one of those sections.
“(5)
In any case where—
“(a)
Subsection (2) would, except to the extent of application of this subsection and subsection (4), require the whole or part of any attributed foreign net loss or foreign investment fund net loss of any company for any income year (in this subsection referred to as the ‘preceding year’) to be offset against net income of a consolidated group of companies in a subsequent year (in this subsection referred to as the ‘subsequent year’); and
“(b)
The company was a member of the consolidated group for part only of the subsequent year,—
the amount of net loss offset under that subsection against net income of the consolidated group for the subsequent year shall not exceed the lesser of—
“(c)
The excess (if any) of the amount of net loss of the company for the preceding year required, but for the application of this subsection and subsection (4), to be offset against net income of the consolidated group in respect of the subsequent year over the aggregate of—
“(i)
Any net income of the company in the subsequent year in any period prior to the company being a member of the consolidated group (calculated by applying the provisions of section FD 9(2)) against which net income that net loss would be able to be offset under this Act; and
“(ii)
Any part of the net loss required, under subsection (2) of this section, to be offset against net income for the subsequent year of another consolidated group of companies of which the company was a member during the subsequent year prior to the company being a member of the consolidated group; and
“(d)
The amount (if any) as shown in adequate and sufficiently detailed accounts furnished to the Commissioner with the consolidated group’s return of income for the income year, of the consolidated group’s net income for the income year (being net income against which that net loss could be offset under this Act) as is reasonably and fairly allocable to the part of the income year during which the company was a member of the consolidated group.
“IG 8 Net losses, attributed foreign net losses, and foreign investment fund net losses of amalgamated company
Where an amalgamated company is deemed under section IF 4 to have a net loss, attributed foreign net loss, or foreign investment fund net loss in respect of an amalgamating company which ceased to exist on the amalgamation, for the purposes of determining whether the net loss, attributed foreign net loss or foreign investment fund net loss may be offset, under sections IG 2, IG 4 and IG 5 against net income of another company, the relevant section of this Act shall be applied as if, with respect to all times prior to the amalgamation, the amalgamated company did not separately exist and was instead the amalgamating company with the same holders of shares and options over snares each holding the same number and class of shares and options over shares as they held at the time in the amalgamating company.
“IG 9 Net losses, attributed foreign net losses, and foreign investment fund net losses offset against net income of amalgamated company
Where a company (referred to in this subsection as the ‘loss company’) has a net loss, attributed foreign net loss, or foreign investment fund net loss in respect of a period which falls wholly or partly before an amalgamation the net loss, attributed foreign net loss or foreign investment fund net loss may be offset, under section IG 2, IG 4, or IG 5 against net income of the amalgamated company if and only if the net loss, attributed foreign net loss or foreign investment fund net loss can be so offset by applying the commonality of ownership and other tests contained in the relevant provisions of this Act severally to the loss company and the amalgamated company in respect of each company which has in the course of or before the amalgamation amalgamated with the amalgamated company, as if, with respect to all times prior to the amalgamation, the amalgamated company did not separately exist and was instead that amalgamating company with the same holders of shares and options over shares each holding the same number and class of shares and options over shares as they held at the time in the amalgamating company.
“IG 10 Net losses may be used to pay penalties
“(1)
A taxpayer may elect to use a net loss of the taxpayer to pay a shortfall penalty assessed in respect of an income tax liability, if—
“(a)
The net loss is available to be offset against net income of the taxpayer in the income year of the shortfall penalty; and
“(b)
The taxpayer notifies the Commissioner of the election within the due date period for the payment of the shortfall penalty.
“(2)
If a taxpayer makes an election under subsection (1) in relation to current year losses and the Commissioner subsequently issues a determination of net loss confirming that the net losses are available to be offset in the current income year, the time that the net losses are offset will be the time of the election.
“(3)
Each dollar of net loss that is used to pay a shortfall penalty—
“(a)
Counts as an amount of payment equal to one dollar multiplied by the tax rate; and
“(b)
Will, from the date the net loss is used, no longer be available for use by a person.
“(4)
For the purposes of subsection (3), the term ‘tax rate’ means the rate of tax or lowest marginal rate of tax that would apply to the taxpayer during the return period to which the relevant tax shortfall relates, if the taxpayer had tax to pay.
“(5)
In this section, ‘income year’ includes any part of a year that, by virtue of section IF 1 or section IG 2, may be taken into account for loss continuity or group purposes.
“Subpart H—Losses—Miners
“IH 1 Losses of mining companies and petroleum miners
“(1)
Where the Commissioner is satisfied that the whole or a part of a net loss of a company (being a mining company or a resident mining operator or a non-resident mining operator) for any income year (in this subsection referred to as the ‘year of loss’) arises as a result of exploration expenditure or development expenditure relating to an area comprised in a mining licence or a mining privilege or to 2 or more such areas (any such area being referred to in this subsection as a ‘licence area’), the following provisions shall apply:
‘(a)
The Commissioner shall determine the amount of that net loss which, in the Commissioner’s opinion, so arises in relation to that licence area or (as the case may be) to each of those licence areas (the amount so determined in respect of any such licence area being referred to in this subsection as the ‘specified sum’ in relation to that licence area); and
“(b)
Where, in relation to the specified sum in relation to a licence area,—
“(i)
At the beginning of any income year, being an income year after the year of loss and being the first such income year in respect of which this subsection applies with respect to that specified sum, (that income year being referred to in this paragraph as the ‘year of claim’), there remains a balance of that specified sum after taking into account such amounts of that specified sum as the Commissioner determines to have been offset against the net income of that company for any income year or years before the year of claim under this Act, and, where that company is a mining company, after taking into account any amounts by which, in the determination of the Commissioner, that specified sum has been reduced in accordance with section IH 4(1)(a) or section IH 4(1)(c); and
“(ii)
By reason only of section GC 2 or section IF 1(1), that balance would, but for this paragraph, be precluded from being, in whole or in part, offset against any net income of that company for the year of claim,—
section GC 2 or IF 1(1) shall not preclude that balance from being offset against the net income of that company to the extent that it does not exceed the amount that would be the net income of the company if its sole source of gross income for the year of claim was from that licence area and, so far as that balance cannot then be offset, from being offset against the net income of that company for the year next following the year of claim, to the extent that it does not exceed the amount that would be the net income of the company if its sole source of gross income for that year was from that licence area, and so on, and, in any such case, section IH 4(1)(e) shall, with any necessary modifications, apply; and
“(c)
Where any apportionment is required for the purposes of this subsection, and any question arises as to the basis or manner of such apportionment, it shall be determined by the Commissioner; and
“(d)
For the purposes of this subsection, the reference in this subsection to exploration expenditure relating to an area comprised in a mining licence or a mining privilege shall be taken as including a reference to expenditure on exploring or searching in any area which is outside but continuous, or geologically contiguous, with that first-mentioned area, being exploring or searching which was included in the programme of exploring or searching as a consequence of which application was made for that mining licence or that mining privilege.
“(2)
Subject to section IH 2(1), where the Commissioner is satisfied that the whole or part of any net loss of a petroleum mining company for the 1990–91 income year or any earlier income year (that income year being referred to in this subsection as the ‘year of loss’) arises from the allowance of—
“(a)
A deduction of the amount of any exploration expenditure incurred by that company on or before 30 September 1990 in exploring or searching for petroleum in an area that is or is subsequently comprised in a mining licence or in 2 or more such areas; or
“(b)
A deduction of an amount in respect of the amount of any development expenditure incurred by that company on or before 30 September 1990,—
the following provisions shall apply:
“(c)
The Commissioner shall determine the amount of that net loss which, in the Commissioner’s opinion, so arises from the allowance of that deduction, in relation to that licence area or (as the case may be) to each of those licence areas (the amount so determined in respect of any such licence area being referred to in this subsection as the ‘specified sum’ in relation to that licence area); and
“(d)
Where, in relation to that specified sum in relation to a licence area, at the beginning of any income year, being an income year after the year of loss and being the first such income year in respect of which this subsection (or section 188c(2) of the Income Tax Act 1976) applies with respect to that specified sum (that income year being referred to in this paragraph as the ‘year of claim’), there remains a balance of that specified sum after taking into account—
“(i)
Such amounts of that specified sum as the Commissioner determines to have been allowed as a deduction to that company, or offset against the net income of that company, in or for any income year or years before the year of claim under this Act or the Income Tax Act 1976 or to have been allowed as a deduction to any other company in or for any such income year or years; and
“(ii)
Where that company was, immediately before the commencement of section 214b of the Income Tax Act 1976, a company to which section 216 of that Act applied, after taking into account any amounts by which, in the determination of the Commissioner, that specified sum has been reduced in accordance with section 216(16)(a) or the first proviso to section 216(16)(b) of that Act (as those provisions applied immediately before the commencement of section 214b of the Income Tax Act 1976); and
“(iii)
By reason only of section GC 2 or IF 1(1), that balance would, but for this paragraph, be precluded from being, in whole or in part, offset against the net income of that company, in or for the year of claim,—
section GC 2 or IF 1(1) shall not preclude that balance from being offset against the net income of that company for the year of claim, to the extent that the amount offset does not exceed the amount that would be the net income of the company for the year if the company’s sole source of gross income was from that licence area, so far as that income or amount extends, and, so far as the balance cannot then be offset, from being offset against the net income of the company for the year next following the year of claim to the extent that the amount offset does not exceed the amount that would be the net income of the company for that year if the company’s sole source of gross income was from that licence area, and so on; and
“(e)
Where any apportionment is required for the purposes of this subsection and any question arises as to the basis or the manner of such apportionment, it shall be determined by the Commissioner; and
“(f)
For the purposes of this subsection—
“(i)
The reference in this subsection to exploration in exploring or searching for petroleum in an area which is or is subsequently comprised in a mining licence shall be taken as including a reference to expenditure in exploring or searching for petroleum in any area which is outside but continuous, or geologically contiguous, with that first-mentioned area, being exploring or searching that was included (whether originally or additionally) in the programme of exploring or searching as a consequence of which application was made for that mining licence; and
“(ii)
The expression ‘mining licence’ means a mining licence issued under the Petroleum Act 1937.
“IH 2 Companies engaged in exploring for, searching for, or mining, petroleum
“(1)
Where in the 1990–91 or any earlier income year a net loss arises from the allowance in that income year to a petroleum mining company of a deduction or further deduction under any of subsections (6), (13)(b), (14)(b), and (18)(c) of section 214b of the Income Tax Act 1976 (or under subsection (4) or subsection (9)(c) of section DZ 6 of this Act)—
“(a)
Any company (referred to in this subsection as a ‘shareholder company’) that is a shareholder of that petroleum mining company and has made at any time (being a time at which that shareholder company was a shareholder of that petroleum mining company) any payment or payments to that petroleum mining company which was or were used for the purposes of the development expenditure of the kind referred to in section DZ 6(4), in respect of which that deduction or further deduction is allowed in that income year, is allowed, if that shareholder company has so elected by notice in accordance with section 214b(22)(d) of that Act (or section DZ 6(12)(d) of this Act), a deduction of an amount that bears to that net loss the same proportion as that payment, or the aggregate of those payments, bears to that development expenditure; and
“(b)
No other deduction and no offset shall be allowed under this Act in respect of—
“(i)
That net loss, except to the extent that it exceeds the aggregate of all amounts deducted, under paragraph (a) in the income year in which that net loss arises:
“(ii)
Any amount allowed as a deduction under paragraph (a) to any such shareholder company: Provided that where that net loss arises from the allowance of a further deduction under the second proviso to section 214b(6) of that Act (or section DZ 6(4) of this Act) that net loss shall, for the purposes of this subsection, be deemed to be a net loss arising in the year which, in section DZ 6(4), is referred to as the year of cessation:
Provided also that in no case shall the aggregate of the amounts deducted by any shareholder company under paragraph (a) of this subsection exceed the aggregate of the payments of the kind referred to in that paragraph made by that shareholder company to the petroleum mining company.
“(2)
Where, in relation to the 1990–91 or any earlier income year, any taxpayer (being a company) is a petroleum mining company, sections CK 1 and IG 1 shall not apply, in relation to that company, in respect of—
“(a)
Any net loss, arising in that company, of the kind referred to in section IH 2(1) except to the extent (if any) that, in relation to that net loss, there is an excess of the kind referred to in section IH 2(1); and
“(b)
Any net loss of that taxpayer for the 1978–79 or any earlier income year.
“IH 3 Loss carry back by petroleum miners
If a petroleum miner would, in the absence of this section, have a net loss for any income year in which—
“(a)
Expenditure for removal or restoration operations is incurred; or
“(b)
A permit is relinquished and deferred deductions are allowed as a deduction under section DM 1(5)(a),—
the allowable deductions of the petroleum miner for that year shall be reduced by the amount that would otherwise be a net loss, and that amount shall be allowed as a deduction in the years preceding the loss year, beginning with the income year immediately preceding the loss year, and the petroleum miner shall have the right to amend its returns for those income years notwithstanding the time bar.
“IH4 Companies engaged in exploring for, searching for, or mining, certain minerals
“(1)
Where, in accordance with sections IE 1 and IF 1 or section IH 1, a mining company is entitled to claim that a net mining loss for any income year (that income year being referred to in this subsection as the ‘year of loss’) shall be carried forward and offset against the net income of that company for subsequent income years, that section shall apply subject to the following provisions:
“(a)
The amount which may be carried forward in respect of the net mining loss from the income year in which the net mining loss arose for offset against the net income of that company in subsequent income years shall not exceed an amount calculated in accordance with the following formula:
“a − b
“where—
“a
is the amount of the mining outgoing excess in the year of loss; and
“b
is 150% of so much of the amount of that mining outgoing excess as is deducted, in accordance with section DN 1(3), in calculating the net income of that company for the year of loss:
“(b)
The maximum amount of net mining losses that a mining company may offset against its net income for an income year is an amount equal to the lesser of the company’s net income for the year and the amount calculated in accordance with the following formula:
_eqn07.JPG)
“where—
“c
is the net mining losses carried forward to that income year; and
“d
is the amount that would be the company’s net income for the year if its only source of gross income for the year was from mining:
“(c)
If the mining company offsets net mining losses against its net income for an income year, the amount of net mining losses that the company may otherwise carry forward to the subsequent income year under sections IE 1 and IF 1 shall be reduced by an amount equal to the larger of zero and the amount calculated in accordance with the following formula:
_eqn08.JPG)
“where—
“e
is the amount of net mining losses offset by the mining company in that income year; and
“d
has the same meaning as in paragraph (b):
“(d)
Paragraphs (b) and (c) shall not apply to any balance of a net loss, being a balance to which section IH 1(1)(b) applies:
“(e)
Where—
“(i)
That company is entitled, in accordance with the preceding provisions of this subsection, to carry forward any amount and offset it against the net income of that company for any income year; and
“(ii)
That company has ceased to be a mining company at or before the end of that income year,—
it shall be treated, for the purposes of those provisions, as if it had not so ceased to be a mining company.
“(2)
Where, in relation to any income year, a company is a mining company,—
“(a)
None of the provisions of section IG 2 shall apply with respect to that company in relation to that income year; and
“(b)
That company shall not be included in a group of companies for the purposes of that section in relation to that income year.
“(3)
Where—
“(a)
But for subsection (2), a mining company and a holding company (not being a mining company) would be included in a wholly-owned group of companies in relation to an income year; and
“(b)
That mining company has net income for that income year in excess of any net loss carried forward by that mining company to that income year under sections IE 1 and IF 1; and
“(c)
That holding company has a net loss for that income year, being a net loss which has been calculated without taking into account any deduction allowed or allowable to that holding company under section DN 3 in respect of the amount written off from any loan made by that holding company to that mining company,—
the amount of that net loss (as so calculated) may, to the extent that it cannot be offset under section IG 2(2) from the net income for that income year of any other company or companies (being a company or companies which together with that holding company are included in a wholly-owned group of companies in relation to that income year), be deducted from the amount by which the net income of that mining company for that income year exceeds any net loss carried forward by that mining company to that income year under sections IE 1 and IF 1, and the amount so deducted from that excess shall not be carried forward under sections IE 1 and IF 1:
Provided that where, by reason of an amount being, in accordance with the preceding provisions of this subsection, offset against the net income of that mining company for that income year, instead of being offset against the net income of that holding company for an income year after that year, the Commissioner is of the opinion that adjustment is warranted for the purposes of this subsection, the Commissioner may, on application made by that holding company within 8 years after the end of that first-mentioned income year, or within such extended period as the Commissioner may allow, and notwithstanding the time bar, make such adjustments for the purposes of this subsection, in relation to that holding company and that mining company, in respect of that first-mentioned income year and any one or more of the 8 income years immediately succeeding that first-mentioned income year, as the Commissioner considers equitable to meet the special circumstances of the case.
“IH 5 Resident mining operators
Notwithstanding anything in this Act, where a resident mining operator has a net mining loss for an income year (that income year being referred to in this subsection as the ‘year of loss’), sections IE 1, IF 1, and IH 1 shall apply subject to the following provisions:
“(a)
Where the net mining loss is not a balance to which section IH 1(1)(b) applies, the amount of the loss that the resident mining operator is allowed to offset against net income in the first income year after the year of loss shall not exceed the sum of—
“(i)
The amount that would be the resident mining operator’s net income for that year if the operator’s sole source of gross income in that year was gross income from mining; and
“(ii)
An amount equal to the greater of zero and an amount calculated in accordance with the following formula:
“a − b
“where—
“a
is the prescribed amount of the resident mining operator for that income year; and
“b
is the mining outgoing excess of the resident mining operator for that income year:
“(b)
Any net mining loss that cannot be offset under paragraph (a) may be offset against the resident mining operator’s net income for the income year immediately succeeding the income year to which paragraph (a) refers, to the extent it does not exceed the amount that could be offset under paragraph (a) if that paragraph referred to the immediately succeeding year, and so on:
“(c)
Section IH 4(1)(e) shall, with any necessary modifications, apply for the purposes of this subsection as if every reference to a mining company or company were a reference to a resident mining operator and as if the reference to section IH 4(1) were a reference to this subsection.
“Subpart I—Losses—Life Insurers
“II 1 Policyholder net losses
“(1)
Subject to this section, section IE 1 and section 92 of the Tax Administration Act 1994 apply to any policyholder net loss as if it were a net loss.
“(2)
Sections IF 1(1) and IG 2(2) shall not apply in respect of a policyholder net loss.”.
“II 2 Policyholder net loss for income year preceding 1990–91
Where any company to which section 204 of the Income Tax Act 1976 (as that provision was in force before its repeal and substitution by section 13(1) of the Income Tax Amendment Act (No. 2) 1990) applied—
“(a)
Incurred any loss in carrying on its business of life insurance in the 1989–90 income year; or
“(b)
Carried forward any loss (incurred in any earlier income year) to the 1989–90 income year in accordance with section 188 of the Income Tax Act 1976 as then in force,—
that loss shall (except to the extent to which it was in the 1989–90 income year deducted from or offset against any gross income of any person otherwise than in accordance with section 205c of the Income Tax Act 1976) be deemed to be a policyholder net loss of that company.
“II 3 Carry forward of policyholder net loss
Where—
“(a)
A life insurer transfers its life insurance business to another company; and
“(b)
The transfer meets the requirements set out in paragraphs (a) to (d) of section CM 18(2),—
the transferor life insurer may, by notification to the Commissioner in such form as the Commissioner may approve, elect that any policyholder net loss calculated by it for the income year of transfer, or carried forward by it to that income year, be treated as a policyholder net loss calculated for or carried forward to that income year by the transferee company and not by the transferor life insurer, and the provisions of this Act shall apply to any such loss accordingly.
“Subpart Z—Withdrawal Tax
“IZ 1 Application of this Subpart
This Subpart shall apply to every person who is deemed to derive withdrawal income.
“IZ 2 Rate of withdrawal tax
The rate of tax (in this Act referred to as ‘withdrawal tax’) in respect of withdrawal income derived by any person is 45% of the gross amount of that withdrawal income.
“IZ 3 Withdrawal income
“(1)
Where any special account is closed in any income year, any amount withdrawn on that closure, not being an amount withdrawn under a withdrawal certificate, shall be deemed to be withdrawal income derived in that income year by the person who operated that account:
Provided that in no case shall the withdrawal income of any person under this subsection exceed,—
“(a)
In the case of a person operating a special farm ownership account or a special fishing vessel ownership account, $60,000 less the aggregate amount withdrawn from that account under withdrawal certificates:
“(b)
In the case of a person operating a special home ownership account, $10,250 less the aggregate amount withdrawn from that account under withdrawal certificates.
“(2)
Where in any income year any special farm ownership account or special fishing vessel ownership account is converted into a special home ownership account, the amount (if any) by which the amount standing to the credit of the special farm ownership account or special fishing vessel ownership account at the end of the 31 March immediately preceding the date of that conversion of that account exceeded the amount of $10,250 shall be deemed to be withdrawal income derived in that income year by the person who operated that account so converted.
“(3)
Where any amount is withdrawn from a special account under a withdrawal certificate, and the farm ownership requirements or the home ownership requirements or the fishing vessel ownership requirements (as the case may be) are not fulfilled in relation to that amount, that amount shall be deemed to be withdrawal income derived by the person who operated the account in the income year in which the Commissioner is notified under the Farm Ownership Savings Act 1974 or the Home Ownership Savings Act 1977 that those requirements were not fulfilled:
Provided that in no case shall the withdrawal income of any person under this subsection exceed,—
“(a)
In the case of a person who operated a special farm ownership account or a special fishing vessel ownership account, $60,000 less the aggregate of any amounts deemed to be withdrawal income derived by that person under subsection (1):
“(b)
In the case of a person who operated a special home ownership account, $10,250 less the aggregate of any amounts deemed to be withdrawal income derived by that person under subsection (1).
“(4)
Any amount that is withdrawal income derived by any person in any income year under this section is not gross income of that person in that year or any other year.
“IZ 4 Payment of withdrawal tax
“(1)
Where, in respect of any withdrawal from any special account, any withdrawal income is derived by any person under section IZ 3(1), the authorised savings institution with which that account is operated shall withhold from the proceeds payable in respect of that withdrawal the amount of the withdrawal tax payable in respect of that withdrawal income.
“(2)
Where, in respect of the conversion of any special farm ownership account or special fishing vessel ownership account to a special home ownership account, any amount standing to the credit of that account is withdrawal income derived by any person under section IZ 3(2), the authorised savings institution with which that account is operated shall deduct from the amount of that withdrawal income the amount of the withdrawal tax payable in respect of that withdrawal income.
“(3)
Any authorised savings institution that is liable to withhold or deduct, under subsection (1) or (2), the amount of any withdrawal tax payable by any person, shall, not later than the 20th of the month immediately following the month in which it became so liable, pay that amount to the Commissioner, and deliver to the Commissioner a certificate in the prescribed form giving such details in relation to that tax and to the person in respect of whom it is payable as are mentioned in that form, and that payment shall be deemed to be a payment of that tax by that person.
“(4)
Notwithstanding anything in this or any other Act, the amount of any withdrawal tax that any authorised savings is liable to withhold or deduct under subsection (1) or (2) shall in all cases be so withheld or deducted, and shall be payable by that authorised savings institution only to the Commissioner in respect of that tax.
“(5)
Where any authorised savings institution has failed to withhold or deduct the amount of any withdrawal tax payable by any person, under subsection (1) or (2), and has paid an amount equal to the amount of that tax to the Commissioner under subsection (3), it may recover the amount so paid from that person.
“(6)
Any person who derives any withdrawal income under section IZ 3(3) shall pay to the Commissioner, within such time as the Commissioner may allow, the withdrawal tax payable in respect of that income.
“IZ 5 Evidence of liability in proceedings for recovery
Any amount that is payable to the Commissioner as or in respect of withdrawal tax under section IZ 4(3) or IZ 4(6) shall be recoverable by the Commissioner in the same manner as if it were income tax imposed under section BB 1, and in any proceedings against any person relating to the recovery of such an amount, a certificate signed by the Commissioner certifying that that amount is payable by that person under this section shall, in the absence of proof to the contrary, be conclusive evidence that that amount is payable to the Commissioner by that person. Judicial notice shall be taken of the signature to any certificate given under this section.
“IZ 6 Relief in certain cases
In any case where it is shown to the satisfaction of the Commissioner that the amount of withdrawal tax payable by any person in respect of any withdrawal income deemed to be derived by the person in relation to any special account operated by the person exceeds the aggregate of the amounts of rebate of income tax allowed in relation to that account under section KG 1, the Commissioner shall make such reduction in the amount of that withdrawal tax as the Commissioner considers to be just and equitable in the circumstances of that particular case.
“IZ 7 Application of other provisions to withdrawal tax
Subject to this Subpart, the other provisions of this Act and of the Tax Administration Act 1994, as far as they are applicable and with any necessary modifications, shall apply with respect to withdrawal tax as if it were income tax imposed under section BB 1 of this Act; but nothing in this Subpart shall be so construed as to include withdrawal tax in the terms ‘income tax’ or ‘tax’ for the purposes of—
“(a)
The provisions listed in section OZ 1(3)(a) to (o) of this Act; or
“(b)
Section 120k of the Tax Administration Act 1994.”.
Amendments to Part J
304 New Zealand superannuitant surcharge provisions
Section JB 1 is replaced by:
“JB 1
Notwithstanding anything in the other provisions of this Act, the New Zealand superannuitant surcharge shall be payable by every New Zealand superannuitant in accordance with this Subpart, Part B and Part NI.”.
305 New Zealand superannuitant surcharge imposed
(1)
In section JB 2(3), the definition of quantity “b”
is replaced by:
“b
is the income tax liability of the New Zealand superannuitant that would have arisen in that income year if this Part of the Act had not been enacted; and”.
(2)
In section JB 2(3), the portion of the definition of quantity “c”
before subparagraph (i) is replaced by:
“c
is the income tax liability of the New Zealand superannuitant that would have arisen in that income year if the taxable income of the New Zealand superannuitant was equal to the sum of—”.
(3)
In section JB 2(3), subparagraph (ii) in the definition of quantity “c”
is replaced by:
“(ii)
Less one-half of any amount received in the form of a pension from a superannuation fund or an annuity to which section CB 9(f) applies, where that one-half amount is not gross income of the New Zealand superannuitant; and”.
306 Determination of “other income”
(1)
In section JB 3(1), subparagraph (i) in the definition of quantity “a”
is replaced by:
“(i)
Plus one-half of any amount received in the form of a pension from a superannuation fund or an annuity to which section CB 9(f) applies, where that one-half amount is not gross income of the New Zealand superannuitant; and”.
(2)
In section JB 3(2)(b), the definition of quantity “e”
is replaced by:
“e
is an amount equal to such part of the superannuitant’s taxable income, not including any amount of—
“(i)
New Zealand superannuation; or
“(ii)
Specified foreign social security pension,—
in the income year as, in the opinion of the Commissioner, relates to gross income (if any) derived by the superannuitant during only the period in which New Zealand superannuation was payable to the superannuitant; and”.
(3)
In section JB 3(2)(b), the definition of quantity “g”
is replaced by:
“g
is an amount equal to such part of the superannuitant’s taxable income, not including any amount of—
“(i)
New Zealand superannuation; or
“(ii)
Specified foreign social security pension,—
in the income year as, in the opinion of the Commissioner, relates to gross income (if any) derived by the superannuitant during only the period in which New Zealand superannuation was not payable to the superannuitant; and”.
(4)
In section JB 3(3), the portion before the proviso is replaced by:
“(3)
Where the Commissioner is satisfied that the other income of a New Zealand superannuitant included gross income that was received by the superannuitant within a reasonable period after the date on which the superannuitant commenced or, as the case may be, ceased to be entitled to receive New Zealand superannuation, the Commissioner may determine that, for the purposes of this Subpart and Part NI, that gross income was received on a date other than the date on which it was received:”.
307 Determination of specified exemption
(1)
In section JB 4(1)(c), in the definition of quantity “f”
, the expression “(not including any amount of New Zealand superannuation)”
is replaced by the expression “(calculated on the basis that New Zealand superannuation is not gross income)”
.
(2)
In section JB 4(1)(d), in the definition of quantity “i”
, the expression “(not including any amount of New Zealand superannuation)”
is replaced by the expression “(calculated on the basis that New Zealand superannuation is not gross income)”
.
(3)
In section JB 4(1)(f), in the definition of quantity “o”
, the expression “(not including any amount of New Zealand superannuation)”
is replaced by the expression “(calculated on the basis that New Zealand superannuation is not gross income)”
.
(4)
Section JB 4(2) is replaced by:
“(2)
For the purposes of subsection (1), in any case where, in relation to a New Zealand superannuitant and to any income year, an amount calculated in accordance with, as the case may be, item c in paragraph (b), item f in paragraph (c), item i in paragraph (d), item 1 in paragraph (e), item o in paragraph (f), paragraph (g), or paragraph (h) of that subsection cannot be determined, for the purpose of an assessment, under section 44(2) of the Tax Administration Act 1994, of the income tax liability of the New Zealand superannuitant by reason of the other income or taxable income of the spouse of the New Zealand superannuitant for the income year not being ascertainable at the time of the making of that assessment, an amount in substitution of that amount shall be determined by the Commissioner in such manner as the Commissioner considers fair and equitable having regard to the circumstances of the case and to the tenor of subsection (1) of this section.”.
