“CB 6B Disposal: Land used for landfill, if notice of election

• An amount that a person derives from disposing of land is income of the person if—

  • “(a) the person uses the land as a landfill before disposing of the land; and

  • “(b) at the time of disposal, the land is not being used as a landfill; and

  • “(c) the person acquiring the land is not an associated person under section OD 7; and

  • “(d) the person gives written notice to the Commissioner of an election that the land be subject to this section by the day that is the later of the following:

    • “(i) the day that is 12 months after the day on which the person acquires the land:

    • “(ii) 24 June 2006; and

  • “(e) the person makes an election under paragraph (d) for all land that the person acquires and uses as a landfill; and

  • “(f) any person associated with the person makes an election under paragraph (d) for all land that the associated person acquires and uses as a landfill.

  “Defined in this Act: associated person, Commissioner, dispose, ”

“Environmental restoration

“CB 24B Environmental restoration accounts

• “Income from refund

  “(1) A person who receives a refund for a tax year under section EK 12 (Refund on request) derives for the person's corresponding income year an amount of income calculated using the formula—

  

  “Income from transfer from environmental restoration account

  “(2) If there is a transfer from a person's environmental restoration account under section EK 15 (Transfer on request), EK 16 (Transfer on death, bankruptcy, or liquidation), or EK 19 (Environmental restoration account of amalgamating company), the person derives for the corresponding income year an amount of income calculated using the formula—

  

  “Definitions of items in formulas

  “(3) The items in the formulas are defined in subsections (4) to (6).

  “Refund

  “(4) Refund is the amount of the refund.

  “Tax rate

  “(5) Tax rate is the highest rate of income tax on taxable income that—

  • “(a) is stated in schedule 1; and

  • “(b) would apply to the person for the tax year if the person had sufficient taxable income.

  “Transfer

  “(6) Transfer is the amount in the environmental restoration account that is transferred.

  “Income arising from renewal of resource consent

  “(7) A person who incurs expenditure of a type listed in schedule 6B, part A, paragraphs 2 to 5 (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant) and not in schedule 6B, part C derives income under subsection (8) if—

  • “(a) the deduction under section DB 37 (Avoiding, remedying, or mitigating effects of discharge of contaminant) for the expenditure is determined by the period for which a resource consent is granted; and

  • “(b) the period of the grant of the resource consent is extended by more than 50% in a later income year or a new resource consent is granted for a period that is more than 50% of the total period of the resource consent.

  “Amount of income

  “(8) The person derives for the income year in which the period of the resource consent is extended, or the new resource consent is granted, an amount of income equal to the greater of zero and the difference between—

  • “(a) the total deduction under section DB 37 (Avoiding, remedying, or mitigating effects of discharge of contaminant) for the person for the period from the grant of the resource consent to the beginning of the income year:

  • “(b) the total deduction for the expenditure that the person would have had under section DB 37 for the period referred to in paragraph (a), if the period of the resource consent at the time of the grant had been 35 years.

  “Defined in this Act: corresponding income year, environmental restoration account, income, income tax, taxable income, tax year., ”

“CB 26 Sale of patent applications or patent rights

• If a person derives an amount from the sale of a patent application with a complete specification or from the sale of patent rights, the amount is income of the person.

  “Defined in this Act: amount, income, patent rights., ”

• “(1) A bonus issue that is not a bonus issue in lieu is a dividend if—

  • “(a) the bonus issue—

    • “(i) is issued fully paid from reserves of the company:

    • “(ii) if a dividend, would not be exempt income under section CW 10 (Dividend within New Zealand wholly-owned group) or CW 11 (Dividend of conduit tax relief holding company); and

  • “(b) the company chooses under this section to treat the bonus issue as a dividend.”

• “(5) If a company is an unlisted widely-held trust not resident in New Zealand and a shareholder cannot obtain sufficient information to calculate the available subscribed capital per share under the ordering rule,—

  • “(a) the share is treated as if it were issued under subsection (4) on terms that the slice rule applies; and

  • “(b) the available subscribed capital under the slice rule is—

    • “(i) the amount paid for the issue of the share, if subparagraph (ii) does not apply; or

    • “(ii) the value of the money or property in which a beneficial interest would have vested in the share-holder had the share not been issued, if the share is a taxable bonus issue under paragraph (d) of the definition of the term.”

“CW 45B Non-resident company involved in exploration and development activities

• “Exempt income

  “(1) An amount of income derived by a non-resident company from exploration and development activities in an offshore permit area is exempt income if it is derived in the period that—

  • “(a) starts on the beginning of the 2005-06 income year for the non-resident company; and

  • “(b) ends on 31 December 2009.

  “Some definitions

  “(2) In this section,—

  “exploration and development activities means the following activities undertaken for the purposes of identifying and developing exploitable petroleum deposits or occurrences in an offshore permit area

  • “(a) operating a ship to provide seismic survey readings:

  • “(b) drilling an exploratory well or other well

  “offshore permit area means an area of land that is—

  • “(a) in New Zealand; and

  • “(b) on the seaward side of the mean high-water mark; and

  • “(c) a permit area or part of a permit area.

  “Defined in this Act: amount, exempt income, exploration and development activities, exploratory well, New Zealand. non-resident company, offshore permit area, permit area., ”

“Environmental restoration

“CX 43B Refund from environmental restoration account

• A refund to a person under section EK 9 (Refund of payment if excess, lacking details, or after earlier payment or request for refund) is excluded income of the person.

  “Defined in this Act: excluded income., ”

• “(iv) in the absence of section DB 37 (Avoiding, remedying, or mitigating effects of discharge of contaminant), no other provision of this Act would allow the lessor a deduction for the expenditure.”

“DB 37 Avoiding, remedying, or mitigating effects of discharge of contaminant

• “When this section applies

  “(1) This section applies if a person—

  • “(a) carries on a business in New Zealand; and

  • “(b) the person incurs, in the business or in ending the operations of the business, expenditure that is—

    • “(i) of a type listed in schedule 6B (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant) and not in schedule 6B, part C; and

    • “(ii) not incurred in relation to revenue account property other than land that is subject to section CB 6B (Disposal: land used for landfill, if notice of election); and

  • “(c) no other provision allows a deduction for the expenditure.

  “Amount and timing of deduction

  “(2) The person is allowed for an income year a deduction for the expenditure of,—

  • “(a) if paragraphs (b) and (c) do not apply, an amount that is calculated using the formula—

    rate x value:

  • “(b) if the operations of the business for which the expenditure was incurred come to an end in the income year, the diminished value or adjusted tax value of the expenditure for the income year:

  • “(c) if an improvement on which the expenditure was incurred is destroyed, or is rendered useless for the purposes for which the expenditure was incurred, and paragraph (b) does not apply, the diminished value or adjusted tax value of the expenditure for the income year.

  “Definition of items in formula

  “(3) The items in the formula in subsection (2)(a) are defined in subsections (4) and (5).

  “Rate

  “(4) Rate is—

  • “(a) 100%, if the expenditure is of a type listed in schedule 6B, part A, item 1, or part B (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant) and the rate is not given by paragraph (b) or (c):

  • “(b) the appropriate rate given by subsection (5) if—

    • “(i) the expenditure is of a type listed in schedule 6B, part A, items 2 to 5; and

    • “(ii) no applicable rate is given by paragraph (c):

  • “(c) the rate for the type of expenditure, the income year, the valuation method adopted under subsection (6), and the person, determined by the Commissioner under section 91AAN of the Tax Administration Act 1994, if such a rate is determined.

  “Banded straight-line rate or corresponding diminishing value rate

  “(5) The rate for expenditure if subsection (4)(b) is satisfied is—

  • “(a) the straight-line rate given in schedule 11, column 2 that is nearest to the rate calculated for the expenditure using the formula in subsection (7), if the person elects to use the straight-line method:

  • “(b) the diminishing value rate given in schedule 11, column 1 that corresponds to the straight-line rate given by paragraph (a), if the person elects to use the diminishing value method.

  “Value

  “(6) Value is—

  • “(a) the adjusted tax value of the expenditure, if the person elects to use the straight-line method:

  • “(b) the diminished value of the expenditure for the income year, if the person elects to use the diminishing value method.

