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Income Tax Act 2007
Income Tax Act 2007
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Income Tax Act 2007
Part I Treatment of tax losses
Subpart IA—General rules for tax losses
Contents
IA 1 What this subpart does
This subpart—
(a)
defines the relationship between the core provisions of this Act, the provisions of this Part, and other provisions in this Act that allow a person with a tax loss to use the amount of the loss; and
(b)
establishes the general rules for using a tax loss.
Defined in this Act: amount, tax loss
Compare: 2004 No 35 s IE 1(1)(a)
IA 2 Tax losses
What is a tax loss?
(1)
A person’s tax loss for a tax year is found by adding together the amounts referred to in subsections (2) to (4).
Loss balances carried forward
(2)
If the person has a loss balance carried forward under section IA 3(4) to the tax year, the amount is included in their tax loss for the tax year to the extent to which it is not subtracted under section IA 4(1)(a) from their net income for the tax year.
Net losses
(3)
If the person has a net loss under section BC 4 (Net income and net loss) for the tax year, the amount is a tax loss component included in their tax loss for the tax year.
Additional amounts
(4)
If the person is described in 1 or more of the following paragraphs and has the amount described in the paragraph, the amount is included as a tax loss component in their tax loss for the tax year:
(a)
a member fund that incurs excess expenditure:
(i)
the amount that is included in the tax loss under section DV 5(4)(b) (Investment funds: transfer of expenditure to master funds); and
(ii)
the amount that the fund chooses under section DV 7(2) (Carry forward of expenditure) to treat as an amount added to the tax loss under this section:
(b)
a person whose imputation credits are included in their annual gross income for the tax year: the amount of converted imputation credits arising under section LE 2 (Use of remaining credits by companies and trustees) for the tax year:
(c)
a person who has an unallocated deduction for the payment of a supplementary dividend in the corresponding income year: the amount referred to in section LP 10(3) (Limitation on deductions) for the tax year:
(d)
a company (company A) if an Australian ICA company has chosen under section OB 69(5) (Further income tax paid satisfying liability for income tax) to have a payment converted into a tax loss component of company A: the amount calculated under section OB 69(7) for the tax year:
(e)
a person who has an unused attributed controlled foreign company (CFC) net loss for the tax year: the amount referred to in section IQ 2(3) (Ring-fencing cap on attributed CFC net losses) for the tax year:
(f)
a person who has an unused foreign investment fund (FIF) net loss for the tax year: the amount referred to in section IQ 3(3) (Ring-fencing cap on FIF net losses) for the tax year:
(g)
a person with an unused specified activity net loss: the amount of the unused specified activity net loss to the extent to which the amount has not been subtracted under section IA 4(1)(a) from net income for a tax year:
(h)
a person who has a mismatch amount under section FH 8 (Expenditure or loss through hybrid entity or foreign deducting branch producing double deduction without double income) that is not set off under section FH 12 (Offset of mismatch amounts against surplus assessable income), the amount given by section FH 12(8) for the tax year.
Ring-fenced amounts
(5)
This section, and sections IA 3 and IA 4, do not apply to the amounts referred to in section IA 7, which are subject to particular rules in other Parts or subparts that limit the way in which a person may use them.
Exclusion: net losses from schedular income[Repealed]
(6)
[Repealed]Meaning of tax loss component
(7)
A tax loss component, for a tax year,—
(a)
means an amount included in a tax loss for the tax year under subsection (3) or (4):
(b)
includes—
(i)
an unused amount of a net loss or an amount treated as a net loss or as an available net loss of a person arising before the 2008–09 tax year which the person was entitled to have carried forward under section IE 1 (Net losses may be offset against future net income) of the Income Tax Act 2004 to that tax year:
(ii)
an amount included in a company’s loss balance at the end of the tax year to which sections IZ 4 to IZ 6 (which relate to tax losses for tax years before 1992) apply, or other amounts in relation to which modified continuity rules apply.