308 Application of other provisions to surcharge
Section JB 6 is replaced by:
“JB 6
Subject to this Subpart and Part NI, the other provisions of this Act and of the Tax Administration Act 1994, as far as they are applicable and with any necessary modifications, shall apply with respect to the New Zealand superannuitant surcharge as if it were income tax imposed under Part B of this Act; but nothing in this Subpart and Part NI shall be so construed as to include the surcharge in the expressions ‘income tax’ or ‘tax’ for the purposes of the provisions listed in section OZ 1(3)(a) to (o).”.
Amendments to Part K
309 Application of section BB 10
Section KB 1 is repealed.
310 Proportionate adjustment to rebates on change of return date
Section KB 2 is replaced by:
“KB 2
Where, for the purposes of section 39 of the Tax Administration Act 1994, a taxpayer is assessed for income tax on a return made for a period less than a year, the taxpayer shall be entitled, by way of rebates allowed under sections KC 1 to KC 4, only to an amount bearing to the total of such rebates to which the taxpayer would be entitled for a full year, the same proportion as the number of days in that period bears to the number of days in a year; and where a taxpayer is assessed on a return or returns for a period more than a year, the total of such rebates to which the taxpayer is entitled shall be proportionately increased.”.
311 Low income rebate
(1)
Section KC 1(2) and (3) are replaced by:
“(2)
For the purposes of subsection (1), in any case where a taxpayer has, during the income year, either arrived in or departed from New Zealand and in respect of that part of the income year (being the income year in which the taxpayer so arrives or departs) that precedes the taxpayer’s arrival in, or, as the case may be, succeeds the taxpayer’s departure from New Zealand, the taxpayer is deemed, under section OE 1, not to be resident in New Zealand, the net income of the taxpayer for the income year is deemed to be an amount equal to the net income of the taxpayer in the period during which (in the income year) the taxpayer is personally present in New Zealand, increased in the proportion that the number of days in the income year bears to the number of days in the period.
“(3)
For the purposes of subsection (1) and notwithstanding subsection (2), where the taxpayer derives gross income from New Zealand in the period (in the income year) that precedes the taxpayer’s arrival in, or, as the case may be, succeeds the taxpayer’s departure from New Zealand (being the period in respect of which the taxpayer is deemed not to be resident in New Zealand), the Commissioner may determine the amount of the net income of the taxpayer for the income year in such manner and in such amount as in all the circumstances of the case appear equitable having regard to the class or classes of the gross income so derived by the taxpayer and to the circumstances of the derivation of that gross income and to the tenor of this section.
“(4)
The amount on which a rebate calculated under paragraphs (b) or (c) of subsection (1) is determined, is calculated in accordance with the following formula:
“a − (b − c)
“where—
“a
is the net income of the taxpayer for the income year; and
“b
is the aggregate amount of gross income of the taxpayer that is interest, dividends, royalties, rents, beneficiary income and taxable distributions under section HH 3 allocated to that year in accordance with Part B; and
“c
is the aggregate amount of deductions allowed in deriving the gross income referred to in item b of this formula allocated to that year in accordance with Part B to the extent it does not exceed the amount calculated in item b of this formula.”.
(2)
Subsection (1) shall come into force on 1 April 1997.
312 Rebate in certain cases for children
In section KC 2, the portion before paragraph (a) is replaced by:
“KC 2
In the assessment of every taxpayer (other than an absentee) who at any time during any income year—”.
313 Transitional tax allowance
(1)
Section KC 3(1) and (2) are replaced by:
“KC 3
“(1)
In the assessment of every taxpayer who in any income year is a qualifying person, there shall be allowed as a rebate of income tax an amount calculated in accordance with the following formula:
_eqn09.JPG)
“where—
“y
is—
“(i)
Where the net income of the taxpayer for the income year is less than $6,241, $728;
“(ii)
Where the net income of the taxpayer for the income year amounts to or exceeds $6,241, $728 diminished by 20 cents for each complete dollar of the net income that exceeds $6,240; and
“z
is the number (if any) of periods of one week, in the income year, in relation to each of which the taxpayer is a full-time earner.
“(2)
For the purposes of subsection (1), in any case where a qualifying person has, during the income year, either arrived in or departed from New Zealand and in respect of that part of the income year (being the income year in which the qualifying person so arrives or departs) that precedes the qualifying person’s arrival in or, as the case may be, succeeds the qualifying person’s departure from New Zealand, the qualifying person is deemed, under section OE 1, not to be resident in New Zealand, the net income of the qualifying person for the income year shall be deemed to be an amount equal to the net income of the qualifying person for the period during which (in the income year) the qualifying person is personally present in New Zealand, increased in the proportion that the number of days in the income year bears to the number of days in that period:
Provided that in any case where the qualifying person derives gross income from New Zealand in the period (in the income year) that precedes the qualifying person’s arrival in or, as the case may be, succeeds the qualifying person’s departure from New Zealand (being the period in respect of which the qualifying person is deemed not to be resident in New Zealand), the Commissioner may determine the amount of the net income of the qualifying person for the income year in such manner and in such amount as in all the circumstances of the case appear equitable having regard to the class or classes of the gross income so derived by the qualifying person and to the circumstances of the derivation of that gross income and to the tenor of this subsection.”.
(2)
In section KC 3(3), paragraph (b) of the definition of “qualifying person”
is repealed.
(3)
In section KC 3(3), the definition of “remunerative work”
is replaced by:
“‘Remunerative work’, in relation to any person, means work from, by, or through the performing of which by the person, gross income (within the meaning of this Act) is derived by the person.”.
314 Rebate in certain cases for housekeeper
In section KC 4(1), the portion before paragraph (a) is replaced by:
“KC 4
“(1)
In the assessment of every taxpayer (other than an absentee) specified in paragraph (a) or paragraph (b) or paragraph (c) of the definition of ‘housekeeper’ in subsection (2) of this section who makes qualifying payments during any income year there shall be allowed as a rebate of income tax for that income year the smaller of—”.
315 Rebate in respect of gifts of money
In section KC 5(1), the portion before paragraph (aa) is replaced by:
“KC 5
“(1)
In the assessment of every taxpayer, other than an absentee or a company or a public authority or a Maori authority or an unincorporated body, or a trustee assessable and liable for income tax under sections HH 3 to HH 6, HK 14, and HZ 2, there shall be allowed as a rebate of income tax the amount of any gift (not being a testamentary gift) of money of $5 or more made by the taxpayer in the income year to any of the following societies, institutions, associations, organisations, trusts, or funds (being in each case a society, an institution, an association, an organisation, a trust, or a fund in New Zealand), namely:”.
316 Determination of net income
(1)
In section KD 1(1), the portion before paragraph (b) is replaced by:
“KD 1
“(1)
Notwithstanding any other provision of this Act, for the purposes of this Subpart, in calculating under this Act the net income or net loss of any person in any income year—
“(a)
Amounts referred to in sections CB 1(1)(a), CB 1(1)(d), CB 5(1)(f), CB 9(a), and CB 9(d), derived by the person in the income year, shall be deemed not to exempt income; and”.
(2)
Section KD 1(1)(c)(ii) and (iii) are replaced by:
“(ii)
Any expenditure that, but for this subparagraph, would be allowed as a deduction, under any of sections DL 2, DO 3 to DO 5, and DZ 2 to DZ 4; and
“(iii)
Any payment in relation to the whole or any part of the amount of which, but for this subparagraph, a deduction would be allowed under section EI 3 or section EI 13; and”.
(3)
Section KD 1(1)(d), (e) and (f) are replaced by:
“(d)
There shall be included in annual gross income every amount of gross income (not being gross income derived from the sale of a building), derived by the person in the income year, that, but for this paragraph, would, under any of sections DC 2, EG 19, EJ 1, EJ 2, and EN 2 to EN 4, be deemed to be, or to have been, derived in an income year other than that income year; and
“(e)
There shall not be included—
“(i)
Any amount of income equalisation reserve deposit (not being interest payable under section EI 2) that, in the income year, is refunded to the person under any of sections EI 4, EI 5, EI 7, and EI 9; and
“(ii)
Any amount of gross income that, under any of sections DC 2, EG 19, EJ 1, EJ 2, EN 2 to EN 4, and EZ 2, is deemed to be, or to have been, derived by the person in the income year, and that, were it not so deemed, would not be or have been gross income derived by the person in the income year; and
“(iii)
Any amount of gross income that, under section EZ 1, is deemed to be, or has been, derived by the person in the 1992–93 income year or any of the 4 succeeding income years; and
“(iv)
Any amount of liquor revaluation income that, under section EZ 2, is deemed to be, or has been, derived by the person in the 1988–89 income year; and
“(v)
Any amount derived from the sale of a building that, under section EG 19, is gross income of the person in the income year; and
“(vi)
Any amount that, having been deposited under section EI 11 in a person’s adverse event income equalisation reserve account (not being interest payable under section EI 12), is refunded to the person under section EI 14, or under either of sections EI 5 and EI 7 as applied by section EI 15; and
“(vii)
Any amount of a net loss of a qualifying company that is attributed to the person as a shareholder of that company under section HG 16; and
“(f)
Where, in the income year, a business or more than one business is carried on by the person, there shall, in relation to that business, or each such business, be calculated under this Act, including this Subpart (that calculation being referred to in this paragraph and in subsection (2) as the ‘specified calculation’), the amount that would be the net income or the net loss of the person for that income year if the person derived gross income only from carrying on the business, and, where that amount so calculated is a net loss, that business shall be deemed, for the purposes of this Subpart (except for the purpose of making the specified calculation), not to have been carried on by the person during the income year; and”.
(4)
Section KD 1(1)(g)(i) is replaced by:
“(i)
For the purposes of this Act, other than the definition of ‘net specified income’, an amount equal to the amount (if any) by which the amount of any dividend, or the aggregate of the amounts of all dividends, paid by the company to the person in the income year is less than an amount equal to so much of the net income of the company for the income year to which, under and for the purposes of this Act, the accounting year of the company corresponds, as bears to that amount the same proportion as the total of the issued shares of the company (other than shares which bear a fixed rate of dividend only) so held by the person bears to the total of the issued shares of the company (other than shares which bear a fixed rate of dividend only) on the last day of that accounting year of the company;”.
(5)
In section KD 1(1)(g)(ii), the definitions of quantities “c”
and “d”
are replaced by:
“c
is the net income of the company for the income year to which, under and for the purposes of this Act, the accounting year of the company corresponds; and
“d
is the income tax liability of the company for the income year to which, under and for the purposes of this Act, the accounting year of the company corresponds; and”.
(6)
In section KD 1(1)(h), the portion before the proviso is replaced by:
“(h)
Where any person receives any distribution from a superannuation scheme, and an employer of that person (being an employer by whom the person continues to be employed one month after the date of receipt of the distribution) has made contributions to that superannuation scheme in the income year in which the distribution was received or in the immediately preceding 2 income years, that distribution shall, unless the Commissioner in the Commissioner’s discretion determines otherwise, be gross income of the person and be deemed to be derived in the income year or years determined by the Commissioner as being the income year or years for which the contributions were appropriate, less an amount that the Commissioner determines is attributable to the member’s contributions for any such year:”.
(7)
Section KD 1(2)(a) is replaced by:
“(a)
Where, in the income year, any asset of the person is used in the carrying on by the person of a business and another business or other businesses, there shall be allowed, in the making, in relation to that first-mentioned business, of the specified calculation, a deduction of such part (and no other part), of the expenditure incurred and of the allowance (if any) by way of depreciation (being the expenditure and being the allowance that, apart from subsection (1)(f), would for the purposes of this Subpart, in the income year, be an allowable deduction in respect of or in relation to the asset), as the Commissioner thinks fit; and”.
(8)
In section KD 1(3), the portion before paragraph (a) is replaced by:
“(3)
For the purpose of determining the amount that is equal to so much of the net income of any person for any income year as, for the purposes of this Subpart, is deemed to be the net income for any period contained in the income year, that is, in relation to the person, a specified period,—”.
(9)
Section KD 1(3)(c) is replaced by:
“(c)
Notwithstanding section 38(1) of the Tax Administration Act 1994—
“(i)
The gross income derived by the person in the income year is, to the extent that it was derived by the person otherwise than from employment, and otherwise than by way of a benefit that was an income-tested benefit, be deemed to have been derived at a uniform daily rate throughout the income year; and
“(ii)
Any expenditure incurred in deriving the gross income to which subparagraph (i) applies that is allowed as a deduction is deemed to have been incurred at a uniform daily rate throughout the income year.”.
(10)
In section KD 1(4), the definition of quantity “a”
is replaced by:
“a
is so much of the net income of the person for the income year that contains the specified period as, in the opinion of the Commissioner, is attributable to the specified period; and”.
317 Allowance of credit of tax in end of year assessment
(1)
Section KD 4(1) is repealed.
(2)
In section KD 4(2), the portion before paragraph (a) is replaced by:
“(2)
Where, in relation to any income year, a credit of tax is allowed under section KD 2 or KD 3 the Commissioner—”.
(3)
Section KD 4(3) is replaced by:
“(3)
Where, on receipt by the Commissioner of a tax deduction certificate forwarded to the Commissioner by any person, the Commissioner credits in payment of the income tax liability of the person for any income year an amount by way of credit of tax, and the crediting of that amount (whether as to the whole or part of that amount) results from the understatement, in the tax deduction certificate, of any amount by way of credit of tax that was paid to the person during the income year by the employer by or on behalf of whom that tax deduction certificate was signed (that amount so paid being referred to in this subsection as the ‘paid amount’), that person and that employer shall be jointly and severally liable to pay to the Commissioner the amount by which the paid amount was so understated, and that amount so liable to be paid shall be deemed to have become due and payable on 31 May in the year next succeeding the year to the whole or part of which the tax deduction certificate relates.”.
(4)
Section KD 4(4) is replaced by:
“(4)
Where the Commissioner is satisfied that the amount of any credit of tax under section KD 2 or KD 3 set off or refunded to the person in relation to any income year is in excess of the proper amount, the Commissioner may recover the excess in the same manner, with any necessary modifications, as if it were income tax payable by the person in that income year:
Provided that where any person is a qualifying person in relation to whom, throughout the income year, any other person is a spouse, that person and that spouse shall be jointly and severally liable for payment of the excess, and the Commissioner may recover the excess in the same manner, with any necessary modifications, as if it were income tax payable by the person or, as the case may be, the spouse in that income year.”.
318 Credit of tax by instalments
(1)
In section KD 5(2), the portion before paragraph (b)(i) is replaced by:
“(2)
Every application made under subsection (1) shall be in the prescribed form, signed by the person and any other person who, at the time at which the application is made, expects to be, in the elected period, a spouse in relation to that person, and shall set forth in relation to the signatory, or each signatory, to the application, a complete statement of the net income that is expected to be attributable to the income year referred to in subsection (1), and of so much of that net income as is expected to be attributable to the elected period, together with such other information as the Commissioner may require, and shall be accompanied by,—
“(a)
In relation to any signatory who expects to derive income from employment evidence of the amount of income from employment (if any) derived by the person in the period of one month immediately preceding the date on which that application was made;
“(b)
In relation to any signatory who expects to derive gross income from a business, either—”.
(2)
In section KD 5(6)(a), the definition of quantity “x”
is replaced by:
“x
is equal to such amount of the net income referred to in subsection (2) expected to be attributable to the part of the income year that is the part (referred to in this subsection as the ‘calculation period’) in relation to which the Commissioner determines that a credit of tax is allowable to the person; and”.
319 Rebate for interest on home vendor mortgages
(1)
In section KE 1(1), the portion before the proviso is replaced by:
“KE 1
“(1)
In the assessment of every taxpayer (not being an absentee, or a company, or a public authority, or a Maori authority, or an unincorporated body, or a trustee assessable and liable for income tax under sections HH 3 to HH 6, HK 14, and HZ 2) who in any income year has derived interest in respect of a home vendor mortgage, there shall be allowed as a rebate of income tax for that income year an amount equal to 20 cents for each complete dollar of the interest so derived:”.
(2)
Section KE 1(2) is replaced by:
“(2)
Where any taxpayer is allowed a rebate under this section, the interest shall not be exempt income under section CB 1(1)(d).”.
320 Rebates for absentees
In section KF 3, the portion before paragraph (a) is replaced by:
“KF 3
Every absentee who has derived gross income from that absentee’s personal services (being services performed for or on behalf of any other person) while personally present in New Zealand in an income year shall be entitled to a rebate of income tax in that absentee’s assessment for that income year of the same proportion of every rebate to which the absentee would have been entitled under any of the provisions of sections KC 1 to KC 4 if the absentee were not an absentee, as the proportion that,—”.
321 Rebate for savings in special farm, fishing vessel, and home ownership accounts
In section KG 1(1), the portion before the proviso is replaced by:
“KG 1
“(1)
In the assessment of every taxpayer who in any income year operates a special account there shall be allowed as a rebate of income tax for that income year an amount equal to 45 cents for every complete dollar of any increase in savings in that account in relation to that income year:”.
322 Rebate from tax payable by persons receiving war pension
Section KZ 1(1) is replaced by:
“KZ 1
“(1)
Where the gross income derived in any income year by any taxpayer who, having served in the First World War with any naval, military, or air forces of any part of the Commonwealth is, in the year in which that gross income is derived, in receipt of a pension granted by the Government of any part of the Commonwealth in respect of the taxpayer’s total disablement attributable to such service, comprises gross income otherwise than income from employment, there shall be allowed as a rebate of income tax for that income year 7.5% of so much of the amount that would be the taxable income if the only gross income derived were derived by the taxpayer otherwise than from—
“(a)
Income from employment; or
“(b)
New Zealand superannuation.”.
323 Continuation of rebates in respect of certain specified development projects
Section KZ 3 is replaced by:
“KZ 3
“(1)
Notwithstanding the repeal of sections KF 1, NF 1(2)(a)(vi), NG 1(2)(f), and OB 5 by sections 13, 21, 22, and 26 of the Income Tax Act 1994 Amendment Act (No. 3) 1995, a non-resident investment company shall, in relation to the development projects specified in subsection (4), continue to be eligible for the rebates specified in subsections (2) and (3), and, accordingly,—
“(a)
Sections NF 1(2)(a)(vi) and NG 1(2)(f) shall continue to apply in respect of the company; and
“(b)
Section OB 5 and the definitions of any terms relevant to those rebates shall be treated as continuing in force for the purposes of this section.
“(2)
Where the Commissioner is satisfied that, if this section had not been passed, the amount that would be the income tax liability of a non-resident investment company if the only gross income of the company were interest derived by it in any income year from development investments would exceed the amount of income tax that would be payable by the company in respect of that interest if the company had derived the interest from a source in the country or territory in which the company is resident, the Commissioner shall allow the excess as a rebate of income tax:
Provided that in any case where—
“(a)
Any interest is derived by a non-resident investment company in any income year from development investments; and
“(b)
The company and the person by whom the interest is paid are not associated persons,—
the amount that would be the income tax liability of the company if the only gross income of the company were that interest shall not exceed 15% of the gross amount of that interest.
“(3)
Where the Commissioner is satisfied that, if this section had not been passed, the amount that would be the income tax liability of a non-resident investment company, as determined by section NG 3, if the only gross income of the company were dividends derived by it from development investments would exceed the amount of income tax that would be payable by the company in respect of those dividends if the company had derived the dividends from a source in the country or territory in which the company is resident, the Commissioner shall allow the excess as a rebate of income tax.
“(4)
This section applies to the development projects specified in the following orders:
“(a)
The Income Tax (Non-Resident Investment Companies) Order 1970 (S.R. 1970/138):
“(b)
The Income Tax (Non-Resident Investment Companies) Order 1972 (S.R. 1972/19):
“(c)
The Income Tax (Non-Resident Investment Companies) Order (No. 2) 1972 (S.R. 1972/248):
“(d)
The Income Tax (Non-Resident Investment Companies) Order (No. 3) 1974 (S.R. 1974/277).”.
Amendments to Part L
324 Determination of amount of credit in certain cases
(1)
Section LB 1(2) is replaced by:
“(2)
Subsection (1)(a) shall not apply to a beneficiary who is an investor of a group investment fund in so far as the beneficiary derives an amount from the group investment fund that is category A income.”.
(2)
In section LB 1(4), the definitions of quantities “b”
and “c”
are replaced by:
“b
is the gross income of the partner as a partner of the partnership for the income year; and
“c
is the gross income jointly derived by the partners of the partnership for the income year.”.
325 Credit of tax for imputation credit
Section LB 2(2) and (3) are replaced by:
“(2)
Any such credit of tax shall be credited, in so far as it extends, against the income tax liability of the taxpayer for the income year.
“(3)
There shall be no refund to the taxpayer of any credit of tax under this section, but where the whole of the credit of the tax is not credited against the income tax liability of the taxpayer for the income year, the taxpayer shall, in respect of any amount of the credit that is not so credited, be deemed to have a net loss for the income year calculated in accordance with the following formula:
_eqn10.JPG)
“where—
“a
is the amount of the credit of tax not credited against the income tax liability for the income year; and
“b
is—
“(i)
In any case where the taxpayer is a company, the basic rate of income tax for companies, expressed as a percentage, stated in clause 5 of Part A of Schedule 1 and applying for the income year; and
“(ii)
In any case where the imputation credit giving rise to the credit of tax is category A income of the trustee of a group investment fund, the rate of tax applicable to category A income of the trustee of a group investment fund, expressed as a percentage, stated in clause 7 of Part A of Schedule 1 and applying for the income year; and
“(iii)
In any other case, the rate of tax deduction on payment of extra emoluments, expressed as a percentage, stated in clause 8 of Schedule 19 and applying for the income year.”.
326 Credits in respect of tax paid in a country or territory outside New Zealand
Section LC 1(1), (2), (3) and (4) are replaced by:
“LC 1
“(1)
Where a person who is resident in New Zealand derives gross income from a country or territory outside New Zealand, income tax paid in that country or territory in respect of that income shall be allowed as a credit against the income tax liability of the person:
Provided that if the person so resident in New Zealand has, as a national or member of that country or territory, paid income tax in that country or territory in respect of that gross income, there shall be allowed as a credit against the income tax liability of the person only such amount as does not exceed the amount of income tax that would have been paid by the person in that country or territory in respect of that gross income if the person, being resident in New Zealand, had not been a national or member of that country or territory.
“(2)
Where in any income year any beneficiary of a trust who is resident in New Zealand derives a taxable distribution—
“(a)
No credit shall be allowed in respect of any tax paid on the taxable distribution unless the tax is substantially of the same nature as non-resident withholding tax imposed under the NRWT rules; and
“(b)
The amount of the credit shall be calculated in accordance with the following formula:
_eqn11.JPG)
“where—
“a
is the tax which qualifies for a credit under paragraph (a); and
“b
is the amount of the taxable distribution, including the tax which qualifies for a credit under paragraph (a) derived by the beneficiary; and
“c
is the total amount of the distribution, including the tax which qualifies for a credit under paragraph (a) derived by the beneficiary.
“(3)
A credit shall not be allowed under this section in respect of income tax paid in a country or a territory specified in Schedule 6 to the extent that the income tax is paid on the types of income specified in that Schedule.
“(4)
Any amount that would but for section CG 16(6) be gross income of a taxpayer in respect of an interest in a foreign investment fund for a period will be treated as if it were gross income for the purpose of determining the taxpayer’s entitlement to a credit under this section, provided that the amount of gross income to be taken into account in determining item ‘a’ of the formula in section LC 14(1) is the taxpayer’s foreign investment fund income with respect to the interest and the period.
“(5)
This Subpart and section BH 1, CF 6, and OE 6 of this Act, and section 88, 115 to 118, 131, and 132 of the Tax Administration Act 1994, as far as they are applicable and with any necessary modifications, shall, for the purposes of subsection (1) of this section, apply as if that subsection were a double tax agreement made between the Government of the country or territory outside New Zealand and the Government of New Zealand.”.
327 Maximum credits
Section LC 2 is replaced by:
“LC 2
Where, under a double tax agreement, a credit for foreign tax is allowed, the amount of that credit shall not exceed the amount of New Zealand tax calculated in accordance with section LC 14.”.
328 Recovery of excess credit allowed through not taking into account refund of foreign tax
Section LC 3(a) is replaced by:
“(a)
A credit for foreign tax payable either directly or by deduction, being a tax which a taxpayer is personally liable to pay, has been allowed as a credit against that taxpayer’s income tax liability; and”.
329 Foreign tax credits—controlled foreign companies
(1)
In section LC 4(1), the portion before the first proviso is replaced by:
“LC 4
“(1)
Subject to this section, where any person has for any income year any attributed foreign income in respect of an income interest in a controlled foreign company, a credit shall be allowed against that person’s income tax liability for the income tax paid or payable by that controlled foreign company in New Zealand or any other country or territory in respect of that attributed foreign income, and, for the purposes of this section, income tax paid or payable by a controlled foreign company includes any withholding tax paid or payable on behalf of that controlled foreign company:’.
(2)
Section LC 4(2) is replaced by:
“(2)
A credit shall not be allowed under subsection (1) in respect of income tax paid or payable in a country or territory specified in Schedule 6.”.
(3)
Section LC 4(4) is replaced by:
“(4)
Any person who is, for an income year, allowed a credit under subsection (1) in respect of attributed foreign income derived in respect of a controlled foreign company (referred to in this subsection as the ‘primary controlled foreign company’) is entitled to set off that credit against the persons income tax liability—
“(a)
For that income year, to the extent it does not exceed the amount that would be the person’s income tax liability for that year if the person did not have any gross income for that year other than attributed foreign income derived in respect of any controlled foreign company resident in the same country or territory as that in which the primary controlled foreign company was resident in the accounting period during which the income tax giving rise to the credit was paid or was payable; and
“(b)
So far as the credit cannot be set off under paragraph (a), for the income year immediately succeeding that income year, to the extent it does not exceed the amount that would be the person’s income tax liability for the year if the person did not have any gross income for that year other than attributed foreign income derived in respect of any controlled foreign company resident in the country or territory as that in which the primary controlled foreign company was resident in the accounting period during which the income tax giving rise to the credit was paid or was payable; and
“(c)
So far as the credit cannot be set off under paragraph (b), for the next income year to the immediately succeeding income year, to the extent it does not exceed the amount that could be offset under paragraph (b) if that paragraph applied to the next income year and so on.”.
(4)
Section LC 4(6) is replaced by:
“(6)
If the person who has any credit allowable is a company, that credit may only be carried forward to any succeeding income year in accordance with this section if and to the extent to which, had that credit been a net loss to which sections IE 1 and IF 1 applied, the carry forward of that net loss would have been permitted by those sections and, for the purposes of this subsection only, that credit shall be deemed to be a net loss that arose on the last day of the income year in respect of which the credit was initially allowable.”.
(5)
Section LC 4(7)(a) is replaced by:
“(a)
No credit shall be allowed in respect of any tax paid in respect of that attributed foreign income unless the tax is substantially of the same nature as non-resident withholding tax imposed under the NRWT rules; and”.
(6)
In section LC 4(7)(b), the portion before the formula is replaced by:
“(b)
The amount of the tax for which a credit is allowed shall not exceed an amount calculated in accordance with the following formula:”.
(7)
Section LC 4(8)(a) is replaced by:
“(a)
The return shows that the person has any credit allowable for the year that cannot in accordance with this section be set off against the income tax liability of that person; or”.
(8)
Section LC 4(11)(a) is replaced by:
“(a)
A credit has been allowed against the income tax liability of any person; and.
330 Group of companies controlled foreign company tax credits
Section LC 5 is replaced by:
“LC 5
“(1)
Where a company (in this section referred to as the ‘primary company’) has for any income year a credit in relation to an income interest in a controlled foreign company (referred to in this section as the ‘taxpaying controlled foreign company’) that is allowable under section LC 4 or has been carried forward to that income year in accordance with section LC 4 and that credit may not be utilised by the primary company in that income year in accordance with section LC 4(4), that credit may be set off against the income tax liability of another company (referred to in this section as the ‘member company’) for that year in accordance with subsection (2) where the member company is, for the year, a member of the same group of companies as the primary company to the extent that the credit does not exceed the amount that would be the member company’s income tax liability if its only gross income was the attributed foreign income derived in respect of that income year and is in respect of any controlled foreign company resident in the same country or territory as that in which the taxpaying controlled foreign company was resident in the accounting period in which was paid or was payable the income tax giving rise to the credit.