  “Formula for rate for expenditure with assumed life

  “(7) The formula for the straight-line rate for a type of expenditure to which subsection (4)(b) applies is—

  

  “Definition of item in formula

  “(8) In the formula in subsection (7), assumed life for expenditure and an income year is,—

  • “(a) for expenditure associated with a business activity that does not require a resource consent, 35:

  • “(b) for expenditure associated with a business activity that requires a resource consent, the lesser of 35 and the number of the years in the period of the resource consent that include or follow the time at which the expenditure is incurred.

  “Link with subpart DA

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

  “Defined in this Act: amount, business, capital limitation, deduction, diminished value, general limitation, general permission. income year, New Zealand., ”

• “(b) in the absence of section DB 37 (Avoiding, remedying, or mitigating effects of discharge of contaminant), no other provision of this Act would allow the person a deduction for the amount; and”

“DQ 4 Environmental restoration accounts scheme

• “Deduction for payment

  “(1) A person is allowed a deduction of the amount given by section EK 7 (Deduction for payment) if the person has made a payment to the Commissioner for an income year under section EK 2 (Persons who may make payment to environmental restoration account) that is not refunded under section EK 9 (Refund of payment if excess, lacking details).

  “Timing of deduction

  “(2) A deduction under subsection (1) is allocated to the income year given by section EK 7 (Deduction for payment).

  “Deduction for transfer

  “(3) A person is allowed a deduction for an income year of the amount given by section EK 8 (Deduction for transfer) if in the income year the person receives—

  • “(a) a transfer under section EK 15 (Transfer on request) that is treated under section EK 15(4) as being a payment by the person:

  • “(b) a transfer under section EK 16(3)(b) (Transfer on death, bankruptcy, or liquidation):

  • “(c) a transfer under section EK 19 (Environmental restoration account of amalgamating company).

  “Timing of deduction

  “(4) A deduction under subsection (3) is allocated to the income year given by section EK 8 (Deduction for transfer).

  “Link with subpart DA

  “(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.

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

• “(a) a person is allowed under section DO 4(1) of the Income Tax Act 1994 a deduction of an amount given by section DO 4(3)(a) or (c) of that Act for expenditure incurred in carrying on a farming or agricultural business on land in New Zealand; and”.

• “(2) The person is allowed a deduction for the unamortised balance of expenditure in the income year in which the expenditure is of benefit to the business.”

• “(a) an item of excluded depreciable property for which a rate is set in section EZ 14 (Annual rate for excluded depreciable property: 1992-93 tax year):

• “(b) a patent or patent application for which a rate is set in sections EE 27B or EE 27D:

• “(c) plant variety rights for which a rate is set in section EE 27E.”

“EE 27B Annual rate for patents: applications lodged with complete specifications before 1 April 2005

• “When this section applies

  “(1) This section applies if—

  • “(a) an application for a patent with a complete specification is lodged with the Intellectual Property Office of New Zealand or a similar office in another jurisdiction; and

  • “(b) the application is lodged with the complete specification before 1 April 2005; and

  • “(c) the patent is granted to a person in an income year of the person that corresponds to the 2005-06 or a later tax year.

  “Income years for which usual rate applies

  “(2) The rate given by subsection (3) applies for the patent for an income year that begins—

  • “(a) after the date on which the patent is granted; and

  • “(b) before the date that is 240 months after the patent application date.

  “Usual rate

  “(3) The rate is calculated using the formula—

  

  “Rate for first income year of use

  “(4) For the patent and the income year that includes the date on which the patent is granted, the rate is found by adding together the following rates:

  • “(a) the rate calculated using the formula—

    

  • “(b) the rate calculated for the income year under subsection (3).

  “Effect of change in ownership of patent application

  “(5) If the patent is granted to a person who does not lodge the application for the patent with the complete specification, the rates calculated under subsections (3) and (4) for the person depend on the period between the date on which the person acquires the application and the date on which the patent is granted.

  “Definition of items in formulas in subsections (3) and (4)

  “(6) The items in the formulas in subsections (3) and (4) are defined in subsections (7) to (9).

  “Months

  “(7) Months is the number in the income year of months, beginning on or a whole number of months after the beginning of the income year,—

  • “(a) in which the patent is used or is available for use; and

  • “(b) that include or begin after the date on which the patent is granted; and

  • “(c) that end before the date that is 240 months after the patent application date.

  “Depreciation months

  “(8) Depreciation months is,—

  • “(a) if subsection (5) does not apply, 240:

  • “(b) if subsection (5) applies, 240 reduced by the number of months, beginning on or a whole number of months after the beginning of an income year of the person, that—

    • “(i) include or begin after the patent application date; and

    • “(ii) end before the date on which the person acquires the application.

  “Months before grant

  “(9) Months before grant is the number of months, beginning on or a whole number of months after the beginning of an income year of the person, that,—

  • “(a) if subsection (5) does not apply,—

    • “(i) include or begin after the patent application date; and

    • “(ii) end before the date on which the patent is granted:

  • “(b) if subsection (5) applies—

    • “(i) include or begin after the date on which the person acquires the application; and

    • “(ii) end before the date on which the patent is granted.

  “Defined in this Act: amount, income year, patent application date,

“EE 27C Annual rate for patent applications lodged with complete specifications on or after 1 April 2005

• “When this section applies

  “(1) This section applies if—

  • “(a) an application for a patent with a complete specification is lodged with the Intellectual Property Office of New Zealand or a similar office in another jurisdiction; and

  • “(b) the application is lodged with the complete specification on or after 1 April 2005.

  “Income years for which rate applies

  “(2) The rate given by subsection (3) applies for a patent application for an income year that—

  • “(a) includes or begins after the patent application date; and

  • “(b) begins before the date on which—

    • “(i) the patent is granted; or

    • “(ii) the patent application is refused or withdrawn.

  “Rate

  “(3) The rate is calculated using the formula—

  

  “Months

  “(4) Months is the number in the income year of months, beginning on or a whole number of months after the beginning of the income year, that—

  • “(a) include or begin after the patent application date; and

  • “(b) end before the date on which—

    • “(i) the patent is granted; or

    • “(ii) the patent application is refused or withdrawn.

  “Depreciation months

  “(5) Depreciation months is,—

  • “(a) if subsection (6) does not apply, 240:

  • “(b) if subsection (6) applies, 240 reduced by the number of months, beginning on or a whole number of months after the beginning of an income year of the person, that—

    • “(i) include or begin after the patent application date; and

    • “(ii) end before the date on which the person acquires the application.

  “Effect of change in ownership of patent application

  “(6) If the person who owns the patent application when the patent is granted, or when the patent application is refused or withdrawn, is not the person who lodges the application for the patent with the complete specification, the rate calculated under subsection (3) for the person depends on the period between the patent application date and the date on which the person acquires the application.

  “Defined in this Act: amount, income year, patent application date,

“EE 27D Annual rate for patents: applications lodged with complete specifications on or after 1 April 2005

• “When this section applies

  “(1) This section applies if—

  • “(a) an application for a patent with a complete specification is lodged with the Intellectual Property Office of New Zealand or a similar office in another jurisdiction; and

  • “(b) the application is lodged with the complete specification on or after 1 April 2005; and

  • “(c) the patent is granted to a person in an income year of the person that corresponds to the 2005-06 or a later tax year.

  “Income years for which rate applies

  “(2) The rate given by subsection (3) applies for a patent for an income year that—

  • “(a) includes or begins after the date on which the patent is granted; and

  • “(b) begins before the date that is 240 months after the patent application date.

  “Rate

  “(3) The rate is calculated using the formula—

  

  “Months

  “(4) Months is the number in the income year of months, beginning on or a whole number of months after the beginning of the income year, that—

  • “(a) include or begin after the date on which the patent is granted; and

  • “(b) end before the date that is 240 months after the patent application date.

  “Depreciation months

  “(5) Depreciation months is,—

  • “(a) if subsection (6) does not apply, 240:

  • “(b) if subsection (6) applies, 240 reduced by the number of months, beginning on or a whole number of months after the beginning of an income year of the person, that—

    • “(i) include or begin after the patent application date; and

    • “(ii) end before the date on which the person acquires the application.

  “Effect of change in ownership of patent application

  “(6) If the patent is granted to a person who does not lodge the application for the patent with the complete specification, the rate calculated under subsection (3) for the person depends on the period between the patent application date and the date on which the person acquires the application.