Defined in this Act: amount, annual gross income, attributed CFC net loss, Australian ICA company, company, deduction, FIF net loss, imputation credit, income, loss balance, net income, net loss, pay, supplementary dividend, tax loss, tax loss component, tax year, trustee, unused specified activity net loss
Compare: 2004 No 35 ss BC 4(4), DV 5(4)(b), DV 7(2), IE 1(1), (3)(a), IE 2(1), IE 3(5), IE 4(6), LB 2(3), (3A), LE 4(5), ME 9(5B)
Section IA 2(2): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(1)(a) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(2): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(1)(b) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(4)(b): substituted (with effect on 1 April 2008), on 7 December 2009, by section 54(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(4)(c): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(4)(d): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(4) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(4)(e): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(5) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(4)(f): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(5) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(4)(f): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(6) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(4)(g): replaced, on 1 April 2018, by section 140(1) (and see section 140(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 2(4)(h): inserted, on 1 July 2018, by section 44(1) (and see section 44(2) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
Section IA 2(6) heading: repealed (with effect on 1 April 2008), on 7 December 2009, pursuant to section 54(8) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(6): repealed (with effect on 1 April 2008), on 7 December 2009, by section 54(8) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(7): substituted (with effect on 1 April 2008), on 7 December 2009, by section 54(9) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(7): amended (with effect on 1 April 2008), on 30 March 2021, by section 94(1) (and see section 94(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IA 2 list of defined terms corresponding income year: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2 list of defined terms schedular income: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2 list of defined terms schedular income tax liability: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2 list of defined terms specified activity net loss: repealed, on 1 April 2018, by section 140(2)(b) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 2 list of defined terms trustee: added (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2 list of defined terms unused specified activity net loss: inserted, on 1 April 2018, by section 140(2)(a) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
IA 3 Using tax losses in tax year
Paying shortfall penalties
(1)
A person who has a tax loss for a tax year may use some or all of the amount of the tax loss under section IW 1 (Shortfall penalties) to pay a shortfall penalty.
Companies using tax losses
(2)
A company that has a tax loss for a tax year may—
(a)
make the amount available to another company under section IC 5 (Company B using company A’s tax loss) to subtract from the other company’s net income for the tax year.
(b)
[Repealed](c)
[Repealed]Taxable distributions
(3)
The amount of a tax loss for a tax year of a beneficiary of a non-complying trust may be used under section HC 22 (Use of tax losses to reduce taxable distributions from non-complying trusts) to adjust the amount of a taxable distribution derived in the corresponding income year.
Remaining loss balances carried forward
(4)
If a person has a balance of tax loss remaining for a tax year after the uses described in this section, the balance is carried forward to the next tax year as a loss balance.
Relationship with other provisions in this subpart
(5)
Sections IA 3B, IA 5, IA 8, and IA 10 override this section.
Relationship with section IB 3
(6)
Section IB 3 (When tax loss components of companies carried forward despite ownership continuity breach) modifies the application of this section when the person is a company.
Defined in this Act: amount, company, corresponding income year, loss balance, net income, non-complying trust, pay, shortfall penalty, tax loss, tax year, taxable distribution
Compare: 2004 No 35 ss BC 4(4), HH 3(4), IE 1(1), (2), IG 10, NH 3(2), NH 4(5), (6), NH 5(6), (7)
Section IA 3(2)(a): amended, on 1 April 2017, by section 147(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section IA 3(2)(b): repealed, on 1 April 2017, by section 147(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section IA 3(2)(c): repealed, on 1 April 2017, by section 147(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section IA 3(5) heading: substituted (with effect on 1 April 2008), on 7 December 2009, by section 55(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 3(5): amended, on 30 March 2017, by section 147(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section IA 3(5): amended (with effect on 1 April 2008), on 7 December 2009, by section 55(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 3(6) heading: inserted (with effect on 1 April 2020), on 30 March 2021, by section 95 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IA 3(6): inserted (with effect on 1 April 2020), on 30 March 2021, by section 95 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IA 3 list of defined terms FDP: repealed, on 1 April 2017, by section 147(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section IA 3 list of defined terms foreign dividend: repealed, on 1 April 2017, by section 147(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
IA 3B Tax losses and procedures under Insolvency Act 2006
When this section applies
(1)
This section applies when a person has a tax loss for a period ending before a date (the loss cancellation date) on which the person—
(a)
is discharged from bankruptcy:
When tax loss cannot be used
(2)
The person cannot use the tax loss to pay a shortfall penalty that is incurred after the loss cancellation date or carry the tax loss forward as part of a loss balance to a period ending after the loss cancellation date.