“(2)
A credit under subsection (1) may only be allowed against the income tax liability of the member company where that credit would be able to be allowed under section IG 2 were—
“(a)
Each reference in that section to a group of companies to be treated as if it were a reference to a wholly-owned group of companies; and
“(b)
Each reference in that section to the loss company to be treated as if it were a reference to the primary company; and
“(c)
Each reference in that section to a net loss of the loss company to be treated as if it were a reference to the credit allowed to the primary company; and
“(d)
Each reference in that section and section GC 4 to the offset of a net loss against net income to be treated as if it were a reference to allowance of the credit against the income tax liability; and
“(e)
Each reference in that section to the profit company to be treated as if it were a reference to the member company; and
“(f)
Each reference in that section to the net income of the profit company to be treated as if it were a reference to the income tax liability of the member company; and
“(g)
Each reference in that section (other than the references in subsection (9)) to sections IE 1 and IF 1 to be treated as if it were a reference to section LC 4; and
“(h)
The reference in section IG 2(2)(f) to ‘any net loss which is available to the profit company under this section’ to be treated as if it were a reference to ‘any other amount allowed to the member company under this section’; and
“(i)
Section IG 2(4), (5), and (10) to be treated as if omitted; and
“(j)
The reference in section IG 2(8) to the ‘same group of companies for the purposes of section 191(5) and (7) of the Income Tax Act 1976’ to be treated as if it were a reference to the ‘same specified group in accordance with section 191(4) of the Income Tax Act 1976’,—
and to the extent to which a credit has been so allowed to the member company, the credit may not be allowed to or carried forward by the primary company.”.
331 Election in respect of foreign tax on dividend
Section LC 6 is replaced by:
“LC 6
Where a double tax agreement provides that a credit in respect of the whole or a part of any foreign tax payable in respect of a dividend shall be allowed against the income tax liability of the person entitled to the dividend only if that person elects to have the amount of the dividend together with the amount of the foreign tax payable in respect of the dividend included in the person’s gross income or assessable income for the purposes of New Zealand tax, that credit shall not be allowed to a taxpayer unless within 4 years after the end of the income year in which the person derived the dividend, or within such further period, not exceeding 2 years, as the Commissioner may allow in any case or class of cases, the taxpayer, in addition to complying with section LC 13, gives to the Commissioner a notice in writing that the taxpayer elects to have the amount of the dividend together with the amount of the foreign tax payable in respect of the dividend included in the taxpayer’s gross income for the purposes of New Zealand tax for the income year in which the dividend was derived by the taxpayer.”.
332 Controlled foreign company tax credits of amalgamating company
(1)
In section LC 8(c), “income tax payable by”
is replaced by “income tax liability of”
.
(2)
In section LC 8, the portion after paragraph (d) is replaced by:
“the tax credit shall be treated as a tax credit of the amalgamated company and may be credited, under section LC 4, against the income tax liability of the amalgamated company in periods commencing on or after the amalgamation, but applying section LC 4 (in so far as its application is dependent upon the application of sections IE 1 and IF 1) as if, with respect to all times prior to the amalgamation, the amalgamated company did not separately exist and was instead the amalgamating company with the same holders of shares and options over shares each holding the same number and class of shares and options over shares as they held at the time in the amalgamating company.”.
333 Ordering of controlled foreign company tax credits of amalgamated company
In section LC 9, the portion before paragraph (a) is replaced by:
“LC 9
Where tax credits of 2 or more amalgamating companies are permitted under section LC 8 to be credited against the amalgamated company’s income tax liability for an income year, those tax credits shall—”.
334 Controlled foreign company tax credits of amalgamated company
(1)
Section LC 10(b) is replaced by:
“(b)
The tax credit has not, under section LC 4 or section LC 5, been credited against the income tax liability of the amalgamated company or any other company in respect of any period prior to the amalgamation (including any part of the income year in which the amalgamation takes place),—”.
(2)
Section LC 10(d) is replaced by:
“(d)
Under section LC 5, the tax credit could have been credited against income tax liability (if any) in respect of that part of the income year of the relevant company which ends with the date of the amalgamation by each amalgamating company.”.
335 Controlled foreign company tax credits of amalgamated company credited against an income tax liability of another company
Section LC 11 is replaced by:
“LC 11
Where an amalgamated company is deemed under section LC 8 to have a controlled foreign company tax credit, in respect of an amalgamating company which ceased to exist on the amalgamation, for the purposes of determining whether the tax credit may be credited, under section LC 5, against the income tax liability of another company, that section shall be applied as if, with respect to all times prior to the amalgamation, the amalgamated company did not separately exist and was instead the amalgamating company with the same holders of shares and options over shares each holding the same number and class of shares and options over shares as they held at the time in the amalgamating company.”.
336 Controlled foreign company tax credits of company credited against income tax liability of amalgamated company
Section LC 12 is replaced by:
“LC 12
Where a company (referred to in this section as the ‘credit company’) has a controlled foreign company tax credit, in respect of a period which falls wholly or partly before an amalgamation, the tax credit may be credited under section LC 5 against the income tax liability of the amalgamated company if and only if the tax credit can be so credited, by applying the commonality of ownership and other tests contained in that section severally to the credit company and the amalgamated company in respect of each company which has in the course of or before the amalgamation amalgamated with the amalgamated company, as if, with respect to all times prior to the amalgamation, the amalgamated company did not separately exist and was instead that amalgamating company with the same holders of shares and options over snares each holding the same number and class of shares and options over shares as they held at the time in the amalgamating company.”.
337 Information for credit to be furnished within 4 years
In section LC 13, the portion before paragraph (a) is replaced by:
“LC 13
A credit for foreign tax shall not be allowed unless, within 4 years after the end of the income year in which arose the income tax liability of the taxpayer against which the credit is claimed, or within such further period, not exceeding 2 years, as the Commissioner allows in any case or class or cases, the taxpayer claiming the credit—”.
338 Ascertainment of New Zealand income tax liability on foreign source income
Section LC 14 is replaced by:
“LC 14
“(1)
Subject to subsections (2) and (3), the part of a taxpayer’s income tax liability for an income year that is to be treated as being in respect of gross income of the taxpayer from a particular source or of a particular nature that is allocated to the income year is an amount calculated in accordance with the following formula:
_eqn12.JPG)
“where—
“a
is the total of the taxpayer’s gross income from that source or of that nature that is allocated to the income year;
“b
is the total of the taxpayer’s allowable deductions that are allocated to the income year and that are attributable to gross income of the type referred to in item a;
“c
is the taxpayer’s net income for the income year; and
“d
is the taxpayer’s notional income tax liability for the income year.
“(2)
If, for an income year, the amount or the total of the amounts determined under subsection (1) exceeds the taxpayer’s notional income tax liability for the year, the amount that is to be treated as being part of the taxpayer’s income tax liability that is in respect of gross income from a particular source or of a particular nature is the amount calculated in accordance with the following formula:
_eqn13.JPG)
“where—
“d
has the same meaning as in subsection (1);
“e
is the total of the amounts calculated under subsection (1) by the taxpayer for that income year; and
“f
is the amount calculated under subsection (1).
“(3)
If an amount calculated under subsection (1) is less than nil, the amount is deemed to be zero.
“(4)
For the purposes of this section, the ‘notional income tax liability’ of a taxpayer for an income year is the amount calculated in accordance with the following formula:
“d + (g × h)
“where—
“d
is the taxpayer’s income tax liability for the income year;
“g
is the amount (if any) of net losses of any other taxpayer that the taxpayer has offset against its net income for the income year in accordance with section IG 2(2); and
“h
is the taxpayer’s applicable basic tax rate for the income year.”.
339 Foreign tax credits of consolidated group members
Section LC 16 is replaced by:
“LC 16
“(1)
Where any consolidated group has in respect of an income year a tax credit available for crediting under section LC 4(1) against the income tax liability of the consolidated group, no part of that credit shall be treated for the purposes of this Act as a tax credit available to any individual member company of that consolidated group.
“(2)
Where—
“(a)
Any company is a member of a consolidated group in an income year (in this subsection referred to as the ‘specified year’); and
“(b)
The company is entitled under section LC 4 to claim to carry forward to the specified year, and credit (against an income tax liability for the specified year) any credit for income tax resulting from income tax payable in any preceding income year,—
that credit shall, subject to subsections (3) and (4), be credited against the income tax liability (if any) of the consolidated group for the specified year (but must not exceed the amount that would be that consolidated group’s income tax liability for the year if it had not derived any gross income other than the attributed foreign income derived in respect of any controlled foreign company or companies resident in the relevant country or territory) and only so far as it cannot be so credited, shall be eligible to be—
“(c)
Credited against the income tax liability of the company or any other consolidated group in the specified year; or
“(d)
Carried forward by the company in accordance with section LC 4 to any succeeding income year; or
“(e)
Treated for the purposes of section LC 5 as a credit of the company carried forward to the specified year, in which event that credit may be credited against the income tax liability of any other company (other than the consolidated group) subject to and in accordance with that section.
“(3)
Where tax credits available to a consolidated group or to one or more member companies of the group are permitted, under section LC 4, or required, under this section, to be credited against the income tax liability of a consolidated group, those credits shall—
“(a)
If resulting from tax payable in 2 or more income years, be credited in the same order as the tax was payable; and
“(b)
If resulting from tax payable in the same income year, be credited, so far as the income tax extends,—
“(i)
In the order elected by the consolidated group by notice to the Commissioner in such form as the Commissioner may allow; or
“(ii)
If no such election is made, on a pro rata basis.
“(4)
In any case where—
“(a)
Subsection (2) would, except to the extent of the application of this subsection, require the whole or part of any tax credit of any company, resulting from income tax payable by the company in any income year (in this subsection referred to as the ‘preceding year’), to be credited against the income tax liability of a consolidated group of companies in a subsequent year (in this subsection referred to as the ‘subsequent year’); and
“(b)
The company was not a member of the same group of companies, for the preceding year or any income year falling between the preceding year and the subsequent year, as any one or more companies which are members of the consolidated group in the subsequent year,—
the amount credited under subsection (2) against the income tax liability of the consolidated group in the subsequent year shall not exceed the aggregate of—
“(c)
The amount of the credit which could be credited by the company in the subsequent year under section LC 4 against its own income tax liability were it not in that subsequent year a member of a consolidated group of companies (its taxable income being nevertheless calculated in accordance with section HB 2(1)); and
“(d)
The aggregate amount which could be credited against their own income tax liability (their taxable income being nevertheless calculated in accordance with section HB 2(1)) under section LC 5 by companies (other than the company) which are members of the consolidated group in the subsequent year if—
“(i)
Neither the company nor those other companies were members of the consolidated group in the subsequent year; and
“(ii)
The company were to take all necessary steps under section LC 5 to permit that crediting by the other companies under that section.
“(5)
In any case where—
“(a)
Subsection (2) would, except to the extent of application of this subsection and subsection (4), require the whole or part of any tax credit of any company resulting from income tax payable by the company in any income year (in this subsection referred to as the preceding year’) to be credited against the income tax liability of a consolidated group of companies in a subsequent year (in this subsection referred to as the ‘subsequent year’); and
“(b)
The company was a member of the consolidated group for part only of the subsequent year,—
the amount of tax credit credited under subsection (2) against the income tax liability of the consolidated group in the subsequent year shall not exceed the lesser of—
“(c)
The excess (if any) of the amount of tax credit of the company for the preceding year required, but for the application of this subsection and subsection (4), to be credited against the income tax liability of the consolidated group in respect of the subsequent year over the aggregate of—
“(i)
Any income tax liability of the company in the subsequent year in respect of any period prior to the company being a member of the consolidated group (calculated by applying the provisions of section FD 9(2)) against which income tax liability that tax credit would be able to be credited under this Act; and
“(ii)
Any part of the tax credit required, under subsection (2) of this section, to be credited against the income tax liability for the subsequent year of another consolidated group of companies of which the company was a member during the subsequent year prior to the company being a member of the consolidated group; and
“(d)
The amount (if any), as shown in adequate and sufficiently detailed accounts furnished to the Commissioner with the consolidated group’s return of income for the income year, of the consolidated group’s income tax liability for the income year (being the income tax liability against which that tax credit could be credited under this Act) as is reasonably and fairly allocable to the part of the income year during which the company was a member of the consolidated group.”.
340 Tax deductions to be credited against tax assessed
(1)
Section LD 1(1) is replaced by:
“LD 1
“(1)
Every employee who is required to furnish or who furnishes to the Commissioner a return of income shall, except where the Commissioner otherwise directs, forward to the Commissioner with the return all tax deduction certificates delivered to the employee in respect of tax deductions made in the income year from source deduction payments made to the employee.”.
(2)
In section LD 1(2), the portion before the proviso is replaced by:
“(2)
Where the Commissioner receives from an employee any tax deduction certificates in respect of tax deductions made in the income year from source deduction payments made to the employee, or receives the amount of any tax deduction so made and not included in any tax deduction certificate, and the Commissioner has made an assessment of the income tax liability in respect of the employee in the income year or is satisfied that no income tax is payable, the Commissioner shall credit the total of the amounts of the tax deductions (but not including any penalties) shown in the certificates, or received by the Commissioner but not included in any tax deduction certificate, successively against—
“(a)
The income tax liability (if any) of the employee for the income year;
“(b)
The income tax liability (if any) of the employee that has not otherwise been satisfied for any year before that income year;
“(c)
The income tax liability (if any) of the employee that has not otherwise been satisfied for any year after that income year and, if more than one, in the order of those years;
“(d)
The provisional tax (if any) that is due by the employee and unpaid for any income year after that income year and, if more than one, in the order of those years,—
and shall refund to the employee in accordance with section MD 1 of this Act, and the Tax Administration Act 1994, an amount equal to the tax deductions not so credited:”.
(3)
Section LD 1(3) is replaced by:
“(3)
If the amount credited by the Commissioner under subsection (2)(b) is less than the income tax liability referred to in that subsection, the Commissioner shall apply the amount so credited in satisfaction, so far as the amount extends, of such income tax liability as the Commissioner determines.”.
(4)
In section LD 1(5), the portion before paragraph (a) is replaced by:
“(5)
Where the Commissioner has credited in satisfaction of an income tax liability or made a refund in respect of an amount shown in a tax deduction certificate which—”.
341 Non-resident withholding tax—credit allowed
Section LD 2 is replaced by:
“LD 2
There shall be allowed as a credit against the income tax liability of a person for an income year an amount equal to the non-resident withholding tax (but not including any penalties) deducted from the non-resident withholding income of that person and paid to the Commissioner in respect of that non-resident withholding income.”.
342 Resident withholding tax deductions to be credited against income tax assessed
Section LD 3(2)(a), (b), (c), and (d) are replaced by:
“(a)
The income tax liability (if any) of the person for that income year; and
“(b)
The income tax liability (if any) of the person that has not otherwise been satisfied for any year before that income year; and
“(c)
The income tax liability (if any) of the person that has not otherwise been satisfied for any year after that income year and, if more than one, in the order of those years; and
“(d)
The provisional tax (if any) that is due by the person and unpaid for any income year after that income year and, if more than one, in the order of those years,—”.
343 Allowance for provisional tax paid by agent
Section LD 6 is replaced by:
“LD 6
Where an agent is liable to pay any amount of provisional tax on behalf of the agent’s principal, any amount paid by the agent shall be credited against the principal’s account on the date on which that payment is made.”.
344 Provisional tax to be credited against income tax liability
Section LD 7 is replaced by:
“LD 7
The provisional tax paid by a taxpayer for an income year shall be credited against the taxpayer’s income tax liability for that year.”.
345 Credit of tax for dividend withholding payment credit in hands of shareholder
Section LD 8(1)(b) is replaced by:
“(b)
The credit of tax shall be credited, so far as it extends, against the taxpayer’s income tax liability for the income year; and”.
346 Refund to non-resident or exempt shareholders
(1)
Section LD 9(1)(b) is replaced by:
“(b)
A person who is resident in New Zealand and for whom the dividend is exempt income otherwise than by virtue of section CB 10 or section CZ 4,—”.
(2)
Section LD 9(2)(a) is replaced by:
“(a)
Shall not exceed the amount of the dividend withholding payment credit that would be included in that gross income in accordance with section CF 6 or section LB 1:”.
347 Purpose of Subpart
Section LE 1 is replaced by:
“LE 1
Subject always to its express provisions, the purpose of this Subpart is to allow a company that pays to a non-resident investor a dividend with an imputation credit attached, and a supplementary dividend to the same investor, a credit of tax calculated by reference to the imputation credit which is equal to and sufficient to fund the supplementary dividend.”
348 Credits in respect of dividends to non-resident investors
Section LE 2 is replaced by:
“LE 2
“(1)
This section applies if a company resident in New Zealand pays in an income year with respect to its own shares—
“(a)
A dividend (referred to in this section as the ‘dividend’); and
“(b)
A single supplementary dividend with respect to the dividend,—
derived by a person not resident in New Zealand.
“(2)
The company is entitled to a credit against its income tax liability calculated under the following formula:
_eqn14.JPG)
where IC is the imputation credit (if any, and calculated having regard to subsections (9) and (10)) attached to the dividend.
“(3)
If any part of the tax credit cannot be set off under subsection (2) against the company’s income tax liability for the year in which the supplementary dividend was paid, the company may—
“(a)
Elect under subsection (4) that the excess credits be set off against any other income tax liability of the company or an income tax liability of another company; and
“(b)
If and to the extent that the excess credit cannot be set off against an income tax liability as a result of an election under subsection (4), carry forward the excess credit under subsection (5) to a later income year.
“(4)
If any part of the tax credit cannot be set off under subsection (2) against the company’s income tax liability and the company so elects, by notice in writing to the Commissioner with the company’s return of income for the income year, the excess credit (so far as it extends) will be set off against the income tax liability—
“(a)
For the income year in which the supplementary dividend is paid, of any other company that is for that income year (or in any case where one of the companies exists for part only of the income year, at all times in the income year at which the 2 companies both exist) in the same wholly-owned group of companies as the company; or
“(b)
For any of the 4 income years immediately preceding the income year in which the supplementary dividend is paid (being in each case the 1993–94 income year or a subsequent income year), of—
“(i)
The company; or
“(ii)
Any other company which is, for both the income year in which the supplementary dividend is paid and the relevant preceding income year (or, in any case where one of the companies exists for part only of the relevant income year, at all times in the relevant income year at which the 2 companies both exist) in the same wholly-owned group of companies as the company.
“(5)
A company which has an excess credit for an income year (referred to in this section as the ‘original income year’) may carry the excess credit forward to the succeeding or a later income year (referred to in this section as the ‘year of carry forward’) if and only if there is a group of persons—
“(a)
The aggregate of whose minimum voting interests in the company in the period from the beginning of the original income year to the end of the year of carry forward (in this subsection referred to as the ‘continuity period’) is equal to or greater than 49%; and
“(b)
In any case where at any time during the continuity period a market value circumstance exists in respect of the company, the aggregate of whose minimum market value interests in the company in the continuity period is equal to or greater than 49%,—
and, for the purposes of this subsection, the minimum voting interest or minimum market value interest, as the case may be, of any person in the company in the continuity period shall be equal to the lowest voting interest or market value interest, as the case may be, in the company that that person has during the continuity period.
“(6)
If a company has carried forward any excess credit to a year of carry forward, the excess credit is to be set off in the first instance against the income tax liability of the company for the year of carry forward, to the extent that the credit does not exceed the income tax liability for that year after allowing for any credit under section LC 1.
“(7)
If any part of the excess credit cannot be set off under subsection (6) against the company’s income tax liability for the year of carry forward, and the company so elects by notice in writing to the Commissioner with the company’s return of income for the year of carry forward, the excess credit is to be set off against the income tax liability for the year of carry forward of any other company that is in the same wholly-owned group of companies as the company for both the year of carry forward and the original income year (or, in any case where one of the companies exists for part only of the relevant income year, at all times in the relevant income year at which the 2 companies both exist).
“(8)
If and to the extent that an excess credit is set off against an income tax liability under subsection (4) or subsection (6) or subsection (7), the excess credit ceases to be available otherwise to be carried forward or credited under this section.
“(9)
The benchmark dividend provisions of sections ME 8 and MG 8 and the provisions of section GC 22 apply as if the company had never paid the supplementary dividend.
“(10)
The maximum imputation credit ratio and benchmark dividend provisions of section ME 8 and the provisions of section GC 22 apply as if the imputation credit attached to the dividend were increased by an amount equal to the tax credit calculated with respect to the dividend under subsection (2).
“(11)
If the company pays such a supplementary dividend with respect to all shares of the relevant class held by persons not resident in New Zealand, the payment of the supplementary dividend with respect only to certain shares of that class is not to be treated as contravening—
“(a)
Any provision of the Companies Act 1955, or section 53 of the Companies Act 1993; or
“(b)
Any provision of the company’s articles of association or constitution (not being a provision which expressly refers to this subsection); or
“(c)
Any rule of law—
that would otherwise prohibit the payment by the company at the time of dividends of different amounts in relation to shares of the class.
“(12)
If a trustee derives the dividend and is required under the terms of the trust to distribute it as beneficiary income to a beneficiary, the distribution by the trustee of the supplementary dividend to the same beneficiary is not to be treated as contravening any term of the trust.”.
349 Special rules for holding companies
(1)
Section LE 3(3)(e) is replaced by:
“(e)
Dividends derived by the former section LE 3 holding company are exempt income other than under section CB 10.”.
(2)
Section LE 3(6) is replaced by:
“(6)
Where section CB 10(2) would otherwise apply to the dividend, the dividend is exempt income under that section only to the extent to which it exceeds the amount calculated under the following formula:
_eqn15.JPG)
“where—
“IC
is the amount of imputation credit attached to the dividend; and
“SD
is the amount of the supplementary dividend; and
“T
is the basic rate of income tax for companies, expressed as a percentage, stated in clause 5 of Part A of Schedule 1 and applying in respect of the income year,—
and the imputation credit will be deemed, for the purposes of section LB 2, to be included in the part of the dividend which is not exempt income.”.
(3)
Section LE 3(8) is replaced by:
“(8)
The supplementary dividend is not exempt income under section CB 10(2).”.
(4)
Section LE 3(10) and (11) are replaced by:
“(10)
If in an income year a section LE 3 holding company derives a supplementary dividend, the maximum amount of net losses that the company may offset against its net income for the year is the amount calculated under section IF 7.”.
350 Underlying foreign tax credits generally, and interpretation
In section LF 1(2)(a)(v), “section BB 11”
is replaced by “section BH 1”
.
351 Dividends from lower-tier companies
In section LF 4(2) in the definition of quantity “d”
, “rate of resident companies’ tax”
is replaced by “basic rate of income tax for companies”
.
352 Dividends from grey list companies
(1)
In section LF 5(1) in the definition of quantity “b”
, “rate of resident companies’ tax”
is replaced by “basic rate of income tax for companies”
.
(2)
In section LF 5(3), “section BB 11”
is replaced by “section BH 1”
.
353 Interest paid in conduit financing arrangements
(1)
Section LF 7(a)(i) is replaced by:
“(i)
Incurs any interest expenditure that is an allowable deduction under this Act; or”.
(2)
In section LF 7, the portion after paragraph (f) and before the formula is replaced by:
“no deduction shall be allowed in calculating the net income of the company for such interest or expenditure incurred in the income year except where and to the extent that the aggregate of such interest or expenditure incurred in the income year exceeds the amount calculated in accordance with the following formula:”.
(3)
In section LF 7, subparagraph (ii) of the definition of quantity “b”
is replaced by:
“(ii)
Gross income deemed to be derived by the company under the qualified accruals rules in respect of the financial arrangement in respect of which the interest or expenditure is incurred, during any preceding income year in which the financial arrangement was held, at all times during the existence of the financial arrangement, by the first foreign company or the associate (as the case may be).’.
Amendments to Part M
354 Application of provisional tax rules
Section MB 1 is repealed.
355 Amount of provisional tax payable
(1)
In section MB 2(2), the portion before paragraph (a) is replaced by:
“(2)
Notwithstanding subsection (1) or any other provision of the provisional tax rules, no person shall be obliged to pay provisional tax in any income year if—”.
(2)
Section MB 2(4)(a) is replaced by:
“(a)
The Commissioner assesses or reassesses the income tax liability of a taxpayer after the due date for payment of the tax; and”.
(3)
Section MB 2(5) is replaced by:
“(5)
Where any provisional taxpayer carrying on the business of providing life insurance is liable for income tax in accordance with the life insurance rules, that taxpayer shall at the time of determining the provisional tax payable for that income year provide to the Commissioner details of the calculation of mat provisional tax, including, in particular, the extent to which the amount of that provisional tax relates to the policyholder base.”.
356 Voluntary payments
Section MB 6 is replaced by:
“MB 6
A taxpayer may at any time make voluntary payments to the Commissioner of such amounts as the taxpayer thinks fit by way of provisional tax, being either—
“(a)
Tax in respect of the taxpayer’s income tax liability for an income year in which that taxpayer is not a provisional taxpayer; or
“(b)
Tax in excess of the provisional tax payable by a provisional taxpayer for that income year.”.
357 Provisional tax of consolidated group members
Section MB 7(1)(a) is replaced by:
“(a)
Each company that is a member of a consolidated group in an income year shall, subject to section HB 1(5), be jointly and severally liable for the amount of provisional tax payable by the consolidated group to be credited against the income tax liability of the group for that income year, and that joint and several liability shall be in substitution for any individual liability of those companies under the provisional tax rules in respect of an income tax liability for that income year (to the extent the income tax liability arises while the company is a member of the consolidated group); and”.
358 Offset of further income tax
(1)
Section MB 10(1) is replaced by:
“MB 10
“(1)
For the purposes of sections MB 2 and MB 5, where, in accordance with section ME 9, a company applies an amount of tax by way of further income tax in payment of any instalment of provisional tax for which the company becomes liable after the date of payment of the further income tax, the instalment of provisional tax shall be satisfied by the amount of the further income tax, so far as that amount extends.”.
(2)
In section MB 10(2), the portion after paragraph (a) is replaced by:
“(b)
Instalments subsequent to that instalment, in the order in which they fall due and payable, so far as the amount of the further income tax extends,—
and the amount shall be deemed to be provisional tax and to have been paid on the date on which the instalment so credited was due and payable.”.
359 Application of other provisions to provisional tax
Section MB 12 is replaced by:
“MB 12
Subject to the provisional tax rules, the other provisions of this Act and of the Tax Administration Act 1994 shall, except where otherwise specified, apply with respect to every amount that any person is liable to pay to the Commissioner under the provisional tax rules as if the amount were income tax imposed under section BB 1 of this Act.”.
360 Assessment and payment of terminal tax
(1)
Section MC 1(1) is repealed.
(2)
Section MC 1(2) is replaced by:
“(2)
Notwithstanding section NC 17(2), terminal tax of a provisional taxpayer shall be due and payable on the 7 th of the month specified in Schedule 13.”.
361 Payment of tax
Section MC 2 is replaced by:
“MC 2
“(1)
Terminal tax payable in respect of any income year by any company which does not have a fixed establishment in New Zealand and which is not deemed to be resident in New Zealand shall be due and payable on 7 February in the year next succeeding the income year.
“(2)
Terminal tax payable in respect of any income year by any person (other than a company to which subsection (1) applies) shall be due and payable on the 7 th of the month specified in Schedule 13.”.
362 Application of income tax or dividend withholding payments not refunded
Section MD 4 is replaced by:
“MD 4
For the purposes of the imputation rules, the dividend withholding payment rules, and the consolidation rules, where any amount of overpaid income tax or overpaid dividend withholding payment which has been credited to the imputation credit account or dividend withholding payment account of a company, or a consolidated group as the case may be, is not refunded and is applied by the Commissioner towards the satisfaction of another amount of income tax liability or provisional tax instalment or the satisfaction of another amount of dividend withholding payment, the application of the amount overpaid shall not give rise to another credit in the company’s or group’s imputation credit account or dividend withholding payment account.”.
363 Companies required to maintain imputation credit account
Section ME 1(2)(b), (c), (d), and (e) are replaced by:
“(b)
A company resident in New Zealand but not subject to tax in respect of part or all of its income under a double tax agreement, where the company is, for the purposes of the double tax agreement, treated as not being a resident of New Zealand; or
“(c)
A company acting only in the capacity of trustee (not being a company that is a group investment fund that derives category A income); or
“(d)
A company whose constitution prohibits it from making any distribution of any land to any proprietor, member, or shareholder of the company; or
“(e)
A company which derives only exempt income (not being exempt income under section CB 10 or section CZ 4); or”.
364 Credits arising to imputation credit account
(1)
The portion before subparagraph (i) of section ME 4(1)(a) is replaced by:
“(a)
The amount of any income tax paid by the company during the imputation year that will be applied in satisfaction of the income tax liability (if any) of the company for the year other than—’.
(2)
Section ME 4(1)(a)(ii), (iii), and (iv) are replaced by:
“(ii)
In the case of a company carrying on a business of providing life insurance to which section CM 16 applies, income tax paid to the extent that income tax does not exceed the company’s policyholder base income tax liability for the year:
“(iii)
In the case of a company that is a group investment fund deriving category A income, income tax paid to the extent that income tax does not exceed the company’s schedular income tax liability in respect of the category A income calculated under section BC 3(2) for the year:
“(iv)
In the case of a company that becomes an imputation credit account company during the imputation year, income tax paid to the extent that income tax does not exceed the amount that would have been the company’s income tax liability for the year, if the year ended on the day immediately preceding the day on which the company became an imputation credit account company:”.