  “Defined in this Act: amount, income year, patent application date,

“EE 27E Annual rate for plant variety rights

• “When this section applies

  “(1) This section applies if—

  • “(a) a plant variety right is given provisional protection; and

  • “(b) the plant variety right is granted to a person in an income year that corresponds to the 2005-06 or a later tax year.

  “Income years for which usual rate applies

  “(2) The rate given by subsection (3) applies for the plant variety right for an income year that begins—

  • “(a) after the date on which the plant variety right is granted; and

  • “(b) before the date on which the plant variety right expires.

  “Usual rate

  “(3) The rate is calculated using the formula—

  

  “Rate for first income year of use

  “(4) For the plant variety right and the income year that includes the date on which the plant variety right is granted, the rate is found by adding together the following rates:

  • “(a) the rate calculated using the formula—

    

  • “(b) the rate calculated for the income year under subsection (3).

  “Definition of items in formulas in subsections (3) and (4)

  “(5) The items in the formulas in subsections (3) and (4) are defined in subsections (6) to (8).

  “Months

  “(6) Months is the number in the income year of months, beginning on or a whole number of months after the beginning of the income year,—

  • “(a) in which the plant variety right is used or available for use; and

  • “(b) that end before the date on which the plant variety right expires.

  “Depreciation months

  “(7) Depreciation months is,—

  • “(a) if subsection (9) does not apply, the number of months in the period for which the plant variety right is granted plus the number of months, beginning on or a whole number of months after the beginning of an income year of the person,—

    • “(i) in which the plant variety right has provisional protection; and

    • “(ii) ending before the date on which the plant variety right is granted:

  • “(b) if subsection (9) applies, the number of months referred to in paragraph (a) reduced by the number of months, beginning on or a whole number of months after the beginning of an income year of the person, that—

    • “(i) include or begin after the date on which the plant variety right is given provisional protection; and

    • “(ii) end before the date on which the person acquires the application.

  “Months before grant

  “(8) Months before grant is the number of months, beginning on or a whole number of months after the beginning of an income year of the person, that,—

  • “(a) if subsection (9) does not apply,—

    • “(i) include or begin after the date on which the plan variety right is given provisional protection; and

    • “(ii) end before the date on which the plant variety right is granted:

  • “(b) if subsection (9) applies,—

    • “(i) include or begin after the date on which the person acquires the application; and

    • “(ii) end before the date on which the plant variety right is granted.

  “Effect of change in ownership of application for plant variety right

  “(9) If the plant variety right is granted to a person who does not lodge the application for the plant variety right, the rates calculated under subsections (3) and (4) for the person depend on the period between the date on which the person acquires the application and the date on which the plant variety right is granted.

  “Defined in this Act: amount, income year, plant variety right., ”

“EE 28 Special rate or provisional rate

• “Rate set for item of depreciable property

  “(1) A special rate or a provisional rate is set for an item of depreciable property under sections 91AAG to 91AAJ of the Tax Administration Act 1994.

  “No special rate for excluded depreciable property

  “(2) A special rate may not be set for an item of excluded depreciable property.

  “No provisional rate for fixed life intangible property or excluded depreciable property

  “(3) A provisional rate may not be set for an item of fixed life intangible property or an item of excluded depreciable property.

  “Defined in this Act: depreciable property, excluded depreciable property, fixed life intangible property, provisional rate, special rate., ”

“When this section applies

• “(1) This section applies when a person in an income year has an item of depreciable property that—

  • “(a) is no longer used; and

  • “(b) is not a building, unless the item satisfies subsection (1B); and

  • “(c) has not been depreciated using the pool method.

“Buildings

• “(1B) This section applies to a building that satisfies subsection (1)(a) and (c) if—

  • “(a) the building has been irreparably damaged and rendered useless for the purpose of deriving income; and

  • “(b) the damage occurs—

    • “(i) in the 2005-06 or a subsequent income year:

    • “(ii) as a result of the extreme climatic conditions that occurred during the month of February 2004 in New Zealand:

    • “(iii) as a result of the storm event that occurred during the month of July 2004 in the Bay of Plenty area; and

  • “(c) the damage is caused other than as a result of the action or failure to act of the person, an agent of the person, or an associated person.”

“Link with subpart FI

• “(6) If a disposal of property to which subpart FI applies is at market value, this section does not apply to the bequest of property.”

“Link with subpart FI

• “(2B) Subsection (2) does not apply to a disposal of property to which any of sections FI 4 and FI 5 applies.”

“When this section does not apply

• “(3) This section does not apply if the item is a building unless—

  • “(a) the building has been irreparably damaged and rendered useless for the purpose of deriving income; and

  • “(b) the damage occurs—

    • “(i) in the 2005-06 or a subsequent income year:

    • “(ii) as a result of the extreme climatic conditions that occurred during the month of February 2004 in New Zealand:

    • “(iii) as a result of the storm event that occurred during the month of July 2004 in the Bay of Plenty area; and

  • “(c) the damage is caused other than as a result of the action or failure to act of the person, an agent of the person, or an associated person.”

“Patents, applications: complete specification before 1 April 2005

• “(4B) The rate is the rate set by section EE 27B if the item is a patent and section EE 27B applies to the item and the person.

“Patent applications: lodged with complete specification on or after 1 April 2005

• “(4C) The rate is the rate set by section EE 27C if the item is a patent application and section EE 27C applies to the item and the person.

“Patents: application lodged with complete specification on or after 1 April 2005

• “(4D) The rate is the rate set by section EE 27D if the item is a patent and section EE 27D applies to the item and the person.

“Plant variety rights

• “(4E) The rate is the rate set by section EE 27E if the item is a plant variety right and section EE 27E applies to the item and the person.”

“Subpart EK—Environmental restoration accounts

“EK 1 Environmental Restoration Funds Account

• “Account

  “(1) There is a Crown Bank Account called the Environmental Restoration Funds Account that is operated under the Public Finance Act 1989.

  “Payments from person paid into account

  “(2) Every payment a person makes to the Commissioner under section EK 2—

  • “(a) is public money; and

  • “(b) must be paid into the Environmental Restoration Funds Account.

  “Defined in this Act: Commissioner,

“EK 2 Persons who may make payment to environmental restoration account

• “ Business required to restore environment

  A person may make a payment to the Commissioner for entry in the person's environmental restoration account for an income year if the person—

  • “(a) carries on a business in New Zealand; and

  • “(b) expects to incur, for a later income year, expenditure that—

    • “(i) is not on revenue account property, other than land to which section CB 6B applies; and

    • “(ii) is of a type listed in schedule 6B, part B (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant); and

    • “(iii) is of a type not listed in schedule 6B, part C; and

  • “(c) makes a provision for such expenditure in financial statements that are—

    • “(i) prepared for external reporting purposes; and

    • “(ii) audited by an accountant who is a chartered accountant or has equivalent professional qualifications; and

    • “(iii) given by the accountant a standard audit opinion, without qualifications on matters relating to the effect of this subpart.

  “Defined in this Act: business, Commissioner, environmental restoration account, income year, revenue account property,

“EK 3 Payments to environmental restoration account

• “Upper limit of payment

  “(1) A person must not make a payment for an income year of more than the person's maximum payment for the income year.

  “Lower limit of payment

  “(2) A person must not make a payment for an income year of less than $1,000.

  “Time for making payment

  “(3) A payment made after the day that is 6 months after the end of an income year is not made for the income year unless—

  • “(a) the Commissioner has allowed a longer period for the payment; and

  • “(b) the payment is made within the period allowed by the Commissioner.

  “Defined in this Act: Commissioner, income year, maximum payment,

“EK 4 Environmental restoration account

• “Person's account

  “(1) The Commissioner must keep an environmental restoration account in the name of every person who makes a payment to the Commissioner under section EK 2.

  “Payments in account

  “(2) Every payment under section EK 2 that a person makes to the Commissioner must be entered in the person's environmental restoration account.

  “Amounts in account

  “(3) The only amounts that may be entered in a person's environmental restoration account are—

  • “(a) payments made by the person to the Commissioner under section EK 2:

  • “(b) transfers made to the account under subsection (6):

  • “(c) interest paid under section EK 6.

  “Amounts not available to others

  “(4) Amounts entered in a person's environmental restoration account may not, while they are in the account,—

  • “(a) be assigned or charged in any way:

  • “(b) pass by operation of law to, or into the custody or control of, someone else, except when the person is bankrupt or has been put into liquidation:

  • “(c) be assets for the payment of the person's debts or liabilities, except when the person is bankrupt or has been put into liquidation:

  • “(d) be assets for the payment of the debts or liabilities of a dead person's estate.