Section IA 3B: inserted, on 30 March 2017, by section 148(1) (and see section 148(2)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
IA 4 Using loss balances carried forward to tax year
Priority uses
(1)
A person’s loss balance carried forward under section IA 3(4) to a tax year, must—
(a)
first, be subtracted from their net income, so far as it extends, for the tax year; and
(b)
secondly, to the extent of a remaining loss balance carried forward under section IA 2(2), be included in their tax loss for the tax year.
Unused specified activity net losses subtracted before loss balance[Repealed]
(1B)
[Repealed]Order for unused specified activity net losses[Repealed]
(1C)
[Repealed]Relationship with other provisions in this subpart
(2)
Sections IA 5 and IA 8 to IA 10 override this section.
Defined in this Act: company, loss balance, net income, tax loss, tax year
Compare: 2004 No 35 s IE 1(2)
Section IA 4(1): amended, on 1 April 2019, by section 142(1) (and see section 142(5) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 4(1)(b): amended, on 1 April 2019, by section 142(2) (and see section 142(5) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 4(1)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 56(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 4(1B) heading: repealed, on 1 April 2019, pursuant to section 142(3) (and see section 142(5) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 4(1B): repealed, on 1 April 2019, by section 142(3) (and see section 142(5) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 4(1C) heading: repealed, on 1 April 2019, pursuant to section 142(3) (and see section 142(5) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 4(1C): repealed, on 1 April 2019, by section 142(3) (and see section 142(5) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 4(2) heading: substituted (with effect on 1 April 2008), on 7 December 2009, by section 56(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 4(2): substituted (with effect on 1 April 2008), on 7 December 2009, by section 56(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 4 list of defined terms tax loss component: repealed, on 1 April 2019, by section 142(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 4 list of defined terms unused specified activity net loss: repealed, on 1 April 2019, by section 142(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
IA 5 Restrictions on companies’ loss balances carried forward: continuity of ownership
General statement
(1)
A company’s tax loss component is carried forward in a loss balance only if the minimum continuity requirements of subsections (2) and (3) are met. The tax loss component includes an unused tax loss component carried forward from an earlier income year.
Continuity of voting interests
(2)
A tax loss component is carried forward in a loss balance under section IA 3(4) only if a group of persons holds for the continuity period minimum voting interests in the company that add up to at least 49%.
Continuity of market value interests
(3)
If a market value circumstance exists for the company at any time during the continuity period, the group of persons must also hold for the continuity period, minimum market value interests in the company that add up to at least 49%.
Breach of continuity of ownership in period
(4)
If a tax loss component cannot be carried forward because the requirements of subsections (2) and (3) are not met, the company may apply section IB 3, IP 3, or IP 3B (which relate to the carrying forward of tax losses for companies) to determine whether some or all of the tax loss component is carried forward in a loss balance.
Avoidance arrangements
(5)
Section GB 3 (Arrangements for carrying forward loss balances: companies’ ownership) may apply to treat a company as not meeting the requirements of subsection (2) or (3).
Some definitions
(6)
In this section,—
continuity period means the period of time from the start of the income year that corresponds to the tax year in which a tax loss component is included in the tax loss to the end of the income year that corresponds to the tax year in which the company uses the tax loss component
minimum market value interest, for a person and a continuity period, means the lowest market value interest they have in the company during the continuity period
minimum voting interest, for a person and a continuity period, means the lowest voting interest they have in the company during the continuity period.
Defined in this Act: company, continuity period, corresponding income year, group of persons, income year, loss balance, market value circumstance, market value interest, minimum market value interest, minimum voting interest, tax loss component, tax year, voting interest
Compare: 2004 No 35 s IF 1(1)
Section IA 5 heading: replaced (with effect on 1 April 2020), on 30 March 2021, by section 96(1) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IA 5(1): substituted (with effect on 1 April 2008), on 7 December 2009, by section 57(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 5(4): substituted (with effect on 1 April 2008), on 7 December 2009, by section 57(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 5(4): amended (with effect on 1 April 2020), on 30 March 2022, by section 118(1) (and see section 118(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IA 5(4): amended (with effect on 1 April 2020), on 30 March 2021, by section 96(2) (and see section 96(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IA 5(5): amended (with effect on 1 April 2020), on 30 March 2021, by section 96(3) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IA 5(6) minimum market value interest: amended (with effect on 1 April 2008), on 7 December 2009, by section 57(3)(a) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 5(6) minimum voting interest: amended (with effect on 1 April 2008), on 7 December 2009, by section 57(3)(b) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IA 6 Restrictions on companies grouping tax losses
Groups of companies
(1)
A company that is part of a group of companies may use under section IA 3(2) a tax loss under subpart IC (Grouping tax losses) only if it meets the requirements of section IC 5 (Company B using company A’s tax loss).