(3)
Section ME 4(3) is replaced by:
“(3)
For the purposes of subsection (1)(f) of this section, a credit shall not arise to the extent that, in accordance with subsection (2) or subsection (3) of section NH 3, payment of all or part of a dividend withholding payment is satisfied by reducing a net loss.”.
365 Debits arising to imputation credit account
(1)
Section ME 5(1)(e)(u) is replaced by:
“(ii)
The refund is in respect of income tax paid that was applied in satisfaction of an income tax liability for an income year—
“(A)
During which the company was not an imputation credit account company; or
“(B)
During only part of which the company was an imputation credit account company, in which case the debit to the company’s imputation credit account shall be the amount calculated in accordance with the following formula:
_eqn16.JPG)
“where—
“a
is the number of days in the year during which the company was an imputation credit account company; and
“b
is the amount of the refund; or”.
(2)
The portion of section ME 5(1)(1) before subparagraph (i) is replaced by:
“(1)
The amount of any overpaid income tax that the Commissioner applies towards the satisfaction of an amount (other than an income tax liability or an instalment of provisional tax) that is due and payable under any provision of this Act or any other of the Inland Revenue Acts, except to the extent that the amount applied—”.
(3)
Section ME 5(1)(m) is replaced by:
“(m)
The amount of any overpaid dividend withholding payment that the Commissioner applies, at a time when the company is not a dividend withholding payment account company, towards the satisfaction of an amount (other than a dividend withholding payment or an income tax liability or an instalment of provisional tax) that is due and payable under this Act or any other of the Inland Revenue Acts:”.
366 Allocation rules for imputation credits
In section ME 8(1) in the definition or quantity “a”
, “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
367 Further tax payable where end of year debit balance, or when company ceases to be imputation credit account company
Section ME 9(5) is replaced by:
“(5)
Where a company pays any further income tax for which it is liable under this section, that tax may be credited against any income tax liability that arises or any instalment of provisional tax in accordance with section MB 10 for which the company becomes liable after the date of payment of the further income tax.”.
368 Credits arising to imputation credit account of group
Section ME 11(1)(a) and (b) are replaced by:
“(a)
The amount of any income tax paid during that imputation year by that consolidated group that will be applied in satisfaction of the income tax liability (if any) of the group except to the extent that such income tax—
“(i)
Would not, if the group were a single company, give rise to a credit by virtue of section ME 4(1)(a)(i) to (viii); or
“(ii)
Is paid by way of a crediting of further income tax under section ME 13(6):
“(b)
The amount of any income tax deemed under section MB 9 to be paid during the imputation year by the consolidated group:”.
369 Debits arising to imputation credit account of group
(1)
In section ME 12(1)(d), the portion before subparagraph (i) is replaced by:
“(d)
The amount of any refund of income tax paid to the consolidated group during the imputation year that was applied towards the satisfaction of an income tax liability of the consolidated group or that was paid as an instalment of provisional tax of the consolidated group except to the extent that—”.
(2)
In section ME 12(1)(1), the portion before subparagraph (i) is replaced by:
“(1)
The amount of any overpaid income tax paid by the consolidated group that the Commissioner applies towards the satisfaction of an amount (other than an amount of income tax) that is due and payable by a company that is a member of the consolidated group under any provision of this Act or any other of the Inland Revenue Acts, except to the extent that the amount applied—”.
370 Debiting and crediting between consolidated group and individual companies
Section ME 13(6) is replaced by:
“(6)
Where at any time—
“(a)
A company has paid any further income tax under section ME 9 in respect of a debit balance in its individual imputation credit account; and
“(b)
The company is entitled under section ME 9(5) to credit that further income tax against any income tax liability of the company that arises or any instalment of provisional tax for which the company becomes liable at or after that time; and
“(c)
The company is at that time a member of a consolidated group,—
that further income tax may be credited against—
“(d)
Any income tax liability of the group that arises at or after that time; or
“(e)
Any instalment of provisional tax in accordance with section MB 10 for which the group becomes liable at or after that time,—
and, to the extent so credited, the further income tax shall not be available to be credited under section ME 9(5).”.
371 Credits and debits arising to policyholder credit account of company
Section ME 18(3)(a) is replaced by:
“(a)
The amount of any credit balance in the account that the company elects in accordance with section ME 19 to use as a credit against the company’s policyholder base income tax liability:”.
372 Use of credit balance to credit against company’s policyholder base income tax liability, or transfer of credit balance to company’s imputation credit account
Section ME 19(1) and (2) are replaced by:
“ME 19
“(1)
A policyholder credit account company may elect that all or part of any credit balance in its policyholder credit account at the time of the election shall be credited against any policyholder base income tax liability of the company, or provisional tax payable by the company in respect of its policyholder base.
“(2)
A company shall make an election under subsection (1) by recording the amount in respect of which it makes the election as a debit in its policyholder credit account, and any amount so recorded as a debit in accordance with subsection (1) shall be credited against any policyholder base income tax liability of the company or provisional tax payable by the company in respect of its policyholder base.”.
373 Credit balance may be transferred on transfer of life insurance business
Section ME 19a(1)(a) is replaced by:
“(a)
The transfer meets the requirements set out in paragraphs (a) to (d) of section CM 18(2); and”.
374 Credits and debits arising to policyholder credit account of person
(1)
Section ME 23(4)(a) is replaced by:
“(a)
Any of the credit balance of the account that the person elects in accordance with section ME 24 to use as a credit against the policyholder base income tax liability of the person;”.
(2)
In section ME 23(6), the portion before paragraph (a)(ii) is replaced by:
“(6)
Notwithstanding any provision of this section, in the case of any policyholder credit account person not resident in New Zealand to whom section CN 3 applies—
“(a)
A credit shall only arise to that person’s policyholder credit account by virtue of income tax paid to the extent that it does not exceed—
“(i)
The amount of income tax liability that would have arisen in respect of the person’s taxable income if the sole activity of the person carrying on a business of providing life insurance consisted of or related to any one or more policies of life insurance for which that life insurer is the insurer which were offered or entered into in New Zealand (whether or not executed in New Zealand and whether or not the life insurer has a fixed establishment in New Zealand or has an agent in New Zealand); or”.
375 Use of credit balance to reduce income tax
Section ME 24 is replaced by:
“ME 24
“(1)
A policyholder credit account person may elect that all or any part of the credit balance in the policyholder credit account of that person at the time of election shall be credited against any policyholder base income tax liability of the person or provisional tax payable in respect of the person’s policyholder base.
“(2)
A person shall make an election under this section by recording the amount in respect of which the election is made as a debit in the person’s policyholder credit account, and any amount recorded as a debit in accordance with this section shall be credited against any policyholder base income tax liability of the person or provisional tax payable by the person in respect of the person’s policyholder base.”.
376 Credits and debits arising to group policyholder credit account
Section ME 26(4)(a) is replaced by:
“(a)
The amount of any credit balance in the account that the nominated company for the group elects in accordance with section ME 28(2) to use as a credit against the policyholder base income tax liability of the group:”.
377 Application of policyholder credit account provisions to consolidated group, etc.
Section ME 28(1) and (2) are replaced by:
“ME 28
“(1)
The nominated company for a consolidated group may elect that all or part of any credit balance in the group’s policyholder credit account at the time of the election shall be credited against any policyholder base income tax liability of the group or provisional tax payable by the group, in respect of its policyholder base.
“(2)
An election under subsection (1) shall be made by recording the amount in respect of which the nominated company makes the election as a debit in the group’s policyholder credit account, and any amount so recorded as a debit in accordance with this subsection shall be credited against any policyholder base income tax liability of the group or provisional tax payable by the group in respect of its policyholder base.”.
378 Statutory producer board may determine to attach imputation credit to certain distributions
In section ME 30(2), the portion after paragraph (a) is replaced by:
“(b)
All or any part of that cash distribution would, were it not for this section, be allowed as a deduction to the producer board, whether as a rebate under section HF 1 or otherwise,—
elect, on or before the day it makes the distribution, not to claim the amount of the cash distribution as an allowable deduction; and where a producer board so elects the amount of the cash distribution shall, to the extent it is not an allowable deduction, be deemed for the purposes of this Act to be a dividend.”.
379 Amount of imputation credit to be attached to cash distribution
In section ME 31(1) in the definition of quantity “b”
, “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
380 Notional distribution deemed to be dividend
In section ME 33(1) in the definition of quantity “b”
, “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
381 Co-operative company may make annual determination to attach imputation credit to certain distributions
In section ME 35(2), the portion after paragraph (a) is replaced by:
“(b)
All or any part of that cash distribution would, were it not for this section, be allowed as a deduction to the co-operative company, whether as a rebate under section HF 1 or otherwise,—
elect, on or before the day it makes the distribution, by notice in writing to the Commissioner, not to claim the amount of the cash distribution as an allowable deduction; and where a co-operative company so elects the amount of the cash distribution shall, to the extent it is not an allowable deduction, be deemed for the purposes of this Act to be a dividend.”.
382 Amount of imputation credit to be attached to cash distribution
In section ME 36(1) in the definition of quantity “b”
, “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
383 Notional distribution deemed to be dividend
In section ME 38(I) in the definition of quantity “b”
, “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
384 Special debits arising to imputation credit account of unit trust or group investment fund
In section ME 41(2)(b), the definitions of quantities “b”
and “c”
are replaced by:
“b
is the taxable income of the company or, as the case may be, the consolidated group for the income year in which the dividends are derived; and
“c
is the income tax liability of the company or, as the case may be, the consolidated group for the income year.”.
385 Credits and debits arising to branch equivalent tax account of company
(1)
Section MF 4(1)(a), (o) and (c) are replaced by:
“(a)
An amount (not less than nil) calculated in accordance with the following formula:
_eqn17.JPG)
“where—
“a
is the amount of the company’s income tax liability for any income year (being the 1988–89 income year or a later income year); and
“b
is the amount that is the lesser of—
“(i)
The amount of any attributed foreign income derived by the company for the income year; and
“(ii)
The taxable income of the company for the income year; and
“c
is the taxable income of the company for the income year; and
“d
is the amount of any foreign tax credit allowed in accordance with section LC 4 or section LC 5 that is set off against the company’s income tax liability for the income year; and
“e
is the amount set off against the company’s income tax liability for the income year by way of crediting the debit balance in the branch equivalent tax account of the company or any other company:
“(b)
An amount calculated in accordance with the following formula—
“f × g
“where—
“f
is the lesser of—
“(i)
The attributed foreign income derived by the company in the income year; and
“(ii)
The amount (including zero) of available net losses offset by the company against the company’s net income for the income year; and
“g
is the basic rate of income tax for companies, expressed as a percentage, stated in clause 5 of Part A of Schedule 1 and applying in respect of the income year:
“(c)
The amount of any debit balance in the account that the company elects in accordance with section MF 5 to set off against the income tax liability of the company or of another company:”.
(2)
Section MF 4(2)(b) is replaced by:
“(b)
In the case of a credit referred to in paragraph (c) of that subsection, on the date the company elects in accordance with section MF 5 to set off the amount against the income tax liability of the company or of another company:”.
(3)
Section MF 4(3)(a) is replaced by:
“(a)
The amount of any dividend withholding payment paid (whether directly or by way of an election to reduce an amount of net loss) by the company during the year, in respect of a dividend derived by the company in respect of an income interest in a controlled foreign company:”.
(4)
Section MF 4(3)(c) is replaced by:
“(c)
An amount equal to any refund of income tax to the extent that the refund would have been made had the company not derived any gross income other than attributed foreign income in the income year to which the refund relates, except, to the extent that the refund is in respect of income tax paid before the date that a debit arises under paragraph (d), a debit shall not arise to the extent that the amount of the refund does not exceed the amount of the debit that arises on that date:”.
386 Use of credit to reduce dividend withholding payment, or use of debit to satisfy income tax liability
(1)
Section MF 5(2)(a) is replaced by:
“(a)
In any case where and to the extent that the credit has arisen under section MF 4(1)(a) (determined by applying the procedure set out in section MF 4(6)), to the extent that the company has paid income tax or provisional tax for the income year equal to or exceeding the credit balance so used; and”.
(2)
Section MF 5(4) is replaced by:
“(4)
Where for any income year the gross income of a company (referred to in this subsection as the ‘first company’) includes an amount of attributed foreign income derived in respect of an income interest in a controlled foreign company, the first company, or any other company which is for the income year in the same group of companies as the first company, may elect that all or any part of the debit balance (if any) in the branch equivalent tax account of the first company or the other company, as the case may be, at the time of the election shall be credited against any income tax liability of the first company.”.
(3)
Section MF 5(6) is replaced by:
“(6)
Where a company has made an election under subsection (4) in respect of the income tax liability for any income year, the amount of debit balance in respect of which the election is made shall be set off against any income tax liability of the company or the relevant other company for that income year to the extent that the Commissioner is satisfied that—
“(a)
The amount set off does not exceed an amount equal to the company’s income tax liability that would arise if no gross income were derived by the company other than the attributed foreign income referred to in subsection (4), such amount to be calculated under the formula set out in section MF 4(1)(a) (but applying as if item ‘e’ were nil); and
“(b)
The company has made a proper election in accordance with this section; and
“(c)
The company has paid (whether directly or by way of an election to reduce an amount of a net loss) the dividend withholding payment that gives rise to a debit to the company’s branch equivalent tax account.”.
(4)
Section MF 5(7) is repealed.
387 Debits and credits arising to group branch equivalent tax account
(1)
Section MF 8(2)(a), (b) and (c) are replaced by:
“(a)
An amount calculated in accordance with the following formula:
_eqn18.JPG)
“where—
“a
is the amount of the income tax liability of the consolidated group for any income year; and
“b
is the amount that is the lesser of—
“(i)
The amount of any attributed foreign income derived by the consolidated group for the income year; and
“(ii)
The taxable income of the consolidated group for the income year; and
“c
is the taxable income of the consolidated group for the income year; and
“d
is the amount of any foreign tax credit allowed to be set off against the income tax liability of the consolidated group for the income year in accordance with sections LC 4, LC 5, and LC 16; and
“e
is the amount set off against the income tax liability of the consolidated group for the income year by way of crediting the debit balance in the branch equivalent tax account of the consolidated group or any company:
“(b)
An amount calculated in accordance with the following formula—
“f × g
“where—
“f
is the lesser of—
“(i)
The attributed foreign income derived by the consolidated group in the income year; and
“(ii)
The amount (including zero) of available net losses offset by the consolidated group against the consolidated group’s net income for the income year; and
“g
is the basic rate of income tax for companies, expressed as a percentage, stated in clause 5 of Part A of Schedule 1 and applying in respect of the income year:
“(c)
The amount of any debit balance in the account that the nominated company for the consolidated group elects in accordance with section MF 10(3) or section MF 10(4) to set off against the income tax liability of the consolidated group or of another company:”.
(2)
Section MF 8(3)(b) is replaced by:
“(b)
In the case of a credit referred to in paragraph (c) of that subsection, on the date the nominated company elects in accordance with section MF 10(3) or section MF 10(4) to set off the amount against the income tax liability of the consolidated group or of another company:”.
(3)
Section MF 8(4)(c) is replaced by:
“(c)
An amount equal to any refund of income tax to the extent that the refund would have been made had the consolidated group not derived any gross income other than attributed foreign income in the income year to which the refund relates, except that, to the extent that the refund is in respect of income tax paid before the date that a debit arises under paragraph (d), a debit shall not arise to the extent that the amount of the refund does not exceed the amount of the debit that arises on that date:”.
388 Debiting and crediting between group and individual branch equivalent tax accounts
In section MF 9, the portion after paragraph (d) is replaced by:
“no credit or debit shall arise to the branch equivalent tax account of any individual company in respect of that attributed foreign income, income tax refund, dividend withholding payment, or dividend withholding payment refund.”.
389 Use of consolidated group credit to reduce dividend withholding payment, or use of group or individual debit to satisfy income tax liability
(1)
Section MF 10(2)(a) and (b) are replaced by:
“(a)
In any case where and to the extent that the credit has arisen under section MF 8(2)(a) (determined by applying the procedure set out in section MF 4(6)), to the extent that the consolidated group has paid income tax or provisional tax for the income year equal to or exceeding the credit balance so used; and
“(b)
In any case where and to the extent that the credit has arisen under section MF 8(2)(b) (as so determined), where the Commissioner has made an assessment or a determination of net loss for the income year in which the attributed foreign income is derived.”.
(2)
Section MF 10(3), (4), and (5) are replaced by:
“(3)
Where a consolidated group derives attributed foreign income for an income year,—
“(a)
The nominated company of the consolidated group; or
“(b)
Any member of the consolidated group; or
“(c)
Any other company which for the income year would be in the same group of companies as the consolidated group if the consolidated group were a single company—
may elect (by crediting the account) that all or any part of the debit balance in the branch equivalent tax account of the consolidated group or the company (as the case may be) at the time of the election shall be set off against the income tax liability of the consolidated group for the income year.
“(4)
Where a company (referred to in this section as the ‘first company’) derives attributed foreign income in an income year, the nominated company of a consolidated group, which group would be, if the consolidated group were a single company, in the same group of companies as the first company for the income year, may elect (by crediting the account) that all or part of any debit balance in the branch equivalent tax account of the consolidated group at the time of the election shall be set off against the income tax liability of the first company for the income year.
“(5)
Where a company has made an election under subsection (3) or subsection (4) in respect of an income tax liability for any income year, the amount of debit balance in respect of which the election is made shall be set off against the income tax liability to the extent that the Commissioner is satisfied that—
“(a)
The amount set off does not exceed an amount equal to the income tax liability that would arise if no gross income were derived in that income year by the consolidated group or the first company, as the case may be, other than attributed foreign income referred to in subsection (3) or subsection (4), such amount to be calculated under the formula set out in section MF 8(2)(a) (but applying as if item ‘e’ were nil); and
“(b)
The company has made a proper election in accordance with this section; and
“(c)
The consolidated group or relevant other company, as the case may be, has paid (whether directly or by way of an election to reduce an amount of net loss) the dividend withholding payment that gives rise to a debit to the branch equivalent tax account of the entity making the payment.”.
(3)
Section MF 10(6) is repealed.
390 Person may elect to maintain branch equivalent tax account
Section MF 11(1) is replaced by:
“MF 11
“(1)
A person resident in New Zealand (not being a company) may at any time during an income year of that person, or within the time within which the person is required to furnish a return of income for that year (or within such further time as the Commissioner may allow), elect to maintain a branch equivalent tax account for that year.”.
391 Credits and debits arising to branch equivalent tax account of person
(1)
Section MF 13(1) is replaced by:
“MF 13
“(1)
There shall arise from time to time, as credits to be recorded in the branch equivalent tax account of a branch equivalent tax account person, amounts calculated in accordance with the following formula:
_eqn19.JPG)
“where—
“a
is the amount of the person’s unadjusted income tax liability for any income year; and
“b
is the amount that is the lesser of—
“(i)
The amount of any attributed foreign income derived by the person during that income year; or
“(ii)
The taxable income of the person for that income year; and
“c
is the taxable income referred to in paragraph (ii) of item b; and
“d
is any foreign tax credit allowed in accordance with section LC 4 or section LC 5 that is offset against the person’s income tax liability for that income year.”.
(2)
Section MF 13(3)(a) and (b) are replaced by:
“(a)
Any of the credit balance of the account that the person elects in accordance with section MF 14 shall be a credit against the income tax liability of the person:
“(b)
An amount equal to any refund of income tax to the extent that the refund would have been made had the person not derived any gross income other than attributed foreign income:”.
392 Debit election to offset income tax payable in respect of foreign dividend
(1)
Section MF 14(1) is replaced by:
“MF 14
“(1)
Where for any income year the gross income of a branch equivalent tax account person includes the amount of any dividend derived in respect of an income interest in a controlled foreign company, the person may elect that all or any part of the credit balance (if any) in the person’s branch equivalent tax account at the time of the election shall be credited against the person’s income tax liability for that income year.”.
(2)
In section MF 14(3), the portion before paragraph (b) is replaced by:
“(3)
Where a person has made an election under this section in respect of the income tax liability for any income year, the amount of credit balance in respect of which the election is made shall be credited against any income tax liability of the person for that income year to the extent that the Commissioner is satisfied that—
“(a)
The amount credited does not exceed the amount that would be the person’s income tax liability for the income year, if the only gross income of the person were the dividends referred to in subsection (1); and”.
393 Credits arising to dividend withholding payment account
Section MG 4(3) is replaced by:
“(3)
For the purposes of subsection (1), a credit shall not arise where, in accordance with subsection (2) or subsection (3) of section NH 3, payment of all or part of a dividend withholding payment is satisfied by reducing a net loss.”.
394 Allocation rules for dividend withholding payment credits
In section MG 8(1) in the definition of quantity “a”
, “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
395 Dividend with both imputation credit and dividend withholding payment credit attached
In section MG 10(1) in the definition of quantity “a”
, “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
Amendments to Part N
396 Assessment and payment of tax
Section NC 17(1) is replaced by:
“NC 17
“(1)
The amount of income tax for which an employee who is not a non-filing taxpayer is liable in respect of the taxable income of the employee in any income year shall be assessed under a general assessment:
Provided that, where by such an assessment the employee would be deprived of any part of the benefit of any reduced deduction to which the employee would otherwise have been entitled in accordance with the application to the employee of a tax code under section NC 8 or to the issue, in place of a tax code applicable to the employee under section NC 8, of a special tax code certificate under section NC 14, the Commissioner may reduce the amount of income tax liability otherwise arising under a general assessment in respect of the taxable income of the employee for the income year by such amount as in the Commissioner’s opinion is equitable for the purpose of meeting the special circumstances of the case.”.
397 Bond, etc., in lieu of tax deductions in case of certain non-resident employees
(1)
In section NC 18(1), the portion before paragraph (b) is replaced by:
“NC 18
“(1)
Where the Commissioner is satisfied on the written application of any employer that it cannot be reasonably determined, at the time that a tax deduction is or will be required to be made from a source deduction payment under the PAYE rules, whether or not that source deduction payment will in respect of any employee of that employer be exempt income under this Act under—
“(a)
Any provision of arrangements to which effect is given by an Order in Council made under section BH 1; or”.
(2)
Section NC 18(3)(a) is replaced by:
“(a)
The occurrence of any event (including the passing of any date or period) that, in terms of any provision of arrangements to which effect is given by an Order in Council made under section BH 1, or in terms of section CB 2(1)(c), renders the employee liable to income tax under this Act; or”.
398 Regulations
Section NC 21(h) is replaced by:
“(h)
Providing that a tax deduction may be made from a withholding payment, whether the amount of the deduction relates exclusively to the income tax liability of the person receiving the payment or relates partly to that income tax and partly to the income tax liability of any employee or subcontractor of that person; and providing in the latter case for that person to recover from the employee or subcontractor a part of the tax deduction and to retain that part but otherwise to comply with the PAYE rules in respect of any tax deduction made by that person from any payment to the employee or subcontractor:”.
399 Application of RWT rules
(1)
Section NF 1(2)(b)(i) is replaced by:
“(i)
Dividends that are exempt income by virtue of the application of section CB 10 or section CZ 4; or”.
(2)
Section NF 1(2)(b)(viii) is replaced by:
“(viii)
Dividends that are exempt income under section CB 9(e):”.
(3)
In section NF 1(3), the portion before paragraph (a) is replaced by:
“(3)
In the case of interest payable by the Commissioner under Part VII of the Tax Administration Act 1994, being interest paid in respect of the tax on taxable income for the 1994–95 income year or any subsequent year,—”.
400 Deduction of Resident Withholding Tax
In section NF 2(7), the portion before paragraph (d) is replaced by:
“(7)
Where any person (in this subsection referred to as the ‘first person’) in relation to any other person (in this subsection referred to as the ‘second person’)—
“(a)
Makes a payment to the second person; or
“(b)
Receives a payment as agent or bare trustee for that second person,—
for the purposes only of determining the first person’s liability to make a deduction of resident withholding tax from that payment in accordance with the RWT rules, that payment shall be deemed not to constitute resident withholding income if, in the case of a payment of either interest or dividends,—
“(c)
Either—
“(i)
The first person has taken reasonable steps to confirm that the second person is a person to whom at the time of payment any of paragraphs (a) to (d) of section NF 9(1) applies; or
“(ii)
Except in any case where the second person is a person to whom either paragraph (i) or paragraph (j) of section NF 9(1) applies or a person holding a certificate of exemption issued in accordance with section NF 9(12), the first person has been provided with the second person’s tax file number and has been notified by the second person that the second person holds a certificate of exemption; or
“(iii)
The first person has sighted a certificate of exemption issued to the second person and has taken reasonable steps to confirm that the second person is the person named in that certificate; and”.
401 Certificates of exemption
(1)
In section NF 9(1), the portion after paragraph (f) is replaced by:
“(g)
Any person who has furnished all returns of income that that person is required to furnish under the Income Tax Act 1976 or the Tax Administration Act 1994 within the time period prescribed in the relevant Act (or within such further time as the Commissioner has allowed), and who has for the year to which that person’s most recently furnished income tax return relates annual gross income in excess of $2,000,000:
“(h)
Any person in any accounting year who has reasonable grounds for believing that the annual gross income of that person for the next accounting year of that person will exceed $2,000,000:
“(i)
Any person who derives in any income year amounts that are exempt income under any of paragraphs (a) and (b) of section CB 3, paragraphs (a) to (j) and paragraph (1) of section CB 4, section CB 5(1)(i), and section CB 9(e) in relation to the activities of that person in the capacity in which that person derived that exempt income:
“(j)
Any person to whom section DJ 16 applies and who would, but for that section, have net income in that person’s most recently completed accounting year, of an amount less than the amount for the time being specified in that section, and has not, in any assessment for that year, been treated as having net income of more than that amount.”.
(2)
Section NF 9(6), (7), (8), (9), (10), (11), and (12) are replaced by:
“(6)
Any person to whom is issued a certificate of exemption on the basis that paragraph (h) of subsection (1) applies to that person shall, within 3 months after the end of the accounting year last referred to in that paragraph, furnish to the Commissioner evidence to the satisfaction of the Commissioner, of that person’s annual gross income for the relevant accounting year, and shall provide such supporting information or further evidence as the Commissioner may require for the purposes of this section and section NF 11.
“(7)
In the event that any person to whom subsection (6) applies has during the relevant 12-month period less than $2,000,000 of annual gross income, that person (in this subsection referred to as the ‘first person’) shall be liable for late payment penalties in relation to amounts received or derived by the first person that would, had the first person not held that certificate of exemption, have been deducted under the RWT rules from payments made by any other person, and section 139b of the Tax Administration Act 1994 shall apply to the first person as if the first person had failed to make a deduction under the RWT rules, and as if that default had occurred on each day that the first person received or derived a payment from which a deduction would otherwise have been made under the RWT rules.
“(8)
When calculating the annual gross income of any company for the purposes of subsection (1)(g) of this section, being a company that was for the relevant year under section IG 1 a member of a group of companies, the annual gross income of that company is deemed to include all of the annual gross income in that year of any other members of that group.
“(9)
When calculating the estimated annual gross income of any company for the purposes of subsections (1)(h), (6), and (7) of this section, being a company which anticipates that it will be a member of a group of companies under section IG 1 for the relevant 12-month period, the estimated annual gross income in that period of that company is deemed to include the estimated annual gross income of all other companies in that group.
“(10)
For the purposes of paragraphs (g) and (h) of subsection (1) and subsections (6) to (9), when calculating the annual gross income of any company, there shall be excluded from the annual gross income calculations any gross income derived by that company (or derived by another company in the same group of companies) from any transaction or series of related or connected transactions with another company in the same group of companies.
“(11)
The Commissioner may—
“(a)
Issue a certificate of exemption; or
“(b)
Permit the retention of a certificate of exemption; or
“(c)
Remit the whole or any part of any additional tax payable by virtue of subsection (7),—
notwithstanding the failure of the applicant for the certificate or the holder of the certificate to satisfy the basis of exemption in subsection (1)(h) or to derive during the relevant 12-month period referred to in subsection (7) annual gross income of at least $2,000,000, where the Commissioner is satisfied that the failure is solely as a consequence of extraordinary circumstances that are—
“(d)
Beyond the reasonable control of the applicant or holder of the certificate of exemption; and
“(e)
Not likely to be repeated in subsequent years; and
“(f)
In the case of any remission of additional tax payable by virtue of subsection (7), circumstances which the applicant for the certificate of exemption could not reasonably have been expected to foresee at the time of application.