  “Amounts not available except for refunds or transfers

  “(5) An amount entered in a person's environmental restoration account may not be removed from the environmental restoration account except by a refund under section EK 9 or EK 12 or by a transfer under subsection (6).

  “Transfers of amounts

  “(6) An amount may be transferred from the environmental restoration account of a person—

  • “(a) to an environmental restoration account of a person to whom the amount has been transferred under section EK 15 or EK 16(3)(b):

  • “(b) to the department that is at the time responsible for the administration of the Environment Act 1986, if the amount has been transferred under section EK 16(3)(a):

  • “(c) to an environmental restoration account of an amalgamated company to which the amount has been transferred under section EK 19.

  “Commissioner may close empty account

  “(7) The Commissioner may close an environmental restoration account of a person if the amount in the environmental restoration account is zero.

  “Defined in this Act: amalgamating company, amount, Commissioner, environmental restoration account, interest, liquidation,

“EK 5 Details to be provided with payment to environmental restoration account

• “(1) A person making a payment to an environmental restoration account must provide the Commissioner with a notice, in a form prescribed by the Commissioner, giving—

  • “(a) the name of the person; and

  • “(b) the income year for which the payment is made; and

  • “(c) a calculation of the maximum payment for the person and the income year; and

  • “(d) any additional information that the Commissioner requires.

  “(2) The person must provide the information required by subsection (1) within 2 working days from the day of the payment.

  “Defined in this Act: Commissioner, environmental restoration account, income year, maximum payment,

“EK 6 Interest on payments to environmental restoration account

• “Interest payable

  “(1) Interest is payable by the Commissioner on—

  • “(a) a payment under section EK 2 to an environmental restoration account:

  • “(b) an amount that is treated under section EK 15 or EK 19 as being a payment to an environmental restoration account.

  “Period

  “(2) Interest is computed with daily rests from the day after the date of the payment until the day before the date on which the payment is included in a refund under section EK 12 or in a transfer under section EK 15, EK 16, or EK 19.

  “Date to which interest accrues

  “(3) Interest that has accrued on a payment is payable to the person who has the environmental restoration account on the earlier of—

  • “(a) 31 March in each year:

  • “(b) the day on which the payment is included in a refund under section EK 12 or in a transfer under section EK 15, EK 16, or EK 19.

  “Rate

  “(4) The interest rate is 3% per year.

  “Defined in this Act: Commissioner, environmental restoration account, interest, year,

“EK 7 Deduction for payment

• “When this section applies

  “(1) This section applies if a person is allowed a deduction under section DQ 4 (Environmental restoration accounts scheme) for a payment to the person's environmental restoration account under section EK 2.

  “Amount of deduction

  “(2) The amount of the deduction is calculated using the formula—

  

  “Definitions of items in formula

  “(3) The items in the formula are defined in subsections (4) and (5).

  “Payment

  “(4) Payment is the lesser of—

  • “(a) the person's payment to the Commissioner under section EK 2 for the income year; and

  • “(b) the person's maximum payment for the income year.

  “Tax rate

  “(5) Tax rate is the highest rate of income tax on taxable income that—

  • “(a) is stated in schedule 1; and

  • “(b) would apply to the person for the tax year if the person had sufficient taxable income.

  “Timing of deduction

  “(6) The person is allowed the deduction for the income year for which the payment is made.

  “Defined in this Act: Commissioner, deduction, environmental restoration account, income tax, income year, maximum payment, tax year, taxable income,

“EK 8 Deduction for transfer

• “When this section applies

  “(1) This section applies if a person is allowed a deduction under section DQ 4 (Environmental restoration accounts scheme) for a transfer to the person's environmental restoration account under section EK 15, EK 16, or EK 19.

  “Amount of deduction

  “(2) The amount of the deduction is calculated using the formula—

  

  “Definitions of items in formula

  “(3) The items in the formula are defined in subsections (4) and (5).

  “Transfer

  “(4) Transfer is the amount of the transfer to the person's environmental restoration account that is treated as a payment by the person under section EK 15(3), EK 16, or EK 19.

  “Tax rate

  “(5) Tax rate is the highest rate of income tax on taxable income that—

  • “(a) is stated in schedule 1; and

  • “(b) would apply to the person for the tax year if the person had sufficient taxable income.

  “Timing of deduction

  “(6) The person is allowed the deduction for the income year for which the transfer is made.

  “Defined in this Act: deduction, environmental restoration account, income tax, income year. maximum payment, tax year, taxable income,

“EK 9 Refund of payment if excess, lacking details

• “When this section applies

  “(1) This section applies if a person's payment under section EK 2 for an income year is—

  • “(a) more than the person's maximum payment for the income year:

  • “(b) made without providing the details required by section EK 5.

  “Refund

  “(2) As soon as practicable after the date on which the payment is received, the Commissioner must refund to the person—

  • “(a) the excess, if the payment is more than the person's maximum payment for the income year:

  • “(b) the payment, if the payment is described by subsection (1)(b).

  “No interest payable by Commissioner

  “(3) No interest is payable by the Commissioner under section EK 6 on the amount of the payment.

  “Defined in this Act: Commissioner, income year, interest, maximum payment,

“EK 10 Certain refunds not income

• A refund under section EK 9 is excluded income under section CX 43B (Refund from environmental restoration account).

  “Defined in this Act: excluded income,

“EK 11 Application for refund

• “Who may apply

  “(1) A person may apply to the Commissioner for a refund under section EK 12 of an amount in the person's environmental restoration account if the refund—

  • “(a) corresponds to expenditure incurred by the person of a type that is listed in schedule 6B, part B (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant) and not in schedule 6B, part C:

  • “(b) represents an excess in the person's environmental restoration account over the maximum account balance for the person's environmental restoration account for the income year.

  “Application

  “(2) An application for a refund must—

  • “(a) be in writing; and

  • “(b) state the grounds on which the application is made; and

  • “(c) provide evidence satisfactory to the Commissioner verifying the existence of the grounds; and

  • “(d) state the amount of the refund that the applicant wants.

  “Defined in this Act: Commissioner, environmental restoration account, income year,

“EK 12 Refund

• “When this section applies

  “(1) This section applies when—

  • “(a) a person wants a refund of some or all of the amount in the person's environmental restoration account and none of sections EK 9, EK 15, EK 16, and EK 19 applies:

  • “(b) the amount in the person's environmental restoration account exceeds the maximum account balance for an income year.

  “Refund if request made

  “(2) The Commissioner must make a refund under this section to a person if—

  • “(a) the person applies for a refund and has incurred expenditure—

    • “(i) of a type that is listed in schedule 6B, part B (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant) and not in schedule 6B, part C; and

    • “(ii) of an amount equal to or greater than the amount given by subsection (3) for the amount of the refund; and

    • “(iii) after the first date on which the person made to the Commissioner a payment under section EK 2 for entry in the person's environmental restoration account or a transfer under section EK 15, EK 16, or EK 19 was made to the person's environmental restoration account:

  • “(b) the maximum account balance for the latest complete income year for the person's environmental restoration account is less than the amount in the environmental restoration account at the end of that income year.

  “Minimum amount of expenditure incurred

  “(3) The amount of expenditure incurred that corresponds to the amount of a refund is calculated using the formula—

  

  “Definitions of items in formula

  “(4) The items in the formula are defined in subsections (5) and (6).

  “Amount

  “(5) Amount is the amount of the refund.

  “Tax rate

  “(6) Tax rate is the highest rate of income tax on taxable income that—

  • “(a) is stated in schedule 1; and

  • “(b) would apply to the person for the tax year if the person had sufficient taxable income.

  “Amount of refund if expenditure incurred

  “(7) If a person is entitled to a refund under subsection (2)(a), the amount that the Commissioner must refund to the person is the smallest of—

  • “(a) the refund for which the person applies:

  • “(b) the contents of the person's environmental restoration account at the time of the refund:

  • “(c) the refund corresponding to the person's expenditure that satisfies subsection (2)(a)(i) to (iii).