Consolidated groups
(2)
Subpart ID (Use of tax losses by consolidated groups) applies to the grouping of tax losses by a consolidated group of companies.
Avoidance arrangements
(3)
Section GB 4 (Arrangements for grouping tax losses: companies) may apply to treat a company as not meeting the requirements referred to in subsection (1).
Defined in this Act: company, consolidated group, group of companies, tax loss
Compare: 2004 No 35 ss IG 1(1), GC 4
Section IA 6(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 58(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IA 7 Restrictions relating to ring-fenced tax losses
Non-application of sections IA 2 to IA 4
(1)
Sections IA 2 to IA 4 (the general rules) do not apply to an amount referred to in subsections (2) to (8).
Treatment as tax loss component
(1B)
For the purposes of the application of sections IA 5, IA 6, IA 9, and IA 10, and subpart IB (Carrying forward companies’ loss balances: continuity of business activities), a ring-fenced tax loss under this section is treated as if it were a tax loss component.
Tax losses of LAQCs[Repealed]
(2)
[Repealed]Policyholder net losses[Repealed]
(3)
[Repealed]Investment funds’ excess expenditure
(4)
The general rules do not apply to excess expenditure of an investment fund under sections DV 5 and DV 7 (which relate to investment funds) except for—
(a)
the amount under section DV 5(4)(a) that the fund must treat as a tax loss component under section IA 2(4)(a)(i); and
(b)
the amount under section DV 7(2) that the fund chooses to treat as a tax loss component under section IA 2(4)(a)(ii).
Attributed CFC net losses
(5)
The general rules do not apply to an attributed CFC net loss except a surplus under section IQ 2(3) (Ring-fencing cap on attributed CFC net losses). The provisions that deal with this net loss, other than the surplus amount, are sections IQ 2, IQ 4, and IQ 6 to IQ 9 (which relate to foreign losses).
FIF net losses
(6)
The general rules do not apply to a FIF net loss except a surplus amount under section IQ 3(3) (Ring-fencing cap on FIF net losses). The provisions that deal with this net loss are sections IQ 3, IQ 5, and IQ 6 to IQ 9.
Mining net losses
(7)
The general rules do not apply to a net loss of a mineral miner to the extent to which the net loss relates to a permit area. The provisions that deal with these net losses are sections IS 1 to IS 4 and IS 6 (which relate to mineral miner’s tax losses).
Petroleum net losses[Repealed]
(8)
[Repealed]Amounts remitted[Repealed]
(9)
[Repealed]Net losses of multi-rate PIEs
(10)
The general rules do not apply to a multi-rate PIE’s net loss when the PIE does not calculate and pay tax using the provisional tax calculation option under section HM 44 (Provisional tax calculation option).
Defined in this Act: amount, associated person, attributed CFC net loss, FIF net loss, loss balance, mineral miner, multi-rate PIE, net loss, pay, permit area, PIE, provisional tax, ring-fenced tax loss, tax, tax loss component
Compare: 2004 No 35 ss DV 5(4)(b), DV 7(2), EY 42(10), HG 16, IE 1(2BB), (2C), IE 3(5), IE 4(6), IG 4(4), IG 5(4), IG 7(2), (3), IH 1, IH 2(1), IH 3–IH 5, II 1(1), (2)
Section IA 7(1B) heading: inserted (with effect on 1 April 2008), on 7 December 2009, by section 59(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 7(1B): inserted (with effect on 1 April 2008), on 7 December 2009, by section 59(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 7(1B): amended (with effect on 1 April 2020), on 30 March 2021, by section 97(1) (and see section 97(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8)
Section IA 7(2) heading: repealed, on 17 July 2013, pursuant to section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section IA 7(2): repealed, on 17 July 2013, by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section IA 7(3) heading: repealed, on 1 July 2010, pursuant to section 296(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 7(3): repealed, on 1 July 2010, by section 296(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 7(5): amended (with effect on 1 April 2008), on 6 October 2009, by section 296(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 7(6): amended (with effect on 1 April 2008), on 7 December 2009, by section 59(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 7(6): amended (with effect on 1 April 2008), on 6 October 2009, by section 296(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 7(7): amended (with effect on 1 April 2008 and applying for the 2008–09 income year and later income years beginning before 1 April 2011), on 30 March 2017, by section 149(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section IA 7(7): amended (with effect on 1 April 2011 and applying for income years beginning on or after that date), on 30 March 2017, by section 149(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section IA 7(7): amended, on 1 April 2014, by section 94(1)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IA 7(7): amended, on 1 April 2014, by section 94(1)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IA 7(7): amended, on 1 April 2014, by section 94(1)(c) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IA 7(8) heading: repealed, on 1 April 2018, pursuant to section 143(1) (and see section 143(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 7(8): repealed, on 1 April 2018, by section 143(1) (and see section 143(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 7(9) heading: repealed, on 30 March 2017, pursuant to section 149(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14)..