“(12)
Notwithstanding any other provision of this section, the Commissioner may at any time issue to a person, being a person to whom at that time subsection (1) does not apply, a certificate of exemption which shall be valid until the date of termination (if any) specified in the certificate where the Commissioner is satisfied that in the period of validity of any certificate of exemption issued to that person either—
“(a)
The person will or is likely to have annual allowable deductions in accordance with this Act not less than the annual gross income of that person; or
“(b)
The person would, but for the application of this subsection, in each income year any part of which income year falls within the period of validity of the certificate of exemption, be or be likely to be entitled to claim aggregate resident withholding tax credits in accordance with section LD 3 exceeding the income tax liability of that person for such income year by an amount not less than $500:
Provided that the Commissioner shall not issue to any person a certificate of exemption in accordance with this subsection unless the Commissioner has received from that person an application in writing in the form prescribed by the Commissioner, which application shall be accompanied by—
“(c)
A set of budgeted accounts detailing the projected annual gross income, annual allowable deductions, resident withholding tax credits, and income tax liability of the person for the proposed period of validity of the certificate of exemption; and
“(d)
Such further information in relation to the person or the budgeted accounts as the Commissioner may require.”.
402 Cancellation of certificates of exemption
Section NF 11(2)(c)(i) and (ii) are replaced by:
“(i)
The evidence required to be furnished by that person under section NF 9(6) shows that that person did not derive annual gross income in excess of $2,000,000 in the relevant accounting year; or
“(ii)
That person fails to furnish satisfactory evidence of annual gross income as required under section NF 9(6); or.
403 Application of NRWT rules
(1)
Section NG 1(2) is replaced by:
“(2)
The NRWT rules shall apply to gross income (in this Act referred to as ‘non-resident withholding income’) deemed under this Act to be derived from New Zealand and that consists of—
“(a)
Dividends (other than investment society dividends) or royalties that are derived by a person who is not resident in New Zealand; or
“(b)
Interest or investment society dividends, being interest or investment society dividends that are derived by a person who is not resident in New Zealand, not being a person who is engaged in business in New Zealand through a fixed establishment in New Zealand,—
not being gross income that is—
“(c)
Gross income under the accruals rules; or
“(d)
Gross income to which section CN 2 applies.”.
(2)
In section NG 1(4), the portion before paragraph (a) is replaced by:
“(4)
In the case of interest payable by the Commissioner under Part VII of the Tax Administration Act 1994—”.
404 Non-resident withholding tax imposed
(1)
Section NG 2(1) is replaced by:
“NG 2
“(1)
Every person who derives non-resident withholding income shall be liable to pay non-resident withholding tax upon that income—
“(a)
At the rate of 30% of so much of that non-resident withholding income as consists of dividends (other than investment society dividends, or supplementary dividends payable as a result of Part LE) to the extent the dividends are not fully imputed:
“(b)
At the rate of zero percent of so much of that non-resident withholding income as consists of—
“(i)
Interest paid by an approved issuer in respect of a registered security and derived by a person who is not an associated person of the approved issuer; or
“(ii)
Non-cash dividends to the extent fully imputed; or
“(iii)
Non-resident withholding income derived by a life insurer from a company resident in New Zealand deemed to exist as a result of the life insurer making an election under section OE 3:
“(c)
At the rate of 15% of so much of that non-resident withholding income as consists of non-resident withholding income to which neither paragraph (a) nor paragraph (b) applies.”.
(2)
In section NG 2(3) in the definition of quantity “T”
, “rate of resident companies’ tax”
is replaced by “basic rate of income tax for companies”
.
405 Non-resident withholding tax to be final tax in certain cases
Section NG 3 is replaced by:
“NG 3
“(1)
Notwithstanding anything in this Act, where a person derives in any income year non-resident withholding income that consists of—
“(a)
A dividend (other than an investment society dividend); or
“(b)
A royalty that is for the use, production, or reproduction of, or for the privilege of using, producing, or reproducing, a literary, dramatic, musical, or artistic work in which copyright subsists; or
“(ba)
Interest or royalties derived by a life insurer from a company resident in New Zealand deemed to exist as a result of the life insurer making an election under section OE 3; or
“(c)
Interest or an investment society dividend, in any case where the person by whom that interest or that investment society dividend is derived and the person by whom that interest or that investment society dividend is paid are not associated persons,—
the income tax liability of that person for that year shall, subject to section KF 1(2) and (3), be the sum of—
“(d)
The total amounts of non-resident withholding tax for which that person is liable in respect of that non-resident withholding income under section NG 2; and
“(e)
The amount that would be that person’s income tax liability for that income year if that person had not derived that non-resident withholding income in that income year.
“(2)
If a taxpayer derives a dividend to which subsection (1) applies, the taxpayer is not entitled to a credit of tax under section LB 2 for any imputation credit attached to the dividend.”.
406 Non-resident withholding tax to be minimum tax in certain cases
Section NG 4 is replaced by:
“NG 4
Where a person derives in any income year non-resident withholding income that consists of interest, or of an investment society dividend (other than interest or an investment society dividend referred to in section NG 3(c)), or of a royalty (not being a royalty referred to in section NG 3(b)), the income tax liability of that person for that income year shall be the greater of—
“(a)
The sum of—
“(i)
The total amount of non-resident withholding tax for which that person is liable in accordance with section NG 2 in respect of all non-resident withholding income; and
“(ii)
The amount that would be that person’s income tax liability for that income year if that person had not derived any non-resident withholding income in that income year:
“(b)
The amount that would, but for the application of this section and calculated under section NG 3 if applicable, be the income tax liability of that person for that income year:
Provided that where, in the case of a company, the aggregate of the amount of that non-resident withholding income and any other gross income derived by the company in that income year does not exceed $1,000, the income tax liability of the company under this Act in respect of that income year, shall be an amount ascertained in accordance with paragraph (a).”.
407 Liability to make deduction in respect of foreign withholding payment dividend
(1)
Section NH 1(2)(a) is replaced by:
“(a)
Dividends paid by a foreign company where the dividend is exempt income in accordance with section CB 10 upon derivation by a company resident in New Zealand:”.
(2)
Section NH 1(2)(b)(iii) is replaced by:
“(iii)
The dividend is exempt income in accordance with section CB 10 upon derivation by the company resident in New Zealand.”.
408 Amount of dividend withholding payment to be deducted
In section NH 2(1) in the definition of quantity “d”
, “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
409 Payment and recovery of dividend withholding payment, etc.
(1)
Section NH 3(2) and (3) are replaced by:
“(2)
Where, in relation to a company that is liable to pay dividend withholding payment in respect of any foreign dividend paid to the company during any quarter, the company satisfies the Commissioner that—
“(a)
It has a net loss that may be carried forward and offset in accordance with sections IE 1 and IF 1 against the net income of the company for the income year in which the foreign dividend is paid to the company; or
“(b)
It has reason to believe that, in respect of the income year in which the foreign dividend is paid to the company, the company will have a net loss that may be carried forward and offset in accordance with sections IE 1 and IF 1 against the net income of the company for the succeeding income year,—
the company may by notice in writing to the Commissioner elect, within the period for payment specified in subsection (1) (or by such later date as the Commissioner may allow), that payment of all or part of the dividend withholding payment shall be satisfied by reducing any such net loss, in so far as the balance of the net loss extends, by an amount not exceeding an amount calculated in accordance with the following formula:
_eqn20.JPG)
“where—
“a
is the amount of the dividend withholding payment payable under section NH 2; and
“b
is the basic rate of income tax for companies, expressed as a percentage, stated in clause 5 of Part A of Schedule 1 and applying in respect of the income year that is concurrent with the imputation year in which the quarter for which the liability arose occurred.
“(3)
Where, in relation to a company (in this subsection referred to as the ‘first company’) that is liable to pay dividend withholding payment in respect of any foreign dividend paid to the company during the quarter, any other company (in this subsection referred to as the ‘loss company’) satisfies the Commissioner that—
“(a)
The loss company has, in any income year prior to the income year during which the foreign dividend is paid to the first company, a net loss that may, in accordance with section IG 2, be offset against the net income of the first company for the income year in which the foreign dividend is paid to the first company; or
“(b)
The loss company has reason to believe that it will, in respect of the income year in which the foreign dividend is paid to the first company, have a net loss that may in accordance with section IG 2 be offset against the net income of the first company for the income year in which the foreign dividend is paid to the first company,—
the loss company may by notice in writing to the Commissioner elect, within the period for payment specified in subsection (1) (or by such later date as the Commissioner may allow), that payment of all or part of the dividend withholding payment payable by the first company shall be satisfied by reducing any such net loss, so far as the balance of the net loss extends, by an amount not exceeding an amount calculated in accordance with the formula specified in subsection (2).”.
(2)
In section NH 3(4), the portion before paragraph (b) is replaced by:
“(4)
Where a company elects under subsection (2) or subsection (3) to satisfy a liability to pay all or part of any dividend withholding payment by way of a reduction of net loss, and the company does not in fact have a net loss or does not have a net loss sufficient to justify the full amount of the reduction of net loss under the relevant subsection, or, in the case of an election under subsection (3), the 2 companies are members of the same group of companies for part only of a relevant income year and the net loss referred to in that subsection could be offset against the net income of the company deriving the dividend by virtue only of subsection (4) or (5) of section IG 2,—
“(a)
The Commissioner may disallow the election in respect of so much of the amount of the dividend withholding payment as the Commissioner considers appropriate having regard to—
“(i)
The amount of the actual net loss of the electing company; and
“(ii)
Where appropriate, the amount or proportion, or likely amount or proportion, of the net loss of the electing company that could under subsection (4) or (5) of section IG 2 be offset against the net income of the company deriving the dividend; and”.
410 Refund for overpayment and to company in loss
(1)
In section NH 4(5), the portion before paragraph (d) is replaced by:
“(5)
Where, and to the extent that, in respect of any income year (referred to in this subsection as the current year’) of a company (referred to in this subsection as the ‘first company’) during which the first company has paid a dividend withholding payment—
“(a)
Either—
“(i)
The company has in the current or any earlier income year, a net loss that may be carried forward and offset in accordance with sections IE 1 and IF 1 against the net income of the company for the income year succeeding the current year; or
“(ii)
Another company (in this subsection referred to as the ‘group company’) has in the current or any earlier income year, a net loss that may, in accordance with section IG 2, be offset against the net income of the first company for the current year, which net loss the group company wishes to apply in enabling the first company to obtain a refund of dividend withholding payment; and
“(b)
The first company has—
“(i)
In any case to which paragraph (a)(i) of this subsection applies, furnished a return under section 33 of the Tax Administration Act 1994 for the income year in respect of which the net loss arose; and
“(ii)
Furnished a return under section 33 of the Tax Administration Act 1994 for the current year; and
“(iii)
Applied in writing to the Commissioner for a refund of the dividend withholding payment; and
“(c)
In any case to which paragraph (a)(ii) of this subsection applies, the group company has—
“(i)
Furnished a return under section 33 of the Tax Administration Act 1994 for the income year in respect of which the net loss arose; and
“(ii)
Elected by notice in writing to the Commissioner that payment of all or part of the dividend withholding payment shall be satisfied by reducing its relevant net loss,—
the first company shall be entitled to a refund of dividend withholding payment of an amount that is equal to the least of—”.
(2)
In section NH 4(5)(e), “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
(3)
In section NH 4(6) in the definition of quantity “b”
, “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
411 Dividend withholding payments and consolidated groups
(1)
In section NH 5(1), “section MF 10(2)”
is replaced by “section MF 10(1)”
.
(2)
In section NH 5(4), the portion from paragraph (c) to “the following formula:”
is replaced by:
“(c)
The group has a net loss that may be carried forward and offset under sections IE 1, IF 1, and IG 6 against the net income of the group for the income year in which the foreign dividend is paid to the company; or
“(d)
It has reason to believe that, in respect of the income year in which the foreign dividend is paid to the company, the group will have a net loss that may be carried forward and offset under sections IE 1, IF 1, and IG 6 against the net income of the group for the succeeding income year,—
the nominated company may by notice in writing to the Commissioner elect, within the period for payment specified in section NH 3(1), that payment of all or part of the dividend withholding payment shall be satisfied by reducing any such net loss, so far as the balance of the net loss extends, by an amount not exceeding an amount calculated in accordance with the following formula:”.
(3)
In section NH 5(4) in the definition of quantity “b”
, “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
(4)
Section NH 5(7)(c) and (d) are replaced by:
“(c)
The consolidated group has a net loss for that income year that may under sections IE 1, IF 1, and IG 6 be carried forward and offset against the net income of the group for a succeeding income year; and
“(d)
The consolidated group has furnished a single return under section HB 1 for the income year in respect of which the net loss arose,—”.
(5)
In section NH 5(7)(f) “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
(6)
In section NH 5(7) in the definition of quantity “b”
, “rate of resident companies’ income tax”
is replaced by “basic rate of income tax for companies”
.
Amendments to Part O
412 Definitions
(1)
Section OB 1 is amended by inserting the following:
“‘Allowable deduction’ means an allowable deduction under section BD 2:
“‘Allowable rebates’ means the total of the rebates and credits of tax to which a taxpayer is entitled in an income year under Part K:
“‘Annual allowable deductions’ means the total of the allowable deductions allocated to an income year under section BD 4:
“‘Annual gross income’ means the total of amounts of gross income allocated to an income year under section BD 3:
“‘Applicable basic tax rate’ means—
“(a)
In respect of an income year and a taxpayer other than a taxpayer to whom section 39 of the Tax Administration Act 1994 applies, the basic rate of income tax under Schedule 1 that is applicable to the taxpayer’s taxable income for that income year; or
“(b)
In respect of a taxpayer and an income year in respect of which that taxpayer is filing a return in accordance with section 39 of the Tax Administration Act 1994 for a period that is less than or greater than 12 months, the basic rate of income tax under Schedule 1 that would apply if the taxpayer’s taxable income for that year were an amount calculated in accordance with the following formula:
_eqn21.JPG)
“where
“a
is the number of days in the period for which the taxpayer is filing a return; and
“b
is the taxpayer’s taxable income for that period:
“‘Applicable surcharges’ means the total of the surcharges for which a taxpayer is liable in an income year under Part J:
“‘Attributed foreign net loss’, with respect to a taxpayer and an income year for which the taxpayer has an attributed foreign loss, means that part of the attributed foreign loss that the taxpayer is not permitted to deduct under section DP 1, but must instead deal with under Part I:
“‘Available net loss’ means an amount a taxpayer is entitled to offset against net income under Part I:
“‘Convertible credit’ means a credit that a taxpayer is allowed in accordance with Part L—
“(a)
As an imputation credit; or
“(b)
In respect of a dividend withholding payment if the taxpayer is not entitled to a refund or the credit under Part N:
“‘Foreign expenditure’ is defined in section EP 1 for the purposes of that section:
“‘Foreign investment fund net loss’, with respect to a taxpayer and an income year for which the taxpayer has a foreign investment fund loss, means that part of the foreign investment fund loss that the taxpayer is not permitted to deduct under section DP 2 or DP 3, but must instead deal with under Part I:
“‘Foreign-sourced amount’ means an amount that is not treated as derived from New Zealand under section OE 4:
“‘Gross income’ means an amount that is gross income under section BD 1:
“‘Gross income from forestry’, in paragraph (a) of the definition of ‘maximum deposit, and in sections EI 1 and EI 3, means gross income from the sale of—
“(a)
Standing or cut or fallen timber in its natural state grown on land owned by the taxpayer in New Zealand (other than land in respect of which the taxpayer is a licensee); or
“(b)
Rights to cut or remove such timber:
“‘Gross income from life insurance’ with respect to a life insurer, means—
“(a)
Any amount that is gross income of the life insurer under sections CM 3 to CM 14, CN 3, GD 7, GD 8, and OE 4; and
“(b)
Any other amount of gross income derived by the life insurer in that income year from carrying on the business of life insurance, not including any amount of policyholder income:
“‘Gross income from mining’, in sections DN 1, DN 4, DN 5, FF 19, and IH 5 and in the definitions of ‘mining operations’ and ‘mining outgoing excess’, in relation to any mining company and to any income year, means so much of the gross income derived by that company in that income year as is derived from the mining operations or the associated mining operations of that company in that income year:
“‘Gross proceeds’ is defined in section EM 3(3) for the purposes of that section:
“‘Income tax liability’ means an income tax liability for an income year determined under Subpart BC:
“‘Mining outgoing excess’ with respect to a mining company and a resident mining operator and to an income year, means an amount calculated in accordance with the following formula:
“a − b
“where—
“a
is the sum of allowable deductions of the mining company or resident mining operator that relate to the derivation of gross income from mining and that are allocated to that income year under section BD 4; and
“b
is the gross income from mining of the mining company or resident mining operator for that income year:
“‘Mortality result’ with respect to a life insurer and to an income year, means the result of the calculation performed by the life insurer for that year under section CM 5:
“‘Net gain’ is defined in section EM 3(3) for the purposes of that section:
“‘Net income’ means net income for an income year determined under section BC 6:
“‘Net loss’ means a net loss for an income year determined under section BC 6 and includes a loss incurred by a taxpayer prior to the 1997–98 income year that the taxpayer would have been entitled to claim in the year or to carry forward to a subsequent income year under section IE 1 or IF 1, if the Taxation (Core Provisions) Act 1996 had not been passed:
“‘Net mining loss’, with respect to a mining company and an income year, means the excess (if any) of allowable deductions allocated to that year that are incurred in deriving gross income from mining over the mining company’s gross income from mining for that income year:
“‘New Zealand resident’ means a person resident in New Zealand under sections OE 1, OE 2 or OE 3:
“‘Non-filing taxpayer’ means a person who—
“(a)
Is a taxpayer to whom section 33a of the Tax Administration Act 1994 applies—
“(i)
Who does not elect to file a return for an income year; or
“(ii)
Whose income tax liability for an income year would be larger if determined under sections BC 4 to BC 8, than if it were equal to the total of all tax deductions required to be made from all amounts of gross income included in the taxpayer’s annual gross income for the income year; or
“(b)
Elects not to file a return for an income year in respect of specified payments derived in the person’s capacity as a non-resident entertainer; or
“(c)
Is a person who, in the relevant income year, derives only non-resident withholding income to which section NG 8 applies:
“‘Non-refundable credit’ means—
“(a)
An amount in respect of a branch equivalent tax account or a policyholder credit account of a taxpayer that the taxpayer elects, under Part M, to credit in payment of income tax; or
“(b)
A credit allowed to a taxpayer under Part L for tax paid in a country or territory outside New Zealand:
“‘Non-resident’ means a person who is not a New Zealand resident:
“‘Non-resident general insurer’ means a person to whom section CN 4 applies:
“‘Notional income tax liability’ is defined in section LC 14(4) for the purposes of that section:
“‘Partnership gross income’ is defined in section HC 1(12) for the purposes of that section:
“‘Partnership net income’ is defined in section HC 1(12) for the purposes of that section:
“‘Policyholder base’, with respect to a life insurer and an income year, means the benefits accruing to policyholders by way of claims paid and payable and amounts included in actuarial reserves of the life insurer:
“‘Policyholder base calculation’ means the calculation referred to in section CM 15(1):
“‘Policyholder base income tax liability’, with respect to a life insurer and to an income year, means the schedular income tax liability for an income year of a life insurer, in respect of the policyholder base determined under section BC 3:
“‘Policyholder income’ means policyholder income as determined under section CM 15:
“‘Policyholder net loss’ means a policyholder net loss as determined under section CM 15:
“‘Refundable credit’ means a credit allowed to a taxpayer under Part L—
“(a)
For withholding tax or provisional tax; or
“(b)
In respect of a dividend withholding payment, if the taxpayer is entitled to a refund of that credit under Part L:
“‘Refundable rebate’ means a credit allowed under Subpart KD or a rebate allowed under section KF 1(2) and (3):
“‘Return of income’ or ‘return of the taxpayer’s income’ means a return of income required under section 33 of the Tax Administration Act 1994:
“‘Schedular gross income’ means income of the following types—
“(a)
Schedular gross income subject to final withholding:
“(b)
Policyholder income under section CM 15:
“(c)
Specified payments derived by a person in the person’s capacity as a non-resident entertainer where the person does not elect to file a return in respect of that income:
“(d)
Gross income derived under section CN 4 by a non-resident general insurer that is not a company:
“(e)
Category A income derived by a trustee of a group investment fund:
“(f)
Gross income derived from a mining venture by a non-resident mining operator:
“‘Schedular gross income subject to final withholding’ means non-resident withholding income to which section NG 3 applies:
“‘Schedular income tax liability’ means the amount determined under section BC 3(2):
“‘Schedular taxable income’, with respect to an income year and a taxpayer who has schedular gross income of a particular type for that year, means the amount of taxable income that arises in calculating the schedular income tax liability in respect of that type of schedular gross income of the taxpayer for the year:
“‘Specified activity net income’ is defined in section IE 2(8) for the purposes of that section:
“‘Specified activity net loss’ is defined in section IE 2(8) for the purposes of that section:
“‘Surplus rebates”, with respect to a taxpayer and an income year, means an amount calculated under section BC 8(6):
“‘Surplus refundable credits’, with respect to a taxpayer and an income year, means any excess credits that are refundable credits and that have not been dealt with otherwise under section BC 9(2):
“‘Tax avoidance arrangement’ means an arrangement, whether entered into by the person affected by the arrangement or by another person, that directly or indirectly—
“(a)
Has tax avoidance as its purpose or effect; or
“(b)
Has tax avoidance as one of its purposes or effects, whether or not any other purpose or effect is referable to ordinary business or family dealings, if the purpose or effect is not merely incidental:
“‘Tax deduction’ means—
“(a)
A deduction required to be made under the PAYE rules; or
“(b)
For the purposes of Part B means—
“(i)
A deduction required to be made under the PAYE rules or the RWT rules; or
“(ii)
With respect to a non-resident entertainer, a deduction required to be made under regulations made under section 225 of the Tax Administration Act 1994; or
“(iii)
Non-resident withholding tax payable under section NG 2:
“‘Taxable income’ means taxable income for an income year as determined under section BC 7:
“‘Terminal tax’ means an amount calculated for an income year under section BC 9(1):
“‘Timing regime’ means a regime outlined in Part E of the Act for allocating allowable deductions or gross income to an income year other than the income year to which the allowable deduction or gross income would have been allocated in the absence of the regime:
“‘Unadjusted income tax liability’ means an unadjusted income tax liability for an income year as determined under section BC 8(2):
“‘Underwriting loss’, with respect to a life insurer and an income year, means the life insurer’s underwriting result for that year, if it is a negative result:
“‘Underwriting result’, with respect to an income year and to a life insurer means the sum of—
“(a)
The mortality result derived by the life insurer in that year; and
“(b)
The premium loading derived by the life insurer in that income year, calculated under section CM 6; and
“(c)
The discontinuance profit derived by the life insurer in that year, calculated under section CM 7:
“‘Value of breeding stock’ is defined in section EM 3(3) for the purposes of that section:
“‘Windfall credit’ is defined in section MZ 1(3) for the purposes of that section:”.
(2)
In section OB 1, the definitions specified in Schedule 1 are amended as set out in that Schedule.
413 Meaning of “source deduction payment”
Section OB 2(2) and (3) are replaced by:
“(2)
Where a taxpayer is a shareholder in and an employee of a close company and in any income year (or in the taxpayer’s accounting year corresponding with any year),—
“(a)
Salary or wages of a regular amount for regular pay periods of one month or less are not throughout that year regularly paid or credited to the taxpayer or applied on the taxpayer’s account in the taxpayer’s capacity of an employee of the company; or
“(b)
The total of the salary or wages derived by the taxpayer in that year in the taxpayer’s capacity of an employee of the company by way of regular payments throughout that year of a regular amount for regular pay periods is less than two-thirds of the total gross income which the taxpayer derives in that year from the company by way of director’s fees and by way of salary, wages, or other gross income for or on account of the taxpayer’s service in the capacity of an employee of the company; or
“(c)
Any amount is paid or credited to the taxpayer, or applied on the taxpayer’s account, in anticipation or in respect of any income that may subsequently be allocated to the taxpayer in the taxpayer’s capacity of a director or employee of the company,—
all gross income that the taxpayer derives from the company in every subsequent year by way of director’s fees and by way of salary, wages, or other gross income for or on account of the taxpayer’s service in the capacity of an employee of the company shall for the purposes of this Act, except the FBT rules, be deemed to be gross income derived otherwise than from source deduction payments, unless, and only to the extent that, the Commissioner determines from time to time in any case or class of cases that that income shall be deemed to be gross income derived from source deduction payments. If any question arises as to whether or not this subsection applies, or as to the extent to which this subsection applies, to any taxpayer or to any class of taxpayers, or to any director’s fees, salary, wages, or other gross income, it shall be determined by the Commissioner, and the Commissioner’s decision shall be final.
“(3)
Upon application in writing in that behalf made to the Commissioner by a taxpayer who is a shareholder in and an employee of a close company but to whom subsection (2) does not apply for the time being, the Commissioner may determine from time to time that, for the purposes of this Act except the FBT rules, the gross income, or any part of the gross income, derived by the taxpayer from the company by way of director’s fees and by way of salary, wages, or other gross income for or on account of the taxpayer’s service in the capacity of an employee of the company shall be deemed to be gross income derived otherwise than from source deduction payments.”.
414 Meaning of “qualifying company”
(1)
Section OB 3(1)(c) and (d) are replaced by:
“(c)
Subject to subsection (4), each person who is at any time during the income year a shareholder in the company is—
“(i)
A natural person other than a trustee; or
“(ii)
A trustee of a trust in respect of which all dividends (not being non-cash dividends other than taxable bonus issues) derived by the trustee from any qualifying company during the income year are beneficiary income of beneficiaries (not being trustees or companies other than qualifying companies); or
“(iii)
Another qualifying company; and
“(d)
The foreign non-dividend income (if any) derived during the income year by the company does not, after deduction of the lesser of—
“(i)
Such part of that foreign non-dividend income as is gross income within the meaning of section CE 1(1)(c); and
“(ii)
10% of the annual gross income of the company for the income year,—
exceed $10,000 (or such greater sum as the Governor-General may from time to time by Order in Council declare for the purposes of this paragraph); and”.
(2)
Section OB 3(3a)(a) is replaced by:
“(a)
As much of the dividends of the kind specified in subsection (1)(c)(ii) as is available to be distributed under general trust law is beneficiary income of beneficiaries (not being trustees or companies other than qualifying companies); and”.
415 Meaning of “non-resident investment company”
Section OB 5(1)(a) is replaced by:
“(a)
Derives no gross income from New Zealand except interest, and has no investments or other assets in New Zealand except the principal money from which the interest is derived; or”.
416 Statutory producer boards
Section OC 3(c) and (d) are replaced by:
“(c)
Levies received by any statutory producer board, other than levies charged specifically for capital development, are treated as gross income; and
“(d)
The provisions of section BD 2(1)(b)(i) and (ii) shall apply to expenditure incurred in fulfilling the functions of any statutory producer board (not being expenditure which is not allowed as a deduction under sections BD 2(2), DB 1, DD 1, DF 1, DJ 1, DO 1, and GD 4) as if that expenditure were—
“(i)
Incurred in deriving gross income of the producer board; or
“(ii)
Necessarily incurred in the carrying on of a business by the producer board.”.
417 Modifications to measurement of voting and market value interests in case of continuity provisions
Section OD 5(10) is amended by replacing in the definition of “limited attribution foreign company”
, paragraph (a)(ii) with:
“(ii)
A company resident in New Zealand which, in accordance with a provision of arrangements to which effect is given by an Order in Council made under section BH 1, is treated as not being resident in New Zealand for the purpose of the arrangements; and”.
418 Modifications to measurement of voting and market value interests in cases of continuity provisions and demutualisation of insurers
In section OD 5a(6), the portion after paragraph (a) is replaced by:
“(b)
The insurer (or another member of the same group of companies, the relevant loss making entity being referred to in this subsection as the ‘loss company’) had a net loss in an income year prior to the 1992–93 income year; and
“(c)
The loss company carried that loss forward to the 1992–93 income year in accordance with the Income Tax Act 1976; and
“(d)
The loss has not been offset against net income for any period prior to demutualisation,—
then, notwithstanding section IF 1(6), for the purposes of Part I, with effect from the date on which the insurer ceases to be a special corporate entity on the demutualisation, the loss will be deemed to have arisen on the first day of the loss company’s 1992–93 income year and not to have arisen in the earlier year.”.
419 Classes of income deemed to be derived from New Zealand
(1)
In section OE 4(1)(m), the portion before the proviso is replaced by:
“(m)
Interest or a redemption payment, derived from or in respect of money lent in New Zealand:”.
(2)
In section OE 4(1)(n), the portion before subparagraph (i) is replaced by:
“(n)
Interest or a redemption payment, derived from or in respect of money lent outside New Zealand to—”.
(3)
Section OE 4(1)(r)(ii) is replaced by:
“(ii)
That are paid by a person who is not resident in New Zealand and are allowed as a deduction to the person for the purposes of tax in New Zealand:”.
(4)
Section OE 4(1)(s)(ii) is replaced by:
“(ii)
That are paid by a person who is not resident in New Zealand and are allowed as a deduction to the person for the purposes of tax in New Zealand:
Provided that this paragraph shall not apply to income which is deemed to be derived from New Zealand by virtue of paragraph (r):”.