  “Amount of refund if maximum account balance decreases

  “(8) If a person is entitled to a refund under subsection (2)(b), the amount that the Commissioner must refund to the person is the lesser of—

  • “(a) the refund for which the person applies:

  • “(b) the difference at the end of the latest complete income year between—

    • “(i) the amount in the person's environmental restoration account, after any transfer under section EK 15, EK 16, or EK 19 for the income year:

    • “(ii) the person's maximum account balance for that income year.

  “Section EK 17 overrides subsections (7) and (8)

  “(9) Section EK 17 overrides subsections (7) and (8).

  “Defined in this Act: amount, Commissioner, environmental restoration account, income tax, income year, maximum account balance, tax year, taxable income,

“EK 13 Income when refund given on request

• A refund under section EK 12 is income, of the amount given by section CB 24B (Environmental restoration accounts), derived by the person in the income year in which the person receives the refund.

  “Defined in this Act: Commissioner, income, income year,

“EK 14 Application for transfer

• “Who may apply

  “(1) A person may apply to the Commissioner for a transfer under section EK 15 from the amount in the person's environmental restoration account.

  “Application

  “(2) An application for a transfer must—

  • “(a) be in writing; and

  • “(b) state the grounds on which the application is made; and

  • “(c) state the amount of the transfer that the applicant wants.

  “Defined in this Act: Commissioner, environmental restoration account,

“EK 15 Transfer on request

• “When this section applies

  “(1) This section applies if—

  • “(a) a person applies under section EK 14 for a transfer of some or all of the amount in their environmental restoration account to a person who is nominated in the application; and

  • “(b) the person has transferred to the nominated person the obligations to which the amount relates; and

  • “(c) none of sections EK 9, EK 12, EK 16, and EK 19 applies.

  “Transfer if request made

  “(2) The Commissioner must make a transfer under this section to an environmental restoration account of the person nominated in the application.

  “Transfer treated as payment by nominated person if transfer of obligations verified

  “(3) A transfer under subsection (2) is treated as being a payment by the nominated person to the nominated person's environmental restoration account if the nominated person satisfies the Commissioner that—

  • “(a) the obligations to which the transferred amount relates have been transferred to the nominated person; and

  • “(b) in the absence of the transfer, the nominated person would be entitled to make a payment, of the amount of the transfer, to the nominated person's environmental restoration account.

  “Commissioner to reverse transfer if not satisfied under subsection (3)

  “(4) If the nominated person does not satisfy the requirements of subsection (3) in relation to an amount, the Commissioner must transfer the amount to the environmental restoration account of the person who made the application under subsection (1)(a).

  “Timing of reversal

  “(5) The transfer under subsection (4) is treated as taking place at the time of the original transfer under subsection (2).

  “Defined in this Act: Commissioner, environmental restoration account,

“EK 16 Transfer on death, bankruptcy, or liquidation

• “When this section applies

  “(1) This section applies if a person—

  • “(a) has an environmental restoration account; and

  • “(b) does one of the following:

    • “(i) dies:

    • “(ii) becomes bankrupt:

    • “(iii) is put into liquidation.

  “Transfer to other person

  “(2) Subsection (3) applies if the Commissioner is informed, by the administrator of the person's estate, the Official Assignee, or the person's liquidator, that the obligation to which the balance in the person's environmental restoration account relates has been transferred to another person.

  “Transfer to Crown or other person

  “(3) The Commissioner must transfer the amount referred to in subsection (4) to—

  • “(a) the department that is at the time responsible for the administration of the Environment Act 1986, if the transfer is to Her Majesty the Queen in right of New Zealand; or

  • “(b) an environmental restoration account of the person to whom the obligation has been transferred, if paragraph (a) does not apply.

  “Amount of transfer

  “(4) The Commissioner must transfer under subsection (3) the amount that is in the person's environmental restoration account—

  • “(a) on the date on which the person dies, if subsection (1)(b)(i) applies:

  • “(b) on the date on which the person becomes bankrupt, if subsection (1)(b)(ii) applies:

  • “(c) on the date on which the person is put into liquidation, if subsection (1)(b)(iii) applies.

  “Section EK 17 overrides subsection (4)

  “(5) Section EK 17 overrides subsection (4).

  “Year of income

  “(6) The amount of a transfer under this section is income, under section CB 24B (Environmental restoration accounts), derived by the person on the day before the day on which the amount of the transfer is determined under subsection (4).

  “Defined in this Act: amount, Commissioner, environmental restoration account, income, liquidation,

“EK 17 Minimum refund or transfer

• The Commissioner must not give a refund or make a transfer under any of sections EK 9, EK 12, EK 15, EK 16, and EK 19 that is less than the lesser of—

  • “(a) $1,000; and

  • “(b) the balance in the person's environmental restoration account on the date on which the refund or transfer is made.

  “Defined in this Act: Commissioner, environmental restoration account,

“EK 18 Payments from which refunds come

• Each refund to a person is treated as coming from the total amount in the person's environmental restoration account in the order in which the person made the payments into the account.

  “Defined in this Act: amount, environmental restoration account,

“EK 19 Environmental restoration account of amalgamating company

• If an amalgamating company with an environmental restoration account ceases to exist because of an amalgamation during an income year,—

  • “(a) the contents of the environmental restoration account of the amalgamating company are transferred to an environmental restoration account of the amalgamated company on the date of the amalgamation:

  • “(b) the amalgamated company is treated as having—

    • “(i) made to the amalgamated company's environmental restoration account the payments that the amalgamating company made before the amalgamation to the amalgamating company's environmental restoration account; and

    • “(ii) made from the amalgamated company's environmental restoration account the transfers that the amalgamating company made before the amalgamation from the amalgamating company's environmental restoration account; and

    • “(iii) received from the amalgamated company's environmental restoration account the refunds that the amalgamating company received before the amalgamation from the amalgamating company's environmental restoration account.

  “Defined in this Act: amalgamated company, amalgamating company, amalgamation, environmental restoration account, income year,

“EK 20 Environmental restoration account of member of consolidated group

• “Member may have environmental restoration account

  “(1) A member of a consolidated group may have an environmental restoration account.

  “Nominated company for group may act on behalf of member

  “(2) The nominated company for the consolidated group may make payments and applications and receive refunds under this subpart on behalf of the member.

  “Use of consolidated financial statements for group

  “(3) In making payments and applications under this subpart, the nominated company may rely on the audited consolidated financial statements for the consolidated group.

  “Use of consolidated figures for liabilities anticipated and expenditure incurred

  “(4) If the nominated company relies on the audited consolidated financial statements for the consolidated group, the consolidated figures for the anticipated liabilities and incurred expenditure of the consolidated group are attributed to the members on the basis of the individual obligations of the members to incur expenditure of a type listed in schedule 6B, part B (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant) and not in schedule 6B, part C.

  “Defined in this Act: consolidated group, environmental restoration account, nominated company,

“EK 21 Commissioner may require notice in electronic format

• The Commissioner may require a person to provide a notice under this subpart in an electronic format that the Commissioner prescribes under section 36BC of the Tax Administration Act 1994.

  “Defined in this Act: Commissioner,

“EK 22 Meaning of maximum payment

• “Meaning of maximum payment

  “(1) In this subpart, maximum payment means the maximum payment that under subsection (2) a person may make to the person's environmental restoration account for an income year.

  “Amount of maximum payment

  “(2) The maximum payment that a person may make for an income year is the lesser of—

  • “(a) the amount by which the maximum account balance for the income year for the environmental restoration account exceeds the amount in the environmental restoration account at the end of the income year:

  • “(b) the amount, if any, given for the person and the income year by subsection (3).

  “Maximum payment for first 5 years of environmental restoration funds scheme

  “(3) If a person has a maximum account balance for the 2005-06 income year that is more than zero, the amount given by this subsection for the person and for that income year, and for each of the later income years before the 2010-11 income year, is the amount given by the formula—

  level increase + (year x 0.2 x initial level) – contents.

  “Definitions of items in formula

  “(4) In the formula,—

  • “(a) level increase is the greater of zero and the amount by which the maximum account balance for the income year exceeds the maximum account balance for the 2005-06 income year:

  • “(b) year is 1 for the 2005-06 income year and increases by 1 for each successive income year to a maximum of 5 for the 2009-10 income year:

  • “(c) initial level is the maximum account balance for the 2005-06 income year:

  • “(d) contents is the amount in the environmental restoration account at the end of the income year.

  “Defined in this Act: amount, business, environmental restoration account, income year, maximum payment,

“EK 23 Other definitions

• “Meaning of maximum account balance

  “(1) In this subpart, maximum account balance for a person and an income year means—

  • “(a) if the person does not satisfy section EK 2 for the income year, zero:

  • “(b) if the person satisfies section EK 2 for the income year, the amount calculated using the formula—

    provision x tax rate.

  “Definitions of items in formula

  “(2) In the formula in subsection (1)(b)—

  • “(a) provision is the provision in the person's financial statements for future expenditure that—

    • “(i) is of a type listed in schedule 6B, part B (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant); and

    • “(ii) is not of a type listed in schedule 6B, part C:

  • “(b) tax rate is the highest rate of income tax on taxable income that—

    • “(i) is stated in schedule 1; and

    • “(ii) would apply to the person for the tax year if the person had sufficient taxable income.

  “Meaning of environmental restoration account

  “(3) In this subpart, environmental restoration account, for a person, means the account that the Commissioner keeps in the person's name under section EK 4.

  “Defined in this Act: business, Commissioner, environmental restoration account, income tax, income year, taxable income., ”

• “(c) the insurer or other person is treated as being resident in Switzerland for the purposes of a double tax agreement between the government of New Zealand and the government of Switzerland.”

• “(1) A taxpayer is not subject for a tax year to the interest apportionment rule in section FG 8 or the adjustment of annual total deduction in section FG 8B unless, at a time in the taxpayer's income year, the taxpayer—

  • “(a) is a non-resident who is not a company:

  • “(b) is a company that is a non-resident in which—

    • “(i) no person who is resident in New Zealand has a direct ownership interest that is equal to or greater than 50%:

    • “(ii) a non-resident has a direct ownership interest that, when aggregated with the direct ownership interests of persons associated with the non-resident, is equal to or greater than 50%:

  • “(c) is a company that is resident in New Zealand—

    • “(i) in which a non-resident has an ownership interest that is equal to or greater than 50%:

    • “(ii) of which a non-resident has control by any other means:

  • “(d) is the trustee of a non-qualifying trust for which 50% or more in value of the settlements on the trust is settled by—

    • “(i) a non-resident:

    • “(ii) persons who are associated with the non-resident.”

“FG 3 When interest apportioned under section FG 8 or annual total deduction adjusted under section FG 8B

• “(1) A taxpayer who is not excluded by section FG 2 from the application of section FG 8 for a tax year is required to make an apportionment under section FG 8 of interest expenditure incurred during the corresponding income year of the taxpayer if the taxpayer—

  • “(a) at no time in the income year—

    • “(i) is a reporting bank for a New Zealand banking group:

    • “(ii) is part of a New Zealand banking group for the purpose of section FG 8C; and

  • “(b) has a New Zealand group debt percentage for the income year that—

    • “(i) is greater than 75%; and

    • “(ii) if the taxpayer is a company or a trustee, exceeds the number obtained by multiplying the worldwide group debt percentage of the taxpayer by 1.1.

  “(2) A taxpayer who is not excluded by section FG 2 from the application of section FG 8B for a tax year is treated as having an annual total deduction for the tax year of an amount that is given by section FG 8B if—

  • “(a) at a time in the taxpayer's corresponding income year the taxpayer is the reporting bank for a New Zealand banking group; and

  • “(b) the New Zealand banking group has a New Zealand net equity, as defined in section FG 8G, of less than the net equity threshold for the New Zealand banking group, as defined in section FG 8H, on a measurement day for the taxpayer's corresponding income year, as defined in section FG 8E.”

• “(c) are not members of the New Zealand banking group of a registered bank.”

• “(c) are not members of the New Zealand banking group of a registered bank.”

• “(aa) none of the taxpayer and the other companies is a member of a New Zealand banking group; and”.

“FG 8B Adjustment of annual total deduction—reporting bank

• “(1) For a taxpayer that is a reporting bank and under section FG 3(2) has an annual total deduction for a tax year given by this section, the taxpayer's annual total deduction for the tax year is,—

  • “(a) if the New Zealand banking group of the reporting bank has a group funding debt for the tax year that is not zero, the amount calculated using the formula—

    unadjusted annual total deduction –adjustments:

  • “(b) if the New Zealand banking group of the reporting bank has a group funding debt for the tax year of zero, the annual total deduction for the tax year that the taxpayer would have had in the absence of this section and section FG 3(2).

  “(2) In the formula in subsection (1)(a),—

  • “(a) unadjusted annual total deduction is the annual total deduction for the tax year that the taxpayer would have had in the absence of this section and section FG 3(2):

  • “(b) adjustments is the sum of the income adjustment amounts that are given by subsection (4) for the measurement periods for the corresponding income year of the reporting bank.

  “(3) The group funding debt for a tax year for the New Zealand banking group of a reporting bank means the amount calculated using the formula—

  

  “where—

  • “SFI is the sum of the amounts for the tax year, each of which is the financial value for the New Zealand banking group of interest-bearing debt calculated under generally accepted accounting practice for a group quarter day

  • “FID is the sum of the amounts for the tax year, each of which is the financial value for the New Zealand banking group, on a group quarter day, of financial arrangements—

    • “(a) for which the consolidated financial statements of the New Zealand banking group would show, in the corresponding income year of the reporting bank, a deduction—

      • “(i) under 1 or more of sections DB 6 to DB 8; and

      • “(ii) other than as a consequence of a fluctuation in the value of a currency of a country relative to the value of a currency of another country; and

    • “(b) that do not contribute to item SFI

  • “FTE is the sum of the amounts for the tax year, each of which is the financial value for the New Zealand banking group, on a group quarter day, of shares that contribute to item SFI

  • “NQ is the number of group quarter days in the corresponding income year of the registered bank.

  “(4) For a measurement day in an income year of a reporting bank, the adjustment amount for a reporting bank is the amount calculated using the formula—

  

  “where—

  • “NET is the net equity threshold for the New Zealand banking group for the measurement day

  • “NZE is the lesser of—

    • “(a) the net equity threshold for the New Zealand banking group for the measurement day:

    • “(b) the New Zealand net equity for the New Zealand banking group for the measurement day

  • “I is the financial value for the New Zealand banking group, on the last day of the income year, of expenditure that—

    • “(a) is incurred by a member of the New Zealand banking group in the income year; and

    • “(b) is an interest expense under generally accepted accounting practice, incurred other than in relation to a share that contributes to item SFI, or is a deduction referred to in paragraph (a) of the definition of item FID in subclause (3)

  • “GFD is the group funding debt for the tax year for the New Zealand banking group

  • “PD is the number of days in the measurement period that corresponds to the measurement day

  • “YD is the number of days in the income year.

  “(5) If this Act requires that the annual total deduction for a reporting bank for an income year be apportioned between 2 or more parts of the income year, the adjustment amount under subsection (4) for a measurement day in the income year is attributed to the part containing the measurement day.

  “(6) In this section, group quarter day for a registered bank and a tax year means a day—

  • “(a) that is the last day of a quarter in the corresponding income year of the registered bank; and

  • “(b) on which the registered bank is a reporting bank.

“FG 8C New Zealand banking group of registered bank

• “(1) The New Zealand banking group of a registered bank for a measurement period consists of every person or fixed establishment that on the measurement day for the measurement period is—

  • “(a) a member under subsection (2) or a potential member under subsection (3) or (4); and

  • “(b) not excluded by an election under subsection (8).

  “(2) If the registered bank—

  • “(a) is resident in New Zealand, the registered bank is a member:

  • “(b) is not resident in New Zealand, a fixed establishment in New Zealand of the registered bank is treated as being a person who is—

    • “(i) separate from the registered bank; and

    • “(ii) a member.

  “(3) A person who is a New Zealand resident is a potential member if—

  • “(a) the person satisfies subsection (5) and—

    • “(i) the registered bank is resident in New Zealand; and

    • “(ii) there is no non-resident who is an ultimate parent of the registered bank under subsection (9):

  • “(b) the person satisfies subsection (6) and—

    • “(i) the registered bank is a non-resident; and

    • “(ii) there is no non-resident who is an ultimate parent of the registered bank under subsection (9):

  • “(c) the person satisfies subsection (7) and there is a non-resident who is an ultimate parent of the registered bank under subsection (9).