420 Commission agency contracts performed out of New Zealand
Section OE 5(1) is replaced by:
“OE 5
“(1)
The income derived by any commission agent in the performance out of New Zealand of commission agency contracts made or procured in New Zealand shall, subject to any apportionment which may be made under this Act in respect of its source out of New Zealand, be deemed to be derived by the commission agent from the commission agent’s business carried on in New Zealand, and the commission agent’s income tax liability shall be calculated accordingly.”.
421 References to particular regimes in former Act, etc.
Section OZ 1(3)(a) is replaced by:
“(a)
Part B, except for sections BB 3(2) and BH 1; and”.
Amendments to Part Y
422 Savings
Section YB 4 is amended by adding:
“(3)
The reorganisation and the changes of style and language carried out by the Income Tax Act 1994 as enacted on 20 December 1994 are not intended to affect the interpretation or effect of the provisions of the Income Tax Act 1976 as they were included in the Income Tax Act 1994.
“(4)
Notwithstanding subsection (1), the changes in style and language carried out by the Taxation (Core Provisions) Act 1996 apply to the interpretation of the provisions of the Income Tax Act 1976 referred to in subsection (1) in their application to the 1997–98 and subsequent income years.”.
423 Consequential changes to words resulting from new terminology
(1)
Wherever it occurs, “assessable income”
is replaced by “gross income”
in the following sections:
| CF 2(12)(b)(iv) | CF 6(3) | CG 11(15) |
| CF 2(13)(d)(i) | CF 6(4) | CG 14(1)(b) |
| CF 3(1)(h) | CG 2 | CG 19(2)(d) |
| CG 19(3)(c) | ED 4(1) | EN 1(4) |
| CI 1(j) | EE 1(8) | EN 1(5) |
| CJ 3 | EG 2(1) | FC 5(1)(b) |
| CJ 4 | EG 11(4) | FC 6(6)(b) |
| CJ 6(1) | EG 11(4a) | FC 6(7) |
| CJ 7(1) | EG 16(2) | FC 6(8) |
| CK 3(1) | EG 17(2)(a) | FE 6(3a) |
| CN 3(2)(b) | EG 19(2) | FE 6(3b) |
| CZ 6(c)(iii) | EI 1(1) | HK 18(I) |
| CZ 6(c)(iv) | EI 4(5) | KD 1(3)(a) |
| CZ 6(c)(v) | EI 5(1) | KD 1(3)(b) |
| CZ 6(d)(vi) | EI 6(1) | KD 8 |
| CZ 6(d)(vii) | EI 7(2) | LB 1(3) |
| DC 2(2) | EI 8(2) | LB 2(1) |
| DC 2(4) | EI 9 | LC 7(1) |
| DJ 5(2) | EI 14(2) | LD 8(1) |
| DL 1(6) | EJ 2(a) | LF 5(2)(a)(v) |
| DL 4(1) | EJ 2(b) | OB 5(3)(a) |
| DM 1(9)(a) | EN 1(2) | OC 4(1) |
| DZ 6(9)(f) |
(2)
Wherever it occurs, “assessable income”
is replaced by “net income”
in the following sections:
| FD 10(5) | KD 1(6) |
| KC 2(d) | KD 4(5) |
| KD 1(5) |
(3)
Wherever it occurs, “assessable income or loss”
is replaced by “net income or net loss”
in the following sections:
| CG 11(1) | FD 7(5) |
| CG 11(19) | FD 8(6) |
| FD 4(5) |
(4)
Wherever it occurs, “deductible”
is replaced by “allowed as a deduction”
in the following sections:
| DM 1(2)(a) | DM 1(7) | EG 19(10)(b) |
| DM 1(3) | DM 1(9)(b) | FG 9(b) |
| DM 1(5)(c) | DM 4(1)(b) | IH 3(b) |
| DM 1(6)(b) | DM 5 |
(5)
Wherever it occurs, “income”
is replaced by “gross income”
in the following sections:
| CD 1(2)(f)(v) | EH 3(7) | EI 17(1) |
| CF 2(11)(c) | EH 3(9) | FE 7(a)(i) |
| EB 5 | EH 9(e)(i) | FE 7(a)(vi)(C) |
| FE 7(b) | FF 10(2)(b) | NC 21(f) |
| FF 10(2)(a) | GD 10(1)(a) | NF 2(7)(h) |
(6)
Wherever it occurs, “income derived”
is replaced by “gross income derived”
in the following sections:
| EH 1(9) | EZ 1(1) | HE 1(g) |
| EH 3(1)(a)(i) | GD 6(1) | OB 3(4)(b) |
| EH 4(2) | HE 1(e) |
(7)
Wherever it occurs, “income or expenditure”
is replaced by “gross income or expenditure”
in the following sections:
| EH 1(1) | EZ 10(1) | FE 6(5)(a)(i) |
| EH 1(7) | FD 10(4)(a)(i) | FE 6(5)(b) |
| EH 3(2)(a) | FD 10(4)(b) |
(8)
Wherever it occurs, “entitled to”
is replaced by “allowed”
in the following sections:
| DL 7(c) |
| DM 1(7) |
| DO 8(c) |
(9)
Wherever it occurs, “income derived”
is replaced by “any amount derived”
in the following sections:
| CB 3(c) | CB 4(1)(l) | CB 9(a) |
| CB 3(e) | CB 5(1)(g) | CB 9(b) |
| CB 4(1)(f) | CB 5(1)(h) | CB 9(d) |
| CB 4(1)(g) | CB 6(c) | CB 9(e) |
| CB 4(1)(h) | CB 6(d) | CB 9(g) |
| CB 4(1)(i) | CB 7(c) | OF 2(3) |
| CB 4(1)(j) |
(10)
Wherever it occurs, “all profits or gains”
is replaced by “any amount”
in the following sections:
| CD 1(2)(a) | CD 1(2)(d) |
| CD 1(2)(b) | CD 1(2)(f) |
| CD 1(2)(c) |
(11)
Wherever it occurs, “loss”
is replaced by “net loss”
in the following sections:
| CF 2(17)(d) | ME 20(3) | NC 14(1) |
| CG 13(2) | ME 40(7) | NH 4(5)(e) |
| GC 22(7) | MF 6(7) | NH 4(6) |
| LC 4(1) | MF 8(4)(a) | NH 5(7)(c) |
| LC 4(9) | MG 12(7) | NH 5(7)(d) |
| ME 11(1)(f) | MG 14(1)(a)(ii) | NH 5(7)(f) |
(12)
Wherever it occurs, “clause 12”
is replaced by “clause 9”
in the following sections:
| NE 2(1) |
| NE 5(a) |
(13)
Wherever it occurs, “in the production of assessable income”
is replaced by “in deriving gross income”
in the following sections:
| EF 1(5) | EG 12(6)(b) |
| EG 12(6)(a)(i) | EG 18(4)(a) |
424 Schedule 1 replaced
Schedule 1 to the Income Tax Act 1994 is replaced by Schedule 2 of this Act.
425 Consequential changes to Schedule 6a
(1)
In clause 3(b) of Part B of Schedule 6a, “exempt”
is replaced by “exempt income”
.
(2)
In clause 13 of Part B of Schedule 6a, “assessable income”
is replaced by “gross income”
.
426 Consequential change to Schedule 7
In clause 6 of Part B of Schedule 7, “claimed”
is replaced by “allowed”
.
427 Consequential change to Schedule 13
(1)
Wherever it occurs in clause 1 of Schedule 13, “in respect of income derived in any income year”
is omitted.
(2)
In clause 2 of Schedule 13, “in respect of income derived”
is replaced by “payable”
.
428 Consequential change to Schedule 20
In Schedule 20, “section IG 2(1)(b)”
is replaced by “section IG 2(1)”
.
Part 2 Amendments to Tax Administration Act 1994
429 Tax Administration Act 1994
The Tax Administration Act 1994 is amended by this Part.
430 Interpretation
Section 3(1) is amended by:
(a)
Replacing paragraphs (a) and (b) of the definition of “assessment”
with:
“(a)
An assessment of the amount on which tax is payable and the amount of that tax, a determination of net loss, or a determination of net loss carried forward:
“(b)
An amendment of—
“(i)
An assessment of tax payable; or
“(ii)
A determination of net loss; or
“(iii)
A determination of net loss carried forward,—”.
(b)
Replacing the definition of “determination of loss”
with:
“‘Determination of net loss’ is defined in section 92(3) for the purposes of that section and section 111:”
(c)
Replacing the definition of “determination of loss carried forward”
with:
“‘Determination of net loss carried forward’ is defined in section 92(4) for the purposes of that section and section 111:”
(d)
Replacing paragraphs (a) and (b) of the definition of “new provisional taxpayer”
with:
“(a)
Is not a natural person; and
“(b)
First commenced to derive gross income from a taxable activity in that income year; and”
(e)
Replacing the definition of “policyholder loss”
with:
“‘Policyholder net loss’, in section 112 of this Act, has the same meaning as in section OB 1 of the Income Tax Act 1994:”
(f)
Replacing paragraph (a)(iii)(B) of the definition of “tax”
with:
“(B)
An amount imposed under section 157 of this Act or payable under section 43 of the Goods and Services Tax Act 1985:”
(g)
Replacing paragraph (a)(v)(A) of the definition of “tax”
with:
“(A)
That is imposed on or payable by a taxpayer in a country or territory other than New Zealand; or”.
(h)
Replacing paragraphs (f), (g) and (h) of the definition of “tax position”
with:
“(f)
The derivation of an amount of gross income or exempt income or a capital gain, or the inclusion or non-inclusion of an amount in gross income:
“(g)
The incurring of an amount of expenditure or loss, or the allowing or disallowing as a deduction of an amount of expenditure or loss:
“(h)
The availability of net losses, or the offsetting or use of net losses:”.
431 Information requisitions in relation to offshore payments
(1)
In section 21(1), the portion before paragraph (a) is replaced by:
“21
“(1)
Where the Commissioner gives an information requisition to any person and the requisition concerns, wholly or in part, an allowable deduction claimed by a taxpayer in respect of any offshore payment of the taxpayer, and—”.
(2)
In section 21(2), the portion before paragraph (a) is replaced by:
“(2)
Where the Commissioner gives an information requisition to any person and the requisition concerns, either wholly or in part, an allowable deduction claimed by a taxpayer in respect of any offshore payment and the person responds to the requisition, any evidence concerning the offshore payment that relates to any information or material sought by the Commissioner in the requisition shall not be admissible in any proceedings under Part VIII or Part VIIIa in which any allowable deduction in respect of the offshore payment is in issue, except to the extent to which—
(3)
In section 21(4), the portion before paragraph (a) is replaced by:
“(4)
Subsection (2) shall not apply unless the Commissioner, by a separate notice issued prior to or contemporaneously with a notice of assessment, informs the taxpayer claiming an allowable deduction in respect of any offshore payment referred to in any requisition that the Commissioner considers that,—”.
(4)
Section 21(6) is replaced by:
“(6)
A copy of every notice given under subsection (1) or subsection (2), if given to a person other than the taxpayer who has claimed an allowable deduction in respect of an offshore payment, shall be given to the taxpayer who has claimed a deduction in respect of the offshore payment; and, for the purposes of section 14, every such copy shall be deemed to be a notice required by this Act to be given by the Commissioner to the taxpayer.”.
432 Keeping of business records
(1)
Section 22(2)(b), (d), (g) and (h) are replaced by:
“(b)
Carries on any other activity (not being the carrying on of employment as an employee) in New Zealand for the purpose of deriving gross income:”;
“(d)
Makes, holds, or disposes of, for the purpose of deriving gross income, any investment:”;
“(g)
The gross income derived by that person from the carrying on of that business, or the carrying on of that other activity, or the making or holding or disposing of that investment; and”;
“(h)
The allowable deductions of that person in the carrying on of that business, or the carrying on of that other activity, or the making or holding or disposing of that investment; and”.
(2)
Section 22(3) is replaced by:
“(3)
A taxpayer to whom section 33a applies and who is required by subsection (2) to retain records of gross income of that taxpayer from which tax has been deducted at source need retain those records only until the expiry of 12 months after the end of the income year in which the gross income was received by the taxpayer.”.
433 Annual income tax returns by taxpayers
Section 33 is replaced by:
“33
“(1)
Subject to this Act and to the Income Tax Act 1994 and to any regulations made under this Act or that Act, every taxpayer, other than a taxpayer to whom section 33a applies, shall for the purposes of the assessment and imposition of income tax furnish to the Commissioner in each year a return or returns in the prescribed form or forms setting forth a complete statement of the taxable income of the taxpayer for the preceding year, together with such other particulars as may be prescribed.
“(2)
A taxpayer to whom section 33a applies shall not furnish a return in respect of an income year other than:
“(a)
For the purpose of having the taxpayer’s income tax liability for that year assessed under a general assessment; or
“(b)
Where required by the Commissioner.”.
434 Annual income tax returns not required from taxpayers
(1)
In section 33a(1)(b), the portion before subparagraph (i) is replaced by:
“(b)
Does not derive gross income other than—
(2)
In section 33a(1)(c), the portion before subparagraph (i) is replaced by:
“(c)
Derives annual gross income that does not exceed—”.
435 Dates by which annual returns to be furnished
Section 37(6) is replaced by:
“(6)
In this section, ‘IR5 taxpayer’ means, in relation to an income year, a natural person where—
“(a)
The only gross income of the person in that year is New Zealand sourced income that consists only of any one or more of the following:
“(i)
Salary or wages; or
“(ii)
Extra emoluments; or
“(iii)
Resident withholding income; and
“(b)
The person does not derive in that income year any gross income consisting of—
“(i)
Withholding payments; or
“(ii)
Beneficiary income; or
“(iii)
Gross income as a private domestic worker.”.
436 Returns to annual balance date
Section 38(1) is replaced by:
“38
“(1)
Instead of furnishing a return in accordance with section 33 for any year ending with 31 March, any taxpayer may, with the consent of the Commissioner, elect to furnish a return for the year ending with the date of the annual balance of the person’s accounts, and in any such case the taxable income for that year shall for the purposes of the Income Tax Act 1994 be deemed to be the taxable income for the year ending with the 31 March nearest to that date.”.
437 Consequential adjustments on change in return date
Section 39(2) and (3) are replaced by:
“(2)
All returns made in accordance with subsection (1) shall be deemed to be returns for the year ending with the 31 March nearest to the new return date, and the gross income and allowable deductions of the taxpayer for that period shall, for the purposes of assessment, be included in the annual gross income and annual allowable deductions of the taxpayer for the same year, and the taxpayer shall determine the taxpayer’s net income under Part B of the Income Tax Act 1994 accordingly.
“(3)
Where a taxpayer has been assessed for income tax on a return made to any date other than 31 March in any year, the taxable income of that taxpayer shall be deemed to have been assessed for tax to that date, and not to the 31 March nearest to that date.”.
438 Annual returns by persons who receive family support credit of tax
Section 41 is replaced by:
”41
”(1)
Where a person is eligible to receive a credit of tax under Part KD of the Income Tax Act 1994, the person must apply to the Commissioner for the credit of tax in such manner as is specified by the Commissioner, providing such information as may be required by the Commissioner, and the person shall sign the application.
“(2)
In every case where,—
“(a)
In relation to any part of any income year (whether that part is the whole or less than the whole of the income year) there is issued to any person under Part KD of the Income Tax Act 1994 a family certificate of entitlement; or
“(b)
After the expiry of any income year, any person makes application under Part KD of the Income Tax Act 1994, to the Commissioner, for a family tax credit in relation to the income year,—
and, apart from this section, the person would not be required under this Act to furnish a return of income for the income year, the person shall furnish to the Commissioner, in respect of the income year (whether or not gross income was derived by the person in the income year), a return in the prescribed form, together with details of every amount (if any) of credit of tax, in relation to the income year, that, under Part KD of the Income Tax Act 1994, has been paid to the person, and together with such other details as may be prescribed, or required by the Commissioner; and the provisions of this Act, so far as they are applicable and with any necessary modifications shall, in relation to every return furnished or required to be furnished under this section, apply as if that return were a return furnished or required to be furnished under section 33.”.
439 Returns by partners, co-trustees and joint venturers
Section 42 is replaced by:
“42
“(1)
When amounts are derived or incurred by 2 or more persons jointly, whether as partners, co-trustees or otherwise,—
“(a)
In the case of co-trustees, the co-trustees shall make a joint return of income, including in a joint calculation of taxable income all amounts that would be gross income and allowable deductions if the co-trustees were a single taxpayer resident in New Zealand, and shall be jointly and severally liable for the resulting income tax liability:
“(b)
In the case of partners,—
“(i)
The partners shall make a joint return of income of the firm, including the gross income jointly derived from the firm, the snares of the partners in the gross income, and a summary of the allowable deductions of each partner that relate to the gross income:
“(ii)
There shall be no joint assessment, but each partner shall make a separate return of income, taking into account the share of the gross income derived from the firm by that partner and the allowable deductions of that partner in respect of that gross income, and be separately assessed accordingly:
“(c)
In any case other than that of co-trustees or partners, each person shall make a separate return taking into account that person’s share of the gross income jointly derived and the allowable deductions of that person in respect of that gross income, and be separately assessed accordingly.
“(2)
This section shall not apply with respect to the gross income derived by and the allowable deductions of an airport operator from activities that, in relation to that airport operator, are activities undertaken as an airport operator.”.
440 Returns by executors or administrators
Section 43(1) is replaced by:
“43
“(1)
The executor or administrator of a deceased taxpayer shall in respect of all gross income derived by that taxpayer in the taxpayer’s lifetime make the same returns as the taxpayer ought to have made or would have been bound to make if the taxpayer had remained alive; and the Commissioner may from time to time require the executor or administrator to make such further returns relative to that gross income as the Commissioner thinks necessary, and may assess the executor or administrator for income tax on that income in the same manner in which the taxpayer might have been assessed had the taxpayer remained alive.”.
441 Non-active companies may be excused from filing returns
(1)
Section 43a(2)(a), (b), and, (c) are replaced by:
“(a)
Has not derived or been deemed to have derived any gross income; and
“(b)
Has no allowable deductions; and
“(c)
Has not disposed of or been deemed to have disposed of any assets; and
“(d)
Has not been a party to or perpetuated or continued with any transactions which, during the income year,—
“(i)
Give rise to gross income in any person’s hands; or
“(ii)
Give rise to fringe benefits to any employee or to any former employee; or
“(iii)
Give rise to a debit in the company’s imputation credit account or dividend withholding payment account.”.
(2)
In section 43a(6)(b)(i), “income”
is replaced by “net income”
.
442 Commissioner may in certain cases demand special returns, and make special assessments
(1)
Section 44(1)(d) and (e) are replaced by:
“(d)
A person who has ceased to carry on business in New Zealand or to derive gross income:
“(e)
The executors or administrators of a deceased taxpayer in respect of taxable income of the taxpayer for the taxpayer’s lifetime:”.
(2)
Section 44(2) is replaced by:
“(2)
The Commissioner may, if the Commissioner thinks fit, at any time during the income year or in any subsequent year, and either before or after the passing of the annual taxing Act or the due date of tax, require any person to whom this section applies to make a return in relation to a specified transaction or transactions from which gross income has been derived, or any specified period in which gross income has been derived, and may assess the person for income tax accordingly, or, when default is made in making any such return, or the Commissioner is dissatisfied with the return, then on such sum as the Commissioner thinks reasonable, and shall give notice of the assessment to the person so assessed.”.
(3)
Section 44(5) and (6) are replaced by:
“(5)
If any such assessment of taxable income is made before the passing of the annual taxing Act, the tax shall be assessed at the rate fixed by the annual taxing Act last passed before the date of the assessment.
“(6)
No assessment made under this section shall in any manner preclude a subsequent assessment of the same person in the ordinary course in respect of the taxable income of the person during the income year with respect to which the assessment under this section was made, but in any such case the tax paid under the earlier assessment shall be credited in the subsequent assessment.”.
443 Disclosure of interest payments where no resident withholding tax deduction required
Section 52(b) is replaced by:
“(b)
Allowed as a deduction for the purposes of the Income Tax Act 1994; and”.
444 Maori authority to make returns of income
Section 57 is replaced by:
“57
Every Maori authority shall in each year furnish to the Commissioner, on or before the date prescribed as the date by which returns of income are required under this Act to be furnished in that year, a return in the prescribed form setting forth a complete statement of the taxable income of the Maori authority in respect of any trust or authority during the preceding year, together with particulars of the amount or amounts distributed to each Maori during that income year, the date of each distribution, the full name and address of each Maori receiving any such distribution, and the number, if any, of each of those Maori on the Maori electoral roll.”.
445 Disclosure of trust particulars
Section 59(3) is replaced by:
“(3)
The trustee of every trust shall in every case make a return of the taxable income of the trustee as trustee of that trust, and each such return shall be separate and distinct from any return of the taxable income of the trustee from any other trust or in the trustee’s own right.”.
446 Returns of inter-related arrangements
Section 60(1)(b) is replaced by:
“(b)
The amount of gross income or allowable deductions of that person in respect of that financial arrangement; and”.
447 Disclosure of information for purposes of entitlement card
(1)
Section 83(2)(e) and (f) are replaced by:
“(e)
The expected net income of the qualifying person, or the combined expected net income of the qualifying person and his or her spouse, which is used to determine that credit of tax; and
“(f)
The net income of the qualifying person, or the combined net income of the qualifying person and his or her spouse, which is used to determine that credit of tax; and”.
(2)
Section 83(5) is replaced by:
“(5)
Where the result of any comparison carried out under subsection (4) indicates that a cardholder is receiving, or has, during the previous income year, received, any gross income from any source, and that gross income may be, or might have been, taken into account in determining the cardholder’s entitlement to or eligibility for an entitlement card, the Commissioner may, for the purpose of subsection (1)(b), supply details of that gross income to any authorised officer of the Department of Social Welfare.”.
448 Secrecy obligations not to prevent disclosure in arrangements for relief from double taxation and exchange of information
In section 88, “section BB 11”
is replaced by “section BH 1”
.
449 Determinations in relation to financial arrangements
Section 90(1)(c) and (d) are replaced by:
“(c)
The method for determining gross income deemed to be derived or expenditure deemed to be incurred in relation to any financial arrangement or class of financial arrangement for the purposes of section EH 1(5) (except the proviso) of the Income Tax Act 1994 that results in the allocation to each income year of an amount that has regard to the tenor of section EH 1(2) of that Act:
“(d)
The method or methods that may be applied in determining gross income deemed to be derived or expenditure deemed to be incurred in relation to any financial arrangement or arrangements, or class or classes of financial arrangements, for the purposes of the provisos to subsections (2) and (5)(a) of section EH 1 of the Income Tax Act 1994 (which financial arrangements may be specified or differentiated by the Commissioner by reference to the type of financial arrangement, any characteristics of such arrangements, the purpose or purposes for which any such arrangement was originally acquired or issued, or otherwise):”.
450 Determinations in relation to petroleum mining operations
In section 91(1), the portion after subparagraph (f)(iv) and before paragraph (g) is replaced by:
“that question shall be determined, for the purposes of ascertaining the gross income of the petroleum miner for any year,—”.
451 Commissioner to make assessments, determinations of net loss, and other determinations
(1)
Section 92(1), (2), (3) and (4) are replaced by:
“92
“(1)
From the returns made under sections 33, 34, 36 to 39, 41 to 44, 63, 79, and 80 and from any other information in the Commissioner’s possession the Commissioner shall in and for every year, and from time to time and at any subsequent time as may be necessary, assess the taxable income and income tax liability of the taxpayer and the tax payable by the taxpayer.
“(2)
Where any taxpayer in any income year has claimed a credit of tax under the imputation rules or the dividend withholding payment rules, or under sections ME 15 to ME 24 or section MF 14 of the Income Tax Act 1994, any adjustment by the Commissioner in respect of any such claim shall be deemed for the purposes of this Act to be part of an assessment made under subsection (1) of this section in relation to the amount of tax payable by that person, and—
“(a)
Part VIIIa and sections 107, 108, 109, 110, 111, 113 and 114 shall apply accordingly; and
“(b)
Reference in section 138j of this Act to the matters which are the subject of the challenge shall, in relation to a challenge concerning any such credit of tax, be treated as a reference to the credit of tax that is the subject of the assessment.
“(3)
Subject to subsection (1), where any taxpayer has furnished a return in respect of any income year, and—
“(a)
The return shows, or purports to show, that the taxpayer has a net loss in that income year; or
“(b)
Notwithstanding that the return shows, or purports to show, that the taxpayer does not have a net loss for that income year the Commissioner ascertains that the taxpayer does have a net loss in that income year,—
the Commissioner shall determine the amount of that net loss (that determination being referred to in this section and in section 111 as a ‘determination of net loss’) in accordance with the provisions of this Act and of the Income Tax Act 1994.
“(4)
Where any taxpayer has claimed to carry forward the whole or part of a net loss from any income year to any later income year, the Commissioner shall determine—
“(a)
Whether, and to what extent, that net loss or part of a net loss may be carried forward to that later income year under sections IE 1 and IF 1 of the Income Tax Act 1994 (in this section and in section 111 of this Act referred to as a ‘determination of net loss carried forward’); and
“(b)
The extent to which that net loss consists of an attributed foreign net loss or a foreign investment fund net loss (as determined under Subpart DP or section IE 3 or IE 4, as the case may be).”.
(2)
In section 92(5), the portion before paragraph (c) is replaced by:
“(5)
Part VIIIa and sections 107, 108, 109, 110, 113, and 114 shall, as far as applicable and with the necessary modifications, apply with respect to a determination of net loss made under subsection (3), or a determination of net loss carried forward made under subsection (4), or a determination of excess credit carried forward made under section LC 4(8) of the Income Tax Act 1994, or a determination of tax advantage arrangement debit made under section GC 22 of that Act, or a determination of incorrect entry made under section ME 20 or section ME 40 or section MF 6 or section MG 12 of that Act, as if—
“(a)
Such determinations were assessments; and
“(b)
References in the Part and in the sections first referred to in this subsection to an alteration or addition to or an amendment of an assessment which has the effect of imposing any fresh liability or increasing any existing liability, were references to an alteration or addition to or an amendment of any determination which has the effect, in respect of any particular, of reducing the amount of the net loss, the net loss carried forward, the credit of tax, the excess credit carried forward, the attributed foreign loss, or the foreign investment fund loss, or of creating or increasing a debit or cancelling or reducing any credit to a company’s special account, as the case may be; and”.
(3)
Section 92(5)(e) is replaced by:
“(e)
Reference in section 138j to the matters which are the subject of the challenge, were references to the net loss, the net loss carried forward, the credit of tax, the excess credit carried forward, the attributed foreign loss, or the foreign investment fund loss, or to the debit or credit, which is the subject of the determination.”.
452 Basic rates of income tax
After section 92, the following is added:
“92a
“(1)
The Commissioner may in any year of assessment (whether before or after the passing of the annual taxing Act for that year) assess the income tax of any taxpayer at the basic rates. No such assessment shall be deemed to be invalid on the ground that it is made before the passing of the annual taxing Act.
“(2)
If the annual rates for any year of assessment are higher or lower than the basic rates, the amount of every assessment of income tax made under this section in respect of that year shall be deemed to be increased or reduced accordingly, and every such assessment shall have the same effect as if the amount as so increased or reduced had been specified in the assessment.”.
453 Assessment of qualifying company election tax and additional tax
Section 94(2)(c) is replaced by:
“(c)
The term ‘income tax’ for any year in section 108(1) included an amount assessed under this section, and the term ‘property’ were substituted for the term ‘gross income’ section 108(2).”.
454 Liability of wholly-owned group and other bodies to pay penalties
In section 94B(2), the portion before paragraph (a) is replaced by:
“(2)
All the partners in a partnership, and all the persons in any other group of persons that derive or incur amounts jointly or that are assessed together, are liable individually and collectively for a shortfall penalty imposed by the Commissioner—”.
455 Assessment of withdrawal tax
In section 95(1), “section ID 2”
is replaced by “section IZ 2”
.
456 Assessment of resident withholding tax deductions
Section 99(2)(a) is replaced by:
“(a)
The term ‘income tax for any year’ in section 108(1) included an amount assessed under subsection (1) of this section and the term ‘gross income’ in section 108(2) included an amount of resident withholding income; and”.
457 Reassessment for income tax where return date between 31 March and 1 October
Section 107 is replaced by:
“107
Where, whether before or after the commencement of this Act,—
“(a)
Any taxpayer, in respect of gross income derived during any number of successive accounting periods ending respectively with a day between 31 March and 1 October in each year, has made returns of income and been assessed for income tax upon the basis that the gross income derived during each such accounting period was derived during the income year ending with the 31 March next succeeding the end of that accounting period; and
“(b)
The Commissioner has altered all those assessments (or such of them as the Commissioner is not precluded by the time bar from altering) by assessing the taxpayer upon the basis that the gross income derived during each accounting period was derived during the income year ending with the 31 March preceding the end of that accounting period,—
the validity of the altered assessment in respect of the gross income derived during any such accounting period shall not be deemed to be affected or to have at any time been affected by reason of its having been made for the same year of assessment as the assessment in respect of the gross income derived by the taxpayer during the preceding accounting period.”.