  “(4) A fixed establishment in New Zealand of a non-resident is treated as being a person who is separate from the non-resident and a potential member if—

  • “(a) the fixed establishment satisfies subsection (6) and—

    • “(i) the registered bank is a non-resident; and

    • “(ii) there is no non-resident who is an ultimate parent of the registered bank under subsection (9):

  • “(b) the fixed establishment satisfies subsection (7) and there is a non-resident who is an ultimate parent of the registered bank under subsection (9).

  “(5) A person satisfies this subsection if,—

  • “(a) under generally accepted accounting practice, consolidated group accounts—

    • “(i) are required to include the person and the registered bank:

    • “(ii) would be required to include the person and the registered bank but for relevant materiality thresholds:

  • “(b) the person is in the same group of companies as the registered bank under section IG 1(2).

  “(6) A person or fixed establishment satisfies this subsection if,—

  • “(a) under generally accepted accounting practice, the person or fixed establishment would be required to be included in consolidated group accounts with the registered bank if—

    • “(i) the registered bank were resident in New Zealand; and

    • “(ii) the relevant materiality thresholds were satisfied:

  • “(b) the person is in the same group of companies as the registered bank under section IG 1(2).

  “(7) A person or fixed establishment satisfies this subsection if,—

  • “(a) under generally accepted accounting practice, the person or fixed establishment would be required to be included in consolidated group accounts with the ultimate parent of the registered bank if—

    • “(i) the ultimate parent were resident in New Zealand; and

    • “(ii) the relevant materiality thresholds were satisfied:

  • “(b) the person is in the same group of companies as the ultimate parent under section IG 1(2).

  “(8) A reporting bank may elect under this subsection to exclude from the New Zealand banking group of the reporting bank—

  • “(a) a person or a fixed establishment, whose main activity is the providing of life insurance:

  • “(b) a person who—

    • “(i) is resident in New Zealand; and

    • “(ii) has a voting interest of 100% in a person who is excluded by an election under paragraph (a); and

    • “(iii) does not have a main activity that is banking, financing or leasing; and

    • “(iv) does not have a main activity that involves the ownership or control of entities having a main activity of banking, financing or leasing:

  • “(c) a fixed establishment of a non-resident, if—

    • “(i) the non-resident has a voting interest of 100% in a person who is excluded by an election under paragraph (a); and

    • “(ii) the fixed establishment has a main activity of financing the person who is excluded by the election under paragraph (a); and

    • “(iii) the fixed establishment does not have a main activity that is banking, financing or leasing, other than the activity referred to in subparagraph (ii); and

    • “(iv) the fixed establishment does not have a main activity that involves the ownership or control of entities having a main activity of banking, financing or leasing:

  • “(d) a person who—

    • “(i) is resident in New Zealand; and

    • “(ii) under generally accepted accounting practice is required for the making of financial reports to be included in consolidated group accounts with a person or fixed establishment who is excluded by an election under paragraph (a) or (b); and

    • “(iii) does not have a main activity that is banking, financing or leasing; and

    • “(iv) does not have a main activity that involves the ownership or control of entities having a main activity of banking, financing or leasing.

  “(9) For the purposes of this section, the ultimate parent of a registered bank is a company—

  • “(a) that has an ownership interest in the registered bank, calculated under section FG 2, of 50% or more; and

  • “(b) in which no ownership interest, as calculated under section FG 2, is held by a company that holds an ownership interest in the registered bank, calculated under section FG 2, of 50% or more.

  “(10) For the purposes of this section, the ultimate parent of a fixed establishment in New Zealand of a registered bank is the registered bank.

“FG 8D Reporting bank for New Zealand banking group

• “(1) For a New Zealand banking group that on a day includes a single registered bank, or includes no registered bank but includes a fixed establishment of a single registered bank, the reporting bank for the day is the registered bank.

  “(2) For a New Zealand banking group that on a day includes more than 1 registered bank, the reporting bank for the day is—

  • “(a) the registered bank that first gives notice to the Commissioner of an election to be the reporting bank, if the Commissioner receives such a notice by the day that is 6 months after the end of the tax year in which the day occurs:

  • “(b) the registered bank chosen by the Commissioner, if paragraph (a) does not apply.

  “(3) For a New Zealand banking group that on a day includes no registered bank but includes fixed establishments of more than 1 registered bank, the reporting bank for the day is—

  • “(a) the registered bank that first gives notice to the Commissioner of an election to be the reporting bank, if the Commissioner receives such a notice by the day that is 6 months after the end of the tax year in which the day occurs:

  • “(b) the registered bank chosen by the Commissioner, if paragraph (a) does not apply.

“FG 8E Measurement periods and measurement days

• “(1) For the New Zealand banking group and income year of a reporting bank, the measurement periods are—

  • “(a) the quarters in the income year, if the reporting bank does not make an election under paragraph (b) or (c):

  • “(b) each calendar month of the income year, if the reporting bank elects that the New Zealand banking group have such measurement periods:

  • “(c) each day of the income year, if the reporting bank elects that the New Zealand banking group have such measurement periods.

  “(2) For the New Zealand banking group and income year of a reporting bank, the measurement days are each last day of each measurement period if the measurement periods are given by subsection (1)(a) or (b).

  “(3) If there is a change in the identity of the reporting bank for a New Zealand banking group, the measurement period corresponding to the first measurement day for the new reporting bank begins on the day after the last measurement day for the former reporting bank.

“FG 8F Financial value and regulatory value

• “(1) In sections FG 8B to FG 8J, the financial value of an item for a New Zealand banking group at a time is the amount that would be recorded for the item in financial statements for the New Zealand banking group that—

  • “(a) related to the time; and

  • “(b) were prepared for external reporting purposes; and

  • “(c) were produced consistently with generally accepted accounting practice at the time by—

    • “(i) consolidating the financial statements for the members of the New Zealand banking group that are in the same group of companies; and

    • “(ii) if more than 1 consolidation is required under subparagraph (i), combining the consolidated financial statements so as to eliminate inter-group transactions.

  “(2) In sections FG 8B to FG 8J, the regulatory value of an item for a New Zealand banking group at a time is the total risk-weighted value for the item that would be obtained for the New Zealand banking group if the New Zealand banking group were a banking group for the purposes of the Capital Adequacy Framework that is issued by the Reserve Bank of New Zealand acting in the prudential supervision of registered banks under the Reserve Bank of New Zealand Act 1989.

“FG 8G New Zealand net equity of New Zealand banking group

• “(1) The New Zealand net equity of the New Zealand banking group of a registered bank for a measurement day is given by the following formula:

  EQV – FRS – EID – UPB – INTG – CGA – REV – TXB – CEFA – NAFA – EOI – NOIA – AEQ – AEQI

  “where—

  • “EQV is the sum of the following amounts for the New Zealand banking group:

    • “(a) the financial value for the measurement day of—

      • “(i) the shareholders' equity for the New Zealand banking group; and

      • “(ii) the branch equity relating to fixed establishments of the New Zealand banking group:

    • “(b) the financial value for the measurement day of shares, each of which—

      • “(i) is issued by a member of the taxpayer's New Zealand banking group; and

      • “(ii) does not contribute to the amount referred to in paragraph (a):

    • “(c) the financial value for the measurement day of financial arrangements, each of which is a loan, or the provision of funds by a non-resident to its fixed establishment that—

      • “(i) is not taken into account in the calculation of the group funding debt of the New Zealand banking group; and

      • “(ii) is made by a non-resident who is not a member of the New Zealand banking group and is associated with a member of the New Zealand banking group under section OD 7 or OD 8(3); and

      • “(iii) is made to a member of the New Zealand banking group; and

      • “(iv) does not contribute to the amount referred to in paragraph (a); and

      • “(v) does not give rise to interest expenditure other than as a result of a fluctuation in the value of a currency of a country relative to the value of a currency of another country; and

      • “(vi) does not relate to a supply of goods or services

  • “FRS is the financial value for the measurement day of fixed rate shares, each of which is—

    • “(a) issued by a member of the New Zealand banking group; and

    • “(b) owned by a person who is resident in New Zealand; and

    • “(c) included in the value of item EQV; and

    • “(d) issued by the member—

      • “(i) on or after 1 January 2005:

      • “(ii) before 1 January 2005, if the measurement period begins on or after 1 January 2010

  • “EID is the financial value for the measurement day of financial arrangements, each of which—

    • “(a) is taken into account under paragraph (a) or (b) of the definition of item EQV in calculating the value of that item; and