458 Time bar for amendment of assessment of taxable income, income tax liability and tax payable under Income Tax Act 1994
Section 108(1)(a) is replaced by:
“(a)
A taxpayer provides a tax return and is assessed for the taxable income of the taxpayer and the income tax liability of the taxpayer and the tax payable by the taxpayer; and”.
459 Commissioner may determine amount of provisional tax
In section 119(2)(b), “section BB 11”
is replaced by “section BH 1”
.
460 Commissioner to pay interest on certain excess tax
In section 120(6), the portion of the definition of “qualifying tax in dispute”
after paragraph (b) is replaced by: “and includes the amount of any provisional tax payable by the taxpayer, for the income year immediately succeeding the income year for which the assessment referred to in paragraph (a) was made or, as the case may be, the income year in respect of which the determination referred to in paragraph (b) was made, to the extent that the amount of that provisional tax is, by reason of the assessment of the amount of the tax referred to in paragraph (a) or the determination of the amount of the credit of tax referred to in paragraph (b), greater than it would have been had that assessment or that determination not been made; but does not include the amount of any provisional tax in respect of which the taxpayer has furnished to the Commissioner a statement or an amended statement or a further amended statement in accordance with section MB 6 of the Income Tax Act 1994:”
.
461 Amount of interest payable
Section 120e is amended by adding:
“(4)
This section is subject to section 120ea.”.
462 Amount of interest payable to or by life insurers
After section 120e, the following is added:
“120ea
Where a life insurer derives policyholder income in an income year and fails to pay or overpays income tax in relation to the policyholder base income tax liability, no interest under section 120e is payable on the proportion of the unpaid or overpaid income tax that is attributable to the amount of underwriting income represented by item ‘u’ in the formula in section CM 15(1).”.
463 Instalments of and due dates for provisional tax
(1)
Section 120k(1) is replaced by:
“120k
“(1)
The income tax liability of a provisional taxpayer whose residual income tax for the income year is greater than $30,000 is to be treated for the purposes of this Part as due and payable in equal instalments on each of the 3 instalment dates in the income year.”.
(2)
In section 120k(3), the portion before paragraph (a) is replaced by:
“(3)
The income tax liability of a new provisional taxpayer whose residual income tax for the income year is greater than $30,000 is to be treated for the purposes of this Part as due and payable—”.
(3)
In section 120k(4), the portion before paragraph (a) is replaced by:
“(4)
The income tax liability of—”.
464 Spreading tax liability or allocating gross income and allowable deductions to earlier income years
(1)
Section 120r is renumbered as section 120r(1) and the portion after paragraph (a) is replaced by:
“(b)
The Commissioner allocates gross income from an income year (‘allocation income year’) to one or more earlier income years,—
to the extent the election or allocation alters the taxpayer’s income tax liability for an income year that precedes the election income year or allocation income year, as the case may be (the extent of the alteration being called the ‘affected tax’), the taxpayer is not required by this Part to pay interest on the affected tax before the taxpayer’s terminal tax date for the election income year or allocation income year.”.
(2)
Section 120r is amended by adding:
“(2)
If gross income of a taxpayer is allocated to an income year under subsection (1)(b), the taxpayer shall allocate to the income year that proportion of deductions allowed in the allocation income year which the allocated gross income represents as a proportion of the gross income for the allocation income year calculated without allocation.”.
465 Interest to be charged where residual income tax exceeds provisional tax
(1)
In section 121(1), the portion after paragraph (c) and before paragraph (d) is replaced by:
“in respect of any amount of income tax payable for the income year by the taxpayer that remains unpaid at the beginning of any day within the period that—”.
(2)
Section 121(3) is replaced by:
“(3)
The income tax payable for an income year by a provisional taxpayer (other than a new provisional taxpayer) whose residual income tax for the year is greater than $30,000 or such other amount as may be prescribed under subsection (10)(b) shall be treated for the purposes of this section as due and payable in 3 equal instalments on, respectively, the first instalment date, the second instalment date, and the third instalment date in that income year.”.
(3)
In section 121(4), the portion before paragraph (a) is replaced by:
“(4)
The income tax payable for an income year by—”.
(4)
In section 121(5), the portion before paragraph (a) is replaced by:
“(5)
The income tax payable for an income year by a new provisional taxpayer whose residual income tax for that year exceeds $30,000 or such other amount as may be prescribed under subsection (10)(b), shall be treated for the purposes of this section as due and payable—”.
(5)
Section 121(9a)(c) is replaced by:
“(c)
Where the interest payable is reduced by reason of the reassessment, the amount of the reduction shall be included in the taxpayer’s annual gross income for the income year following that in which the Commissioner issues the notice of reassessment.”.
(6)
Section 121(9c)(a) and (b) are replaced by:
“(a)
The application of subsection (9a)(b) would result in an allowable deduction in respect of additional interest incurred by a taxpayer falling within a particular income year; and
“(b)
The deduction would be unable to be included in the calculation of net income for that income year by reason of the taxpayer having died, been liquidated, or otherwise having ceased to exist before that income year,—”.
(7)
In section 121(12), the second definition is replaced by:
“‘Interest liability period’, in relation to any taxpayer and any amount of income tax payable by the taxpayer in any income year, means the period specified in subsection (1) in relation to that amount of income tax and that taxpayer:”.
466 Interest on tax overpaid
(1)
In section 122(3), the portion before paragraph (a) is replaced by:
“(3)
The interest entitlement period, in relation to any person and to the income tax and residual income tax payable by that person for any income year, shall be the period that ends with the close of the taxpayer’s terminal tax date for that income year and that commences on—”.
(2)
Section 122(7a)(b) is replaced by:
“(b)
The amount of the reduction shall be an allowable deduction for the income year following that in which the Commissioner issues the notice of reassessment.”.
(3)
Section 122(7c)(a) and (b) are replaced by:
“(a)
The application of subsection (7a)(b) would result in an allowable deduction in respect of additional interest incurred by a taxpayer falling within a particular income year; and
“(b)
The deduction would be unable to be included in the calculation of net income in that income year by reason of the taxpayer having died, been liquidated, or otherwise having ceased to exist before that income year,—”.
467 Amount in nature of interest to be added to fringe benefit tax paid on annual or income year basis
(1)
Section 123(2)(c) is replaced by:
“(c)
For all purposes be deemed to be of the same nature as fringe benefit tax, and shall be assessable, allowed as a deduction, and recoverable accordingly.”.
(2)
Section 123(4)(a)(iii) is replaced by:
“(iii)
The fact that any additional amount calculated under this section will be allowed as a deduction to the employer:”.
468 Interest to be charged and payable with respect to certain dividend withholding payments
(1)
Section 124(1)(a) is replaced by:
“(a)
Any company fails to pay (whether directly or by way of an election to reduce an amount of a net loss) an amount of dividend withholding payment payable with respect to a dividend derived, by the last date for payment provided for in section NH 3(1) of the Income Tax Act 1994; and”.
(2)
In section 124(1)(d), the portion before subparagraph (i) is replaced by:
“(d)
The company pays the amount of dividend withholding payment in respect of which there was a failure to pay (including by way of a notice of election to reduce a net loss made under subsection (2) or subsection (3) of section NH 3 of the Income Tax Act 1994, which subsections shall apply in any such case as if the notice was given within the period for payment specified in section NH 3(1))—.
(3)
In section 124(1), the definition of quantity “a”
is replaced by:
“a
is the amount of dividend withholding payment in respect of which there was a failure to pay (except to the extent to which that amount is eventually paid by the company by notice of election to reduce a net loss given under subsection (2) or subsection (3) of section NH 3 of the Income Tax Act 1994); and”.
(4)
Section 124(3)(a) is replaced by:
“(a)
Any company pays (whether directly or by way of an election to reduce an amount of a net loss) an amount of dividend withholding payment in respect of a dividend derived, by the last date for payment provided in section NH 3(1) of the Income Tax Act 1994; and”.
469 Certain rights of objection not conferred
Section 125(e) is replaced by:
“(e)
Any determination of the Commissioner, for the purposes of section 130 of this Act and section 73 of the Income Tax Act 1976, as to whether and to what extent any allowance (being an allowance paid before 1 April 1995) in respect of or in relation to the employment or service of any person constituted a reimbursement of expenditure incurred by that person in deriving that person’s gross income; or”.
470 Determination of objection not to affect other matters
Section 129 is replaced by:
“129
The determination of an objection under this Part shall relate solely to the matters which are the subject of the objection, and shall not affect the right of the Commissioner to amend the assessment objected to in any manner rendered necessary by any other matter.”.
471 When objection may be referred directly to High Court
In section 136(5), “Head Office”
is replaced by “National Office”
.
472 Determination by Taxation Review Authority of objection in relation to allowances
Section 138(2) is replaced by:
“(2)
A Taxation Review Authority shall consider every objection referred to the Authority by the Commissioner under subsection (1) and shall in each case redetermine, in relation to the determination to which the objection is made, the extent (if any) to which the allowance to which that determination applies constitutes a reimbursement of expenditure incurred by that person in deriving the person’s gross income.”.
473 Determination of challenge not to affect other matters
Section 138j is replaced by:
“138j
The determination of a challenge by a hearing authority under this Part—
“(a)
Relates solely to the matter that is the subject of the disputable decision being challenged; and
“(b)
Does not affect the right of the Commissioner to make a disputable decision relating to a different matter and to amend the disputable decision being challenged in any way rendered necessary by the later disputable decision.”.
474 Tax shortfalls
(1)
Section 141(11) is replaced by:
“(11)
If—
“(a)
The Commissioner adjusts and increases a taxpayer’s net income under section EC 1 of the Income Tax Act 1994; and
“(b)
The taxpayer elects to allocate the increase in net income to the year of adjustment (as that term is defined in section EC 1 of the Income Tax Act 1994) and any other income year,—
the tax shortfall arising from the increase in net income is to be computed for the year of adjustment.”.
(2)
After section 141(12), the following is added:
“(12a)
Where a life insurer derives policyholder income in an income year and the life insurer’s tax position in respect of the policyholder base income tax liability gives rise to a tax shortfall, the Commissioner shall not assess under sections 141a to 141e a penalty on the proportion of the tax shortfall that is attributable to the life insurer’s tax position in respect of the amount of underwriting income represented by item ‘u’ in the formula in section CM 15(1).”.
475 Unacceptable interpretation
(1)
Section 141b(3)(b)(i)(A) and (B) are replaced by:
“(A)
The net losses of the taxpayer in respect of the return period, ascertained in accordance with the provisions of the Income Tax Act 1994; and
“(B)
The basic rate of income tax for companies in the relevant return period; or”.
(2)
In section 141b(3), the portion after paragraph (b) is replaced by:
“that is shown as tax paid or payable, or as net losses of the taxpayer, or as a refund to which the taxpayer is entitled, in a tax return provided on time by the taxpayer for the return period.”.
(3)
Section 141b(8)(a)(ii) is replaced by:
“(ii)
Any other group of persons that derive or incur amounts jointly or that are assessed together,—”.
(4)
Section 141b(8)(b) is replaced by:
“(b)
The tax rate in a return period applying to a partnership is deemed to be the same as the basic rate of income tax for companies for the relevant period.”.
476 Deduction of tax from payments due to defaulters
(1)
Section 157(1)(c) is replaced by:
“(c)
To the extent that that sum is in respect of or in relation to income tax (or any part of any income tax) or any interest under Part VII assessed on an income tax liability, the taxpayer who has that income tax liability:”.
(2)
In section 157(10), paragraph (a) of the definition of “income tax”
is replaced by:
“(a)
Income tax imposed under section BB 1 of the Income Tax Act 1994:”.
477 Person failing to make resident withholding tax deductions
Section 171(2) is replaced by:
“(2)
The right of the Commissioner to recover from the person the amount in respect of which default has been made shall be in addition to any right of the Commissioner to recover from the recipient of that amount any income tax in respect of an income tax liability that would have arisen if the only gross income of the recipient were resident withholding income of which that amount formed part; and nothing in the RWT rules shall be construed as preventing the Commissioner from taking such steps as the Commissioner thinks fit to recover that amount from both of those persons concurrently, or from recovering that amount wholly from one of those persons, or partly from one and partly from the other of those persons.”.
478 Relief in cases of serious hardship
Section 176(2) is replaced by:
“(2)
In any case where a new start grant is payable to a taxpayer, the Commissioner shall grant relief—
“(a)
To the taxpayer, or, if the taxpayer is deceased, the administrator or executor of the taxpayer; and
“(b)
If and to the extent that the Commissioner thinks it appropriate having regard to the matters referred to in section EZ 9(3) of the Income Tax Act 1994, to a person or entity associated with the taxpayer,—
from the payment of any unpaid tax that relates to an income tax liability that would have arisen if the only gross income of the taxpayer were gross income derived from—
“(c)
The business of farming in respect of which the new start grant was paid:
“(d)
Land used in carrying on that business of farming:
“(e)
The sale of the farm.
479 Discretion to grant relief from income tax or fringe benefit tax in cases of financial hardship
(1)
Section 177(1)(a)(i) is replaced by:
“(i)
Any amount of income tax imposed under section BB 1 of the Income Tax Act 1994 in relation to gross income derived by that taxpayer (whether that gross income is gross income derived or deemed to be derived under the qualified accruals rules or otherwise); or”.
(2)
Section 177(2) is replaced by:
“(2)
The Commissioner may, if the Commissioner thinks fit, at any time after receipt of the application referred to in subsection (1), require any taxpayer to whom this section applies to make a return in relation to a specified transaction or transactions from which gross income has been derived or any specified period in which gross income has been derived, and may assess the taxpayer for income tax accordingly and shall give notice of the assessment to the person so assessed, and subsections (3) to (6) of section 44 shall apply to such an assessment as if it were an assessment made in accordance with subsection (2) of that section.”.
480 Remission of additional tax imposed on underestimation
(1)
Section 178(3)(a) is replaced by:
“(a)
The transaction or event is the payment of directors’ fees, salary, wages, or other gross income for or on account of service as an employee to any taxpayer who is a shareholder in or an employee of a close company; or”.
(2)
Section 178(5)(a) and (b) are replaced by:
“(a)
The allocation of gross income derived by the taxpayer; or
“(b)
The incurring of expenditure which is allowed as a deduction to the taxpayer—”.
481 Obligation to pay tax on foreign investment fund income aide to be suspended
(1)
Section 183(1)(c) is replaced by:
“(c)
Has an income tax liability for the income year; and”.
(2)
In section 183(1)(e), the portion before subparagraph (ii) is replaced by:
“(e)
The taxable income of the person for the income year, less the aggregate of—
“(i)
The income tax payable by the person under the Income Tax Act 1994 (but for this subsection) with respect to the taxable income; and”.
(3)
In section 183(1)(g), the definition of quantity “c”
is replaced by:
“c
is the annual gross income of the person for the income year; and”.
482 Refund of tax paid on income subsequently exempted by Order in Council
Section 184 is replaced by:
“184
In any case where the Commissioner is satisfied that income tax has been paid in relation to any income, which is exempt from tax by virtue of any Order in Council under section BH 1 of the Income Tax Act 1994 or the corresponding provisions of any former Act, being income derived before the date of the Order in Council, the Commissioner, notwithstanding anything in section MD 1 of the Income Tax Act 1994, may refund the amount of the tax so paid if written application is made by or on behalf of the taxpayer at any time within 4 years after the date of the Order in Council.”.
483 Consequential changes to words resulting from new terminology
(1)
Wherever it occurs, “income”
is replaced by “gross income”
in the following sections:
| 33a(1)(d) | 82(5)(a) | 108(2)(b) |
| 82(7) | 82(6)(b) | 178(3)(a) |
(2)
Wherever it occurs, “loss”
is replaced by “net loss”
in the following sections:
| 43a(6)(b)(i) | 111(5) | 112(2) |
| 43a(6)(b)(iii) | 111(6) | 112(3) |
| 111(2) | 112(1) | 120t(1)(a) |
| 111(3) |
(3)
Wherever it occurs, “levied”
is replaced by “imposed”
in the following sections:
| 93(1) | 97(1) | 101(1) |
| 93(3) | 97(4) | 102(3) |
| 94(1) | 98(1) | 103(1) |
| 94(3) | 98(3) | 104(1) |
| 95(1) | 99(3) | 104(4) |
| 95(3) | 100(1) | 106(1) |
| 96(3) | 100(4) | 140d(1) |
Part 3 Consequential Amendments to other Acts
484 Consequential amendments to other Acts
The enactments specified in Schedule 3 are amended as set out in that Schedule.
SCHEDULES
Schedule 1 Amendments to Definitions in Section OB 1
Section 412(2)
| Definition | Amendment |
|---|---|
| Accrual expenditure |
By replacing the portion before paragraph (a) with: “in sections EF 1 and FE 4, in relation to any person, means any amount of expenditure incurred on or after 1 August 1986 by the person that is allowed as a deduction under this Act, or was deductible under the Income Tax Act 1976, other than expenditure incurred—”. |
| Adjusted tax value |
By replacing paragraph (a)(iii)(A) with: “(A)Since its acquisition by the taxpayer has been, in respect of any income year, property for which no amount could have been claimed as a deduction in respect of depreciation to the taxpayer under section EG 1 of this Act or section 108 of the Income Tax Act 1976 (whether by virtue of the nature of the taxpayer’s use of the property or the non-residence of the taxpayer or otherwise); and”. |
|
By replacing the portion of the definition of quantity “ad(aggregate deductions) is the aggregate amount of— “(i)Any depreciation deductions that would, before the income year in which the particular time falls, have been allowed as a deduction to the taxpayer if the property had been used or available for use by the taxpayer wholly in deriving gross income of the taxpayer at all times since— “(A)The date of the taxpayer’s acquisition of the property, in the case of property to which paragraph (i) of the item bv (base value) applies; or “(B)The end of the 1992–93income year, in the case of property to which paragraph (ii) of the item bv (base value) applies; or “(C)The beginning of the month in the income year in which the taxpayer became entitled to an allowable deduction in respect of depreciation under section EG 1 of this Act or section 108 of the Income Tax Act 1976, in the case of property to which paragraph (iii) of the item bv (base value) applies; or”. | |
| Allowable deduction | By repealing it. |
| Amount |
By replacing paragraph (a) with: “(a)Includes an amount in money’s worth:”. |
| Assessable income |
By replacing it with: “‘Assessable income’ means, in respect of the 1995–96 and a prior income year, the assessable income as defined for the purposes of that income year under this Act or the Income Tax Act 1976:”. |
| Assessable income from forestry | By repealing it. |
| Assessable income from mining | By repealing it. |
| Authorised savings institution | By replacing “Part ID”with “Part IZ”. |
| Available subscribed capital |
By replacing paragraphs (vi) and (vii) of the definition of quantity “(vi)Any amount in respect of any taxable bonus issue (except to the extent fully credited) made to a shareholder to whom the bonus issue was exempt income under sections CB 10(1) to (3) and CZ 4; or “(vii)Any consideration received by the company which is primarily attributable, directly or indirectly, to the payment by the company of a dividend (except to the extent fully credited) to a shareholder where— “(A)The dividend was exempt income of the shareholder Under sections CB 10(1) to (3) and CZ 4; and “(B)The shareholder was not required by section NH 1 to deduct an amount by way of dividend withholding payment,— in respect of the dividend; or”. |
| Beneficiary income |
By replacing it with: “‘Beneficiary income’, in relation to any person who is a beneficiary of a trust for an income year, means: “(a)Any gross income derived during that income year by a trustee of the trust to the extent to which it— “(i)During that income year vests absolutely in interest in the beneficiary; or “(ii)Is paid or applied by the trustee to or for the benefit of the beneficiary during, or within 6 months after the end of, that income year; or “(b)Any foreign sourced amount derived during that income year by a trustee of a trust that would have been gross income of the trustee had any settlor of the trust been resident in New Zealand at any time during the income year, to the extent to which it— “(i)During that income year vests absolutely in interest in the beneficiary; or “(ii)Is paid or applied by the trustee to or for the benefit of the beneficiary during, or within 6 months after the end of, that income year;— but does not include gross income derived by a trustee of the trust in any income year during which the trust is a superannuation fund: Provided that the provisions of this definition do not apply to a unit trust:”. |
| Branch equivalent income or loss |
By replacing it with: “‘Branch equivalent income or loss’, in relation to any foreign company and any accounting period, means the net income or net loss that would arise with respect to that accounting period in accordance with section CG 11:”. |
| Business purposes or business use |
By replacing it with: “‘Business purposes’, or ‘business use’, in sections DH 1 to DH 4, in relation to the use of a motor vehicle and to a taxpayer, means travel undertaken by the vehicle wholly and exclusively in deriving gross income of the taxpayer:”. |
| Capital gain amount |
By replacing paragraph (b) with: “(b)Any capital gain amount of the company determined in accordance with subsections (7) to (10) of section CF 3:”. |
| Category A income |
By replacing it with: “‘Category A income’, in relation to a group investment fund (not being a designated group investment fund), means so much of the gross income derived from the investments and funds of the group investment fund in any income year as is calculated in accordance with the following formula: _eqn22.JPG) “where— “ais the specified value; and “bis the current value of all the investments and funds of the group investment fund; and “cis the gross income derived from all of the investments and funds of the group investment fund in that income year:”. |
| Category B income | By replacing “assessable income”with “gross income”. |
| Commission agency contract |
By replacing it with: “‘Commission agency contract’ is defined in section OE 5(2) for the purposes of that section:”. |
| Commission agent |
By replacing it with: “‘Commission agent’ is defined in section OE 5(2) for the purposes of that section:”. |
| Company | In paragraph (b)(iii), by replacing “derives income”with “derives gross income”. |
| Continuity provisions | By replacing “IG 2(1)(b)”with “IG 2(1)”. |
| Corpus |
By replacing paragraph (b) with: “(b)A settlement of property on the trust, whether made directly or indirectly by one transaction or a series of transactions, which property would, but for that settlement— “(i)Have constituted gross income of the settlor; or “(ii)Have constituted gross income of the settlor if at the time of that settlement the settlor had been a person resident in New Zealand subject to the provisions of this Act:”. |
|
By replacing paragraph (d) with: “(d)A settlement of property on the trust, whether made directly or indirectly by one transaction or a series of transactions, in respect of which settlement the settlor claims an allowable deduction: Provided that the provisions of this definition do not apply to a unit trust:”. | |
| Cost price |
By replacing the second proviso in paragraph (b) with: “Provided also that in any case where that lease asset has, before the entering into of the lease, been used by the lessor in deriving gross income, the cost price of the lease asset shall be equal to the capital expenditure incurred by the lessor in acquiring the lease asset, reduced by the aggregate of all allowable deductions in respect of depreciation allowed to the lessor in respect of that lease asset by the Commissioner in every income year:”. |
| Depreciable property |
By replacing paragraph (a) with: “(a)Means any property of that taxpayer which might reasonably be expected in normal circumstances to decline in value while used or available for use by persons— “(i)In deriving gross income; or “(ii)In carrying on a business for the purpose of deriving gross income; but. |
|
By replacing paragraph (b)(vi) with: “(vi)Property the cost of which is allowed as a deduction under any of sections BD 2(1)(b)(i) and (ii), DJ 6, DJ 11, DL 6, DM 1, DO 8, DO 6, DO 7, DZ 1, DZ 8, EO 5, EZ 5, and EZ 6, or by virtue of an amortisation or other similar deduction allowed under any section of this Act such as sections DJ 9, DL 2, DO 4, DO 5, and EO 2, other than sections EG 1 to EG 15 and section EG 18:”. | |
|
By replacing paragraph (b)(viii) with: “(viii)Property the cost of which was or is allowed as a deduction in any income year to any other taxpayer under any of sections DO 3, DZ 2, DZ 3 and DZ 4 of this Act (or any of sections 127,127a and 128 of the Income Tax Act 1976 or sections 119, 119d and 119g of the Land and Income Tax Act 1954):”. | |
| Depreciating property |
By replacing it with: “‘Depreciating property’ in sections FD 10 and FE 6, means, in relation to a taxpayer, property in respect of which the taxpayer has claimed or will claim an allowable deduction on account of— “(a)Depreciation under section EG 1; or “(b)Amortisation of expenditure under section EZ 5, section EZ 6, or any other amortisation provision:”. |
| Depreciation loss |
By replacing it with: “‘Depreciation loss’— “(a)In the definition of ‘film expenditure’ and in section EO 3, in relation to a film, means the amount of the allowance or the aggregate of the allowances by way of depreciation, in respect of any asset (being an asset used in producing the film) that, had that asset been used in deriving gross income in the income years in which the cost of production of the film was incurred, would have been allowed as a deduction under this Act: “(b)In the definition of ‘film production expenditure’ and in section EO 4, in relation to a film, means the amount of the allowance or the aggregate of the allowances by way of depreciation, in respect of any asset (being an asset used in producing the film) that, had that asset been used in deriving gross income in the income years in which the film production expenditure in relation to the film was incurred, would have been allowed as a deduction under this Act:”. |
| Development expenditure |
By replacing paragraph (b)(iii) with: “(iii)Any other expenditure which is allowed as a deduction as incurred under any section of this Act other than sections DM 1 to DM 8 and which is not excluded from deductibility under any of sections BD 2(2), DB 1, DD 1, DF 1, DJ 1, DO 1, and GD 4:”. |
In paragraphs (a)(vi)(B), (c)(vi)(B), and (d)(vi)(B), “assessable income”is replaced with “gross income”. | |
| Dispose |
By replacing it with: “‘Dispose’ in sections CJ 6, DM 1 to DM 10, and GC 12 has a corresponding meaning to paragraph (b) of the definition of ‘disposition’:”. |
| Disposition |
By replacing paragraph (b) with: “(b)In sections CJ 6, DM 1 to DM 10, EF 2, and GC 2 means the sale or transfer of any assets, voluntarily or involuntarily, and includes loss or destruction:”. |
| Double tax agreement |
By replacing it with: “‘Double tax agreement’ means a convention or agreement made between the Government of a territory outside New Zealand and the Government of New Zealand, with a view to affording relief from double taxation in relation to foreign tax imposed by the laws of that territory and New Zealand tax, being an arrangement specified in an Order in Council made under section BH 1 of this Act or the corresponding provision of any former Act:”. |
| Eligible company |
By replacing it with: “‘Eligible company’, in the consolidation rules, means, at any time, a company which is at that time resident in New Zealand and is not— “(a)A company which, in accordance with provisions of arrangements to which effect is given by an Order in Council made under section BH 1, is treated as not being resident in New Zealand for the purpose of the arrangements; or “(b)A company which derives only exempt income (not being a company where that income is exempt under section CB 10, but including any local authority that is not a local authority trading enterprise); or “(c)A loss attributing qualifying company:”. |
| Established activity |
By replacing it with: “‘Established activity’ is defined in section IE 2(8) for the purposes of that section:”. |
| Estimated useful life |
By replacing it with: “‘Estimated useful life’ means, in respect of any depreciable property or any high-priced livestock, the period over which such property might reasonably be expected to be useful in deriving gross income or carrying on a business in New Zealand, having regard to such factors as likely wear and tear, the passage of time, exhaustion, and obsolescence and based upon an assumption of normal and reasonable maintenance:”. |
| Exempt interest |
By replacing paragraph (c) with: “(c)Exempt income under section CB 2(1)(b) or section CB 9(e); or”. |
|
By replacing paragraph (f) with: “(f)Payable on National Development Bonds or New Zealand Savings Certificates to the extent that interest is exempt income under section CB 1(1)(a); or”. | |
| Expenditure on account of an employee |
By replacing paragraph (a)(i) with: “(i)A payment that is, or such part of a payment as is, exempt income under section CB 12:”. |
| Film expenditure |
By replacing it with: “‘Film expenditure’, in the definition of ‘cost of production’ and in sections EO 3 and GC 11, in relation to a film, means any expenditure (not being expenditure incurred in acquiring any asset in respect of which a deduction by way of depreciation is allowed) in respect of which a deduction is allowed; and includes any loss in respect of which a deduction is allowed in section BD 2(1)(b)(i) and (ii) and any depreciation loss:”. |
| Film production expenditure |
By replacing the portion before paragraph (a) with: “‘Film production expenditure’, in relation to a film and to any taxpayer, means any expenditure (not being expenditure incurred in acquiring any asset in respect of which a deduction by way of depreciation is allowed) in respect of which a deduction is allowed; and includes any loss which may be allowed as a deduction under section BD 2(1)(b)(i) and (ii), being expenditure and being a loss incurred by the taxpayer in producing any film (whether that expenditure was incurred prior to, on, or subsequent to the date on which the film is completed) in relation to which the taxpayer is, or is expected to become, a film owner; and also includes any depreciation loss in relation to the film; but does not include any expenditure incurred by the taxpayer—”. |
| First business day |
By replacing it with: “‘First business day’, in the provisional tax rules, in relation to a taxable activity, means the first day in an income year on which gross income is derived or expenditure incurred as a result of carrying on that taxable activity:”. |
| Foreign company |
By replacing paragraph (a)(ii) with: “(ii)Is resident in New Zealand but is not subject to tax in respect of part or all of its income under a provision of arrangements to which effect is given by an Order in Council made under section BH 1, where that company is, for the purposes of the arrangements, treated as not being a resident of New Zealand:”. |
|
By replacing paragraph (b)(ii) with: “(ii)Is resident in New Zealand but, under a provision of arrangements to which effect is given by an Order in Council made under section BH 1, is treated as not being resident in New Zealand for the purpose of the arrangements:”. | |
| Foreign non-dividend income | By replacing “assessable income”with “gross income”. |
| Income |
By replacing it with: “‘Income’ is defined in section FC 11(6) for the purposes of that section:”. |
| Income from employment |
By replacing paragraph (b)(ii) with: “(ii)Any salary, wages, or other gross income to which section OB 2(2) applies:”. |
| Income from personal exertion |
By replacing it with: “‘Income from personal exertion’ is defined in section IE 2(8) for the purposes of that section:”. |
| Income year |
By replacing it with: “‘Income year’— “(a)In respect of the gross income of any person, means the year in which that gross income is allocated in accordance with section BD 3: “(b)In respect of the net income, taxable income, or net loss of any person, means the year to which gross income in respect of which that amount is calculated is allocated in accordance with section BD 3, and “(c)In Part B, means any period for which a person is assessed for income tax, including a period other than a year for which the person is assessed for income tax in accordance with section 39 of the Tax Administration Act 1994:”. |
| Interest | In paragraph (a), by replacing “deriving of income”with “deriving of gross income”. |
| Land |
By replacing the portion of paragraph (a) before subparagraph (i) with: “(a)In paragraphs (a) and (d) of the definition of ‘trading stock’ and in sections CD 1, CD 4, DJ 13, FE 6(3a) and (3b), FF 6, GD 2, and GD 9, includes—”. |
| Liability |
By replacing it with: “‘Liability’ in the definition of ‘tax avoidance’, includes a potential or prospective liability to future income tax:”. |
| Life insurer | In paragraph (a), by replacing “underwriting income”with “underwriting result”. |
| Low value property |
By replacing paragraph (f) with: “(f)The cost of which is not allowed as a deduction other than in accordance with section EG 16:”. |
| Maori |
By replacing paragraph (b) with: “(b)In sections HH 1 to HH 5, means a person belonging to the aboriginal race of New Zealand; and includes a person descended from a Maori; and, except for the purposes of the definition of ‘Maori authority’, also includes any person legally or beneficially entitled to any gross income of a Maori authority:”. |
| Maximum deposit |
By replacing the portion before paragraph (b)(i) with: “‘Maximum deposit’— “(a)In sections EI 1 to EI 10, in respect of an accounting year, means— “(i)Where the taxpayer (not being a company, or a public authority, or a Maori authority, or an unincorporated body) derives gross income from forestry, an amount equal to the net income of the taxpayer that would arise for the year if gross income from forestry derived in that accounting year were the only gross income derived by the taxpayer; and “(ii)Where any taxpayer is engaged in any business of fishing, an amount equal to the net income of the taxpayer that would arise for the year if gross income derived by the taxpayer in that accounting year from that business were the only gross income derived by the taxpayer; and “(iii)Where any taxpayer is engaged in any farming or agricultural business on any land in New Zealand, an amount equal to the net income of the taxpayer that would arise for the year if gross income derived by the taxpayer in that accounting year from that business were the only gross income derived by the taxpayer, and if section EI 11 did not apply to any amount deposited by the taxpayer in respect of that accounting year in the taxpayer’s adverse event income equalisation account from that business,— the amount being calculated in each case without reference to any adjustments made under any provision of this Act authorising the apportionment or allocation of gross income derived or expenditure incurred to any accounting year other than the accounting year in which the gross income was in fact derived, or the expenditure was in fact incurred, or under sections EI 1 to EI 10 or sections EI 13 to EI 15: Provided that, in respect of any accounting year or accounting years, the Governor-General may, by Order in Council, declare that, in relation to any taxpayer (being a taxpayer to whom sub-paragraph (iii) would otherwise apply), the maximum deposit shall be an amount calculated in the manner specified in the Order in Council or shall be an unlimited amount: “(b)In sections EI 11 to EI 16, in relation to a taxpayer and an accounting year, means, where the taxpayer is engaged in any farming or agricultural business on any land in New Zealand, an amount equal to the total net income that would arise for the taxpayer and that accounting year if the gross income and allowable deductions of the taxpayer were determined solely by reference to—”. |
| Member | In paragraph (a), by replacing “CF 3(1)(1)”with “CF 3(1)(ia)”. |
| Mining operations | By replacing “assessable income”, wherever it occurs, with “gross income”. |
| Net specified income |
By replacing the definition of quantity “ais an amount equal to so much of the net income of the person for the income year that contains the specified period as, in the opinion of the Commissioner, is attributable to the weeks in relation to which, in the specified period, the person is a full-time earner; and”. |
|
By replacing paragraph (b) with: “(b)An amount equal to the income tax liability of the person if the amount calculated under paragraph (a) were the person’s net income and any rebate of tax allowed under section KC 1 were taken into account:”. | |
| New provisional taxpayer | By replacing “assessable income”wherever it occurs, with “gross income”. |
| New Zealand tax |
By replacing it with: “‘New Zealand tax’, in the definitions of ‘foreign tax’ and ‘double tax agreement’ and in sections LC 2, LC 3, LC 6, LC 13, and LC 14, means income tax imposed as such by this Act or any corresponding former Act:”. |
| Non-resident withholding income |
By replacing it with: “‘Non-resident with holding income’, means dividends, royalties, interest, and investment society dividends to which section NG 1 applies:”. |
| Option | By replacing “GC 18”with “GC 3”. |
| Paid |
By replacing paragraph (a) with: “(a)In relation to interest and to any redemption payment, being gross income or non-resident withholding income, derived by any person from money lent by the person, includes distributed, credited, or dealt with in the interest of or on behalf of the person:”. |
| Pay or payment |
By replacing paragraph (a) with: “(a)In relation to interest and to any redemption payment, being gross income or non-resident withholding income, derived by any person from money lent by the person, has a corresponding meaning to paragraph (a) of the definition of ‘paid’:”. |
| Payable |
By replacing it with: “‘Payable’ in relation to interest and to any redemption payment, being gross income or non-resident withholding income, derived by any person from money lent by the person, has a corresponding meaning to paragraph (a) of the definition of paid’:”. |
| Petroleum exploration operations | By replacing “assessable income”with “gross income”. |
| Petroleum mining operations | In paragraph (a)(iii), by replacing “assessable income”with “gross income”. |
| Petroleum permit |
By replacing it with: “‘Petroleum permit’ means— “(a)A permit that relates to petroleum; and “(b)A petroleum licence;— and in sections DM 3 to DM 10 every reference to a petroleum permit shall also apply to a replacement permit, and all expenditure incurred, deductions allowed, and petroleum mining assets that are attributable to that petroleum permit shall be attributable to the replacement permit:”. |
| Pool depreciation method |
By replacing it with: “‘Pool depreciation method’ in the definition of ‘pool’ and in sections EG 1 to EG 14, means the method of calculating allowable deductions in respect of depreciation set out in sections EG 2(2) and EG 11:”. |
| Poolable property |
By replacing paragraph (b) with: “(b)Is used or available for use by the taxpayer wholly in deriving gross income or in carrying on a business for the purpose of deriving gross income, or, if it is not so wholly used or available for use, that other use is subject to fringe benefit tax; and”. |
| Prescribed amount |
By replacing it with: “‘Prescribed amount’ in sections DN 4 and IH 5, in relation to a resident mining operator and to an income year, means an amount equal to 50% of the amount by which the gross income derived by that resident mining operator in that income year otherwise than from the resident mining operator’s mining operations or associated mining operations exceeds the aggregate of the expenditure and losses (being expenditure and losses that are allowed as deductions under this Act) incurred by the resident mining operator in that income year in deriving that gross income:”. |
| Qualifying amalgamation |
By replacing paragraph (a) with: “(a)Each of the amalgamating companies and the amalgamated company is, at the time of the amalgamation, resident in New Zealand and is not— “(i)A company which, pursuant to provisions of arrangements to which effect is given by an Order in Council made under section BH 1, is treated as not being resident in New Zealand for the purpose of the arrangements; or “(ii)A company which derives only exempt income (not being a company where that income is exempt under section CB 10, but including any local authority that is not a local authority trading enterprise); and”. |
| Qualifying trust |
By replacing it with: “‘Qualifying trust’— “(a)In relation to any trust, other than a superannuation fund, and any income year in which a distribution is made from that trust, means any trust, if in all income years commencing with the income year in which a settlement was first made— “(i)To that trust; or “(ii)For the benefit of that trust; or “(iii)On the terms of that trust,— until the income year in which the distribution is made,— “(iv)No amount of trustee income was only non-resident withholding income; or “(v)Neither section BD 1(2)(c) nor section HH 4(3b) have applied to the trustee of the trust to exclude from gross income any amount derived from outside New Zealand; and all the trustee’s obligations in respect of the trustee’s income tax liability have been satisfied: “(b)Includes a superannuation fund:”. |
| Reinvestment profit | By replacing “assessable income”with “gross income”. |
| Related activity |
By replacing it with: “‘Related activity’ is defined in section IE 2(8) for the purposes of that section:”. |
| Residual income tax liability | By omitting “deducted from or”wherever it occurs. |
| Revenue account property |
By replacing it with: “‘Revenue account property’ means, in respect of any person, property which is trading stock of the person or otherwise property in respect of which any amount derived on disposition would be gross income of the person other than under section EG 19:”. |
| Salary or wages |
By replacing paragraph (d) with: “(d)Any payment to the extent to which, under section DF 8(1), it is deemed to be an amount of expenditure of the kind referred to in section BD 2(1)(b)(ii); and”. |
|
By replacing paragraph (e) with: “(e)An extra payment that is included in gross income under section CC 1; and”. | |
|
By replacing paragraph (k) with: “(k)Any salary, wages, or other gross income to which section OB 2(2) applies; or”. | |
| Security payment |
By replacing it with: “‘Security payment’ in the qualified accruals rules, means money received by the holder of a security arrangement to the extent that the money is received in relation to a loss incurred due to the failure of performance of the secured arrangement and the value of the money is gross income of the holder:”. |
| Serving employee |
By replacing it with: “‘Serving employee’ in sections CC 2 and DF 6, in relation to any employer, means a person who has (whether before or after the commencement of this Act) been called up for service in any of the naval, military, or air forces of the Crown, whether on voluntary enlistment or otherwise, and whether within New Zealand or elsewhere, and who when the person was called up was employed by the person’s employer in such circumstances that the whole or any part of the wages, salary, allowance, or other remuneration paid to the person by the employer is allowed as a deduction to the employer; and ‘employer’ has a corresponding meaning; and for the purposes of this definition, any person who occupies or has occupied in relation to any company the position of director, by whatever name called, shall be deemed to be or to have been employed by the company:”. |
| Shareholder |
By replacing paragraph (c)(iii) with: “(iii)Any investor of a group investment fund in so far as the investor derives category A income from the group investment fund:”. |
| Shareholder-employee |
By replacing paragraph (a) with: “(a)In sections EB 1 and EF 1, means a person who receives or is entitled to receive salary, wages or other gross income to which section OB 2(2) applies:”. |
| Special account | By replacing “Part ID”with “Part IZ”. |
| Special farm ownership account | By replacing “Part ID”with “Part IZ”. |
| Special fishing vessel ownership account | By replacing “Part ID”with “Part IZ”. |
| Special home ownership account | By replacing “Part ID”with “Part IZ”. |
| Specified dividends |
By replacing paragraph (a)(iii) with: “(iii)A company all the income of which is exempt income otherwise than under section CB 10 or section CZ 4; or”. |
| Specified income |
By replacing paragraph (b) with: “(b)In Parts JB and NI, in relation to a New Zealand superannuitant and to any income year, means the amount that would be the taxable income of the New Zealand superannuitant for the income year if the source deduction payments derived by the superannuitant had not been so derived:”. |
| Statutory producer board or producer board |
By replacing paragraph (c) with: “(c)Any primary producer board or marketing board established by any Act— but in the definition of ‘special corporate entity’, and in sections HF 1, OC 3, and OF 2(2)(m) does not include a body that derives only exempt income:”. |
| Tax avoidance |
By replacing the portion before paragraph (a) with: “in sections BG 1, EH 1, GB 1, and GC 12, includes—”. |
| Taxable distribution |
By replacing paragraph (b) with: “(b)In the case of a foreign trust, profits derived in any income year by the trustee of the trust from the realisation of a capital asset of the trust or any other capital profit or capital gain realised by the trustee in any income year, not being profit or gain required to be taken into account for the purpose of determining an income tax liability, less any capital loss incurred by the trustee of the trust from the realisation of a capital asset of the trust or otherwise in the income year during which the profit or gain was realised;—”. |
By replacing “income derived”with “gross income derived”. | |
| Trading stock |
By replacing paragraph (a)(iv) with: “(iv)Any land, any amount derived from the sale or other disposal of which would be gross income to which section CD 1 applies:”. |
|
By replacing the portion of paragraph (b) before subparagraph (i) with: “In paragraph (a) of the definition of ‘cost price’, in the definitions of ‘depreciable property’, ‘market selling price’, ‘market value’, and ‘produce transactions’, and in the consolidation rules and sections CG 8, CK 3, EE 1, EF 2, FB 3, FC 4, FC 10, FE 6, FG 4, HF 1, OB 4(3), and OC 3 includes—”. | |
|
By replacing paragraph (d)(vii) with: “(vii)Any land, any amount derived from the sale or other disposal of which would be gross income to which section CD 1 applies:”. | |
| Trustee income |
By replacing it with: “Trustee income’ in the definition of ‘qualifying trust’ and in the trust rules and section CB 4, in relation to any trust and any income year, means gross income derived by a trustee of that trust, not being, in the case of any trust other than a superannuation fund, gross income that— “(a)During that income year vests absolutely in interest in a beneficiary of the trust; or “(b)Is paid or applied by the trustee to or for the benefit of a beneficiary of the trust during, or within 6 months after the end of, that income year: Provided that the provisions of this definition do not apply to a unit trust:”. |
| Underwriting income | By repealing it. |
| Withdrawal certificate | By replacing “Part ID”with “Part IZ”. |
| Withdrawal income |
By replacing it with: “‘Withdrawal income’ means withdrawal income as determined under section IZ 3:”. |
| Withdrawal tax | By replacing “section ID 2”with “section IZ 2”. |
Schedule 2
Section 424
“SCHEDULE 1 “Basic Rates of Income Tax and Specified Superannuation Contribution Withholding Tax
“PART A “Income Tax
“1 Policyholder income
On the amount of schedular taxable income in respect of policyholder income of a person, the basic rate of income tax shall be 33 cents for every $1 of that schedular taxable income.
“2 Maori authorities
The basic rate of income tax for the taxable income of a Maori authority shall be 25 cents for every $1 of that taxable income.
“3 Undistributed rents, royalties, and interest of Maori Trustee
The basic rate of income tax for the taxable income of the Maori trustee shall be 25 cents for every $1 of that taxable income.
“4 Trustee income
On the taxable income of a trustee, where such taxable income is not included within any of the provisions of clauses 3, and 6 to 8, (whether or not the trustee is a company or a corporation), the basic rate of income tax shall be 33 cents for every $1 of that taxable income.
“5 Companies
On all taxable income not included within any of the provisions of clauses 1, 2 or 3, the basic rate of income tax on the taxable income of a company shall be 33 cents for every $1 of that taxable income.
“6 Trustees of superannuation funds
On the taxable income of a trustee of any superannuation fund, the basic rate of income tax shall be 33 cents for every $1 of that taxable income.
“7 Trustees of group investments funds
On the amount of schedular taxable income in respect of category A income of a trustee, the basic rate of tax shall be 33 cents for every $1 of that schedular taxable income.
“8 Taxable distributions from non-qualifying trusts
On all taxable distributions from non-qualifying trusts the basic rate of income tax shall be 45 cents for every $1 of the taxable distribution.
“9 Other taxpayers
On all taxable income not included within any of the provisions of clauses 1 to 10, the basic rate of tax for every $1 of the taxable income shall be the effective rate of tax ascertained by calculating tax on that taxable income in accordance with the rates of tax specified in Part B and dividing the tax so calculated by the number of dollars included in that taxable income.
“10 Specified superannuation contribution withholding tax
On the amount of any specified superannuation contribution (being the gross amount of that contribution before deduction of specified superannuation contribution withholding tax) by an employer to a superannuation fund, the specified superannuation contribution withholding tax for every $1 of that amount shall be 33 cents.
“PART B “Rates Referred to in Clause 9 of Part A
| “On so much of the taxable income as— | “The rate of tax for every $1 of taxable income shall be Cents |
|---|---|
| “Does not exceed $34,200 | 20 |
| “Exceeds $34,200 but does not exceed $38,000 | 22.875 |
| “Exceeds $38,000 | 33.” |
Schedule 3 Other Enactments Amended
Section 484
| Enactment | Amendment |
|---|---|
| 1934–35, No. 39—The Companies (Bondholders Incorporation) Act 1934–35 (R.S. Vol. 1, p. 509) |
By repealing section 37, and substituting the following section: “37 Proportionate part of cost of bonds to be included in cost of timber or flax for income tax purposes
For the purpose of calculating the taxable income for an income year of any bondholders company that has acquired any bonds affecting timber or flax, the cost of such timber or flax, for the purposes of sections DJ 14 and DL 1 of the Income Tax Act 1994, shall be deemed to include such part of the cost to the bondholders company of the bonds as, in the opinion of the Commissioner of Inland Revenue, is attributable to the timber or flax.” |
| 1968, No. 35—The Estate and Gift Duties Act 1968 (R.S. Vol. 28, p. 341) | In section 35ba, by replacing “assessable”with “gross”. |
|
In section 35ba, by replacing paragraphs (a) and (b) with: “(a)Reducing the amount of any allowable deduction of the person; or “(b)Increasing the gross income of that person,—”. | |
In section 75(1)(d), by replacing “assessable”with “gross”. | |
In section 75(1)(e), by omitting “in calculating his assessable income”. | |
In section 75b(1), by replacing “assessable”with “net”. | |
|
In section 75b(1), by replacing paragraphs (a) and (b) with: “(a)Reducing the amount of any allowable deduction of the person; or “(b)Increasing the gross income of that person; and”. | |
| 1973, No. 5—The Rates Rebates Act 1973 (R.S. Vol. 24, p. 719) |
By repealing paragraph (c) of the definition of the term “(c)Includes, in the case of a ratepayer who carries on any business as a self-employed person, the amount that would be the ratepayer’s net income in the preceding income year (within the meaning of the Income Tax Act 1994) if the only gross income for that year of the ratepayer was derived in carrying on that business; but”. |
| 1981, No. 27—The Holidays Act 1981 (R.S. Vol. 27, p. 611) | By omitting from section 6 the words “production of his assessable”, and substituting the words “derivation of the worker’s gross”. |
| 1985, No. 141—The Goods and Services Tax Act 1985 (R.S. Vol 27, p. 425) | In section 20a(1), by repealing the definition of “assessable income”. |
|
In section 20a(1), by adding the following after the definition of “‘taxable income’, ‘income year’ and ‘taxpayer’ have the same meanings as in section OB 1 of the Income Tax Act 1994.”. | |
In section 20a(2)(a), by replacing “or determination of the assessable”with “of the taxable”. | |
In section 20a(2)(c), by replacing “Income Tax Act 1976”with “Tax Administration Act 1994”. | |
|
In section 20a(2)(d), by replacing subparagraph (i) with: “(i)If the expenditure were incurred by the first-mentioned registered person, it would be an allowable deduction in calculating the taxable income of that person or allowable in the calculation or determination of any goods and services tax payable by that person; and”. | |
In section 20a(2)(d)(ii), by adding “or the Tax Administration Act 1994”after “Income Tax Act 1976”. | |
In section 20a(3)(a) and (c), by adding “or the Tax Administration Act 1994”after “Income Tax Act 1976”wherever it occurs. | |
In section 21(3b), by replacing “deduction available”with “deduction allowable”. | |
In section 21(3b), by replacing “exempt from tax”with “exempt income”. | |
In section 21(3b)(a), by inserting “the allowable”before “deduction”. | |
In section 21(4), by replacing “Part Xb”with “the FBT rules”. | |
| 1987, No. 200—The Finance Act 1987 |
By omitting from section 6(2) all the words that precede paragraph (a), and substituting the following words: “Neither subsection (1) nor subsection (6) of section IF 1 of the Income Tax Act 1994 applies for the purpose of determining the entitlement to carry forward under that section any net loss for the income year ending with the 31st day of March 1988 or for any earlier income year, or to offset the loss against the net income for any other income year (including the income year ending with the 31st day of March 1988),—”. |
|
By repealing subsection (3) of section 6, and substituting the following subsection: “(3) In calculating the net income for any income year of any company (not being Petrocorp, and not being a subsidiary that was, for that income year, a member of a group of companies that included Petrocorp) under the Income Tax Act 1994, no deduction shall be made under section IG 2(2) of that Act in relation to any net loss or part of any net loss of Petrocorp or any subsidiary in the income year ending with the 31st day of March 1988 or in any earlier income year.”. | |
By omitting from section 6(4) the expression“1976”, and substituting the expression “1994”. | |
| 1988, No. 95—The Petroleum Sector Reform Act 1988 | By omitting from section 3(3) the words “Act 1976, allow”, and substituting the words “Act 1994, allow a deduction for”. |
By omitting from section 3(4) the word “assessable”, and substituting the word “gross”. | |
| 1990, No. 126—The National Provident Fund Restructuring Act 1990 | By omitting from section 73(1)(f) the word “assessable”, and substituting the word “taxable”. |
By inserting in section 73(1)(f), after the words “that income is treated as”, the word “taxable”. | |
By omitting from section 73(1)(g) the word “assessable”, and substituting the word “taxable”. | |
| 1991, No. 142—The Child Support Act 1991 |
By repealing section 37, and substituting the following section: “37 Nil assessment of taxable income
Where, in respect of any income year, the Commissioner determines, in accordance with the provisions of the Income Tax Act 1994, that a person has net income of zero and the Commissioner has notified the person to that effect in a notice issued in accordance with the provisions of that Act, the Commissioner shall, for the purposes of this Act, but subject to this section, be deemed to have assessed the taxable income derived by that person in that income year as nil.” |
|
By repealing paragraph (b) of section 73(1), and substituting the following paragraph: “(b)The liable person estimates that his or her net income (within the meaning of that expression in section OB 1 of the Income Tax Act 1994) for the year corresponding with that child support year will be nil or will be calculated only from gross income consisting solely of income from investments; and”. | |
By omitting from section 73(2)(c) the word “assessable”, and substituting the word “net”. | |
By omitting from section 75(1)(b) the word “assessable”, and substituting the word gross. | |
By inserting in section 75(1)(c), after the expression “$520 in”, the word “gross”. | |
By omitting from section 75(2)(a) the word “assessable”, and substituting the word “gross”. | |
By inserting in section 75(2)(b), after the expression “$520 in”, the word “gross”. | |
| 1992, No. 13—The Accident Rehabilitation and Compensation Insurance Act 1992 |
By repealing the definitions of the terms “‘Employee’ means a natural person who receives or is entitled to receive any amount that is treated as income from employment, as defined in paragraph (a) of the definition of ‘employee’ in section OB 1 of the Income Tax Act 1994, and any salary, wages, or other gross income to which section OB 2(2) or section OB 2(3) of the Income Tax Act 1994 applies: “‘Employer’ means a person who pays or is liable to pay any amount that, in relation to any other person, is treated as income from employment, as defined in paragraph (a) of the definition of ‘income from employment’ in section OB 1 of the Income Tax Act 1994, and any salary, wages, or other gross income to which section OB 2(2) or section OB 2(3) of the Income Tax Act 1994 applies:”. |
|
By inserting in section 3, after the definition of the term “‘Gross income’ has the same meaning as in section OB 1 of the Income Tax Act 1994:”. | |
|
By repealing paragraph (a) of the definition of the term “(a)Was deriving annual earnings at the date of the deceased’s death that did not exceed $12,740; and”. | |
|
By inserting in section 3, after the definition of the term “Taxable income’ has the same meaning as in section OB 1 of the Income Tax Act 1994:”. | |
By inserting in section 76(1), after the words “shall constitute”, the word “gross”. | |
By inserting in section 76(2), after the words “not to be treated as”, the word “gross”. | |
By omitting from section 89(4) the word “determination”, and substituting the word “calculation”. | |
By omitting from section 89(4) the word “assessable”, and substituting the word “taxable”. | |
| 1992, No. 56—The Energy Companies Act 1992 | By omitting from section 62(3) (as substituted by section 7 of the Energy Companies Amendment Act 1992) the word “loss”, and substituting the words “net loss as defined in section OB 1 of the Income Tax Act 1994”. |
| 1992, No. 141—The Student Loan Scheme Act 1992 |
By inserting in section 2, in their appropriate alphabetical order, the following definitions: “‘Gross income’ means gross income as defined in section OB 1 of the Income Tax Act 1994: “‘Net income’ means net income as defined in section OB 1 of the Income Tax Act 1994:”. |
By omitting from section 14(1) the word “assessable”, and substituting the word net. | |
By omitting from section 17(1)(a) the word “assessable”, and substituting the word “gross”. | |
By omitting from section 21(2) the word “assessable”, and substituting the word “net”. | |
By omitting from section 26(4) the words “income derived in”, and substituting the words “net income for”. | |
By omitting from section 27(1) the words “income derived in”, and substituting the words “net income for”. | |
By omitting from section 30(1) the word “income”. | |
By omitting from section 39 the word “assessable”, and substituting the word net. | |
By omitting from section 41 the words “his or her assessable”, and substituting the word “taxable”. | |
By omitting from section 61 the word “assessable”, and substituting the word net. | |
| 1994, No. 165—The Taxation Review Authorities Act 1994 | By inserting in section 26a(1)(b), before the word “loss”, the word “net”. |
| 1996, No. 17—The Income Tax Act 1994 Amendment Act 1996 | In section 35, in the amended section KC 1(1), by replacing the words “Subject to this section and to section BB 10, in”with the word “In”. |
In section 35, in the amended section KC 1(1)(a), by replacing the words “assessable income”wherever they occur with the words “net income”. | |
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In section 35, by replacing amended section KC 1(1)(b) and (c) with: “(b)Where the net income of that taxpayer (not being a taxpayer to whom paragraph (a) applies) is less than $9,500 for the income year, a rebate of 5 cents for each complete dollar of the amount determined under the formula in subsection (4): “(c)Where the net income of that taxpayer amounts to, or exceeds, $9,500 for the income year, an amount calculated in accordance with the following formula: “x − y − z “where— “xis— “(i)$475, where the taxpayer is a New Zealand superannuitant: “(ii)The lesser of $475 and an amount equal to 5 cents for each complete dollar of the amount determined under the formula in subsection (4), in all other cases; and “yis the lesser of $432.25 and an amount equal to 1.75 cents for each complete dollar of the net income that exceeds $9,500; and “zis the lesser of $42.75 and an amount equal to 1.125 cents for each complete dollar of the net income that exceeds $34,200.”. | |
In section 49, in the amended section KC 1(1), by replacing the words “Subject to this section and to section BB 10, in”with the word “In”. | |
In section 49, in the amended section KC 1(1)(a), by replacing the words “assessable income”with the words “net income”. | |
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In section 49, by replacing amended section KC 1(1)(b) and (c) with: “(b)Where the net income of that taxpayer (not being a taxpayer to whom paragraph (a) applies) is less than $9,500 for the income year, a rebate of 4.5 cents for each complete dollar of the amount determined under the formula in subsection (4): “(c)Where the net income of that taxpayer amounts to, or exceeds, $9,500 for the income year, an amount calculated in accordance with the following formula: “x − y “where— “xis— “(i)$427.50, where the taxpayer is a New Zealand superannuitant: “(ii)The lesser of $427.50 and an amount equal to 4.5 cents for each complete dollar of the amount determined under the formula in subsection (4), in all other cases; and “yis an amount equal to 1.5 cents for each complete dollar of the net income that exceeds $9,500.”. | |
In the Third Schedule, by replacing “Clause 11”with “Clause 9”. | |
In the Third Schedule, by replacing the words “for every $1 shall be”with the words “for every $1 of taxable income”. | |
In the Third Schedule, by replacing the words “the income”with the words “the taxable income”. | |
In the Fifth Schedule, by replacing “Clause 11”with “Clause 9”. | |
In the Fifth Schedule, by replacing the words “for every $1 shall be”with the words “for every $1 of taxable income”. | |
In the Fifth Schedule, by replacing the words “the income”with the words “the taxable income”. |
This Act is administered in the Inland Revenue Department.