    • “(b) gives rise to a deduction for the tax year under 1 or more of sections DB 6 to DB 8 for a member of the New Zealand banking group

  • “UPB is the financial value for the measurement day of unvested policyholder benefit liabilities and policy-holder retained profits that contribute to the value of item EQV

  • “INTG is the financial value for the measurement day of intangible assets, other than—

    • “(a) goodwill relating to a business that is not banking, financing, leasing, or life insurance and that—

      • “(i) is acquired from a person who, at the time of acquisition, is not associated under section OD 7 or OD 8(3) with a member of the New Zealand banking group:

      • “(ii) relates to an entity that is acquired from a person who is not associated under section OD 7 or OD 8(3) with a member of the New Zealand banking group:

    • “(b) a film or film right:

    • “(c) property that is depreciable property or is expected to become depreciable property

    • “CGA is the sum for the measurement day of capital gain amounts, each of which arises for the 2004-05 or a later tax year from a transfer of an intangible asset between a member of the New Zealand banking group and a person who—

      • “(a) is not a member of the New Zealand banking group; and

      • “(b) is associated with a member of the New Zealand banking group under section OD 7 or OD 8(3)

    • “REV is the financial value for the measurement day of revaluation reserves that contribute to the value of item EQV

    • “TXB is the financial value for the measurement day of net future tax benefits that are taken into account in determining the value of item EQV and arise from—

      • “(a) net losses for the tax year:

      • “(b) losses carried forward from an earlier tax year:

      • “(c) timing or temporary differences to the extent that the items giving rise to the timing or temporary differences would contribute to a net loss for the tax year if the items were deductible in the tax year

    • “CEFA is the financial value for the measurement day of the credit enhancements provided by members of the New Zealand banking group, each of which is, for the purpose of the Capital Adequacy Framework that is issued by the Reserve Bank of New Zealand,—

      • “(a) a credit enhancement that is provided to an associated funds management and securitisation scheme of a non-member:

      • “(b) a credit enhancement that is provided to an affiliated insurance group that is a non-member and has not been expensed

    • “NAFA is the financial value for the measurement day of advances by members of the New Zealand banking group, each of which is, for the purpose of the Capital Adequacy Framework that is issued by the Reserve Bank of New Zealand, an advance of a capital nature to a connected person who is not a member of the New Zealand banking group

    • “EOI is the amount that would, if the New Zealand banking group included the potential members of the New Zealand banking group and before any set-off allowed under generally accepted accounting practice, be the financial value for the measurement day of shares in non-residents that—

      • “(a) are held by—

        • “(i) a member or potential member of the New Zealand banking group:

        • “(ii) a company resident in New Zealand in which a member or potential member of the New Zealand banking group holds a direct voting interest of 10% or more and that, in the income year, pays to the member or potential member a dividend to which a conduit tax relief credit is attached; and

      • “(b) are not interests in foreign investment funds for which the FIF income or loss is calculated using the comparative value method or the deemed rate of return method; and

      • “(c) are not shares in a grey list company that—

        • “(i) are listed on the official list of a recognised exchange; and

        • “(ii) are revenue account property; and

        • “(iii) would not be a sufficient interest in the offshore company if the class of the shares were the only class of share issued by the offshore company

    • “NOIA is the notional offshore investment amount for the New Zealand banking group for the income year of the reporting bank, as defined in subsection (4)

    • “AEQ is the financial value for the measurement day of interests, each of which is taken into account in calculating item EQV and is held by a person who—

      • “(a) is not a member of the New Zealand banking group; and

      • “(b) is not a member of the New Zealand banking group because of an election under section FG 8C(8); and

      • “(c) is resident in New Zealand or holds the interest through a fixed establishment in New Zealand

    • “AEQI is the financial value for the measurement day of—

      • “(a) shares in persons who are not members of the New Zealand banking group because of an election under section FG 8C(8):

      • “(b) loans, other than on arm's-length terms, to persons who are not members of the New Zealand banking group because of an election under section FG 8C(8).

  “(2) Subsection (3) applies if a component of an item, other than the item NOIA, that is subtracted from the item EQV under subsection (1) is a component of 1 or more other such items.

  “(3) The value of the component is included in a single item for which the value of the component is not less than the value of the component for each of the other items.

  “(4) The notional offshore investment amount for a New Zealand banking group for an income year of the reporting bank for the New Zealand banking group is the greater of zero and the amount given by the following formula:

  

  “where—

  • “FTC is the total for the tax year of foreign tax credits each of which—

    • “(a) is claimed as a credit against the income tax liability for the tax year of—

      • “(i) a member of the New Zealand banking group:

      • “(ii) a person who is excluded from the New Zealand banking group by an election under section FG 8C(7); and

    • “(b) does not arise from attributed CFC income or from FIF income; and

    • “(c) does not arise from income derived before 1 July 2005

  • “DMT is the amount—

    • “(a) set by the Governor-General by Order in Council as the threshold amount for the application of this subsection; or

    • “(b) equal to $5,000,000, if no threshold amount is set under paragraph (a) and paragraph (c) does not apply; or

    • “(c) equal to $416,667 multiplied by the number of months beginning on or after 1 July 2005 in the corresponding income year for the reporting bank, if the corresponding income year includes that date and no threshold amount is set under paragraph (a)

  • “CRT is the rate of tax for companies referred to in schedule 1, part A, item 5 for the tax year

  • “IRR is the amount—

    • “(a) set by the Governor-General by Order in Council as the interest rate of return for the purposes of this subsection; or

    • “(b) of 7% per year, if no interest rate of return is set under paragraph (a)

  • “NM is the number of months beginning on or after 1 July 2005 in the income year of the reporting bank for the New Zealand banking group.

  “(5) The Governor-General may, from time to time by Order in Council,—

  • “(a) specify a type of instrument that is included in item EQV for the purposes of subsection (1):

  • “(b) specify a type of instrument that is not included in item EQV for the purposes of subsection (1):

  • “(c) set, replace, or repeal a figure for a threshold amount for a value of an instrument, or aggregate value of a type of instrument, held by a person or group of persons for the purposes of a specification under paragraph (a) or (b):

  • “(d) amend or delete a specification under paragraph (a) to (c):

  • “(e) set, replace, or repeal a figure for the threshold amount for the purposes of paragraph (a) of the definition of item DMT in subsection (4):

  • “(f) set, replace, or repeal a figure for the interest rate of return for the purposes of paragraph (a) of the definition of item IRR in subsection (4).

  “(6) An Order in Council under subsection (5) may—

  • “(a) come into effect on or after 1 July 2005:

  • “(b) apply for measurement periods and quarters that—

    • “(i) are in the 2005-06 or a subsequent income year; and

    • “(ii) commence on or after 1 July 2005.

“FG 8H Net equity threshold

• “(1) The net equity threshold for a measurement day for the New Zealand banking group of a registered bank is given by the following formula:

  0.04 x (RWE – DEQ)

  “where—

  • “RWE is the sum of the following values for the measurement day:

    • “(a) for an asset that is included in a balance sheet, the regulatory value of the asset:

    • “(b) for an exposure that is not included in a balance sheet, the regulatory value of the exposure:

    • “(c) for goodwill that is not taken into account in calculating item INTG in determining the New Zealand net equity of the New Zealand banking group, the financial value of the goodwill

  • “DEQ is the total of the regulatory values for the measurement day of items, other than item NOIA, that are deducted from item EQV in determining the New Zealand net equity of the New Zealand banking group.

  “(2) For the purposes of subsection (1), the assets of a fixed establishment include the assets that are treated as being the assets of the fixed establishment under generally accepted accounting practice.

“FG 8I Valuation of debt and risk-weighted exposures

• For the purposes of sections FG 8B to FG 8H, the value on a day of a financial arrangement or risk-weighted exposure that is denominated in a foreign currency must be determined—

  • “(a) in New Zealand currency; and

  • “(b) using the close of trading spot exchange rate for the foreign currency on the day.

“FG 8J Treatment of temporary change in New Zealand net equity or net equity threshold

• A change in a quantity that, but for this subsection, would produce a temporary change in the New Zealand net equity or net equity threshold of the New Zealand banking group of a registered bank does not affect the value of the New Zealand net equity or net equity threshold if the change is produced by an arrangement that has an effect of defeating the intent and application of sections FG 8B to FG 8I.”