Section IA 7(9): repealed, on 30 March 2017, by section 149(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section IA 7(10) heading: substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 296(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 7(10): substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 296(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 7 list of defined terms LAQC: repealed, on 17 July 2013, by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section IA 7 list of defined terms life insurer: repealed, on 1 July 2010, by section 296(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 7 list of defined terms loss-attributing qualifying company: repealed, on 17 July 2013, by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section IA 7 list of defined terms loss balance: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 7 list of defined terms mineral miner: inserted, on 1 April 2014, by section 94(2)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IA 7 list of defined terms mining company: repealed, on 1 April 2014, by section 94(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IA 7 list of defined terms mining permit area: repealed, on 1 April 2014, by section 94(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IA 7 list of defined terms multi-rate PIE: inserted, on 1 April 2010, by section 296(6)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 7 list of defined terms new start grant: repealed, on 30 March 2017, by section 149(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section IA 7 list of defined terms non-resident mining operator: repealed, on 1 April 2014, by section 94(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IA 7 list of defined terms petroleum mining company: repealed, on 1 April 2018, by section 143(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 7 list of defined terms PIE: inserted, on 1 April 2010, by section 296(6)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 7 list of defined terms policyholder net loss: repealed, on 1 July 2010, by section 296(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 7 list of defined terms portfolio tax rate entity: repealed, on 1 April 2010, by section 296(6)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 7 list of defined terms provisional tax: inserted, on 1 April 2010, by section 296(6)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 7 list of defined terms resident mining operator: repealed, on 1 April 2014, by section 94(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IA 7 list of defined terms ring-fenced tax loss: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IA 8 Restrictions relating to schedular income
Certain schedular income
(1)
For the purposes of section BC 7 (Income tax liability of person with schedular income), a person must not take a tax loss into account in calculating a schedular income tax liability for a tax year for income described in the following paragraphs of the definition of schedular income:
(aa)
paragraph (a), which relates to life insurers’ schedular policyholder base income; or
(a)
[Repealed](b)
paragraph (f), for non-resident passive income described in section RB 3 (Schedular income tax liability for filing taxpayers for non-resident passive income); or
(c)
paragraph (g), which relates to non-resident shippers; or
(d)
[Repealed](e)
paragraph (i), which relates to non-resident general insurers; or
(f)
paragraph (k), which relates to companies carrying forward loss balances.
Grouping tax losses
(2)
For the purposes of subsection (1), a company that is part of a group of companies must not take a tax loss of another company in the same group into account under section IC 5 or ID 2 (which relate to companies’ use of tax losses) in calculating a schedular income tax liability for the tax year.
Relationship with sections IA 3 to IA 7
(3)
This section overrides sections IA 3 to IA 7.
Defined in this Act: company, general insurance, group of companies, income, insurer, loss balance, non-resident, non-resident passive income, schedular income, schedular income tax liability, schedular policyholder base income, tax loss, tax year
Compare: 2004 No 35 s ID 1(1)
Section IA 8(1)(aa): inserted, on 1 July 2010, by section 297(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 8(1)(a): repealed (with effect on 1 April 2008), on 6 October 2009, by section 297(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IA 8(1)(d): repealed, on 2 November 2012, by section 113 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section IA 8(1)(e): amended (with effect on 1 April 2020), on 30 March 2021, by section 98(1) (and see section 98(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IA 8(1)(f): inserted (with effect on 1 April 2020), on 30 March 2021, by section 98(2) (and see section 98(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IA 8 list of defined terms loss balance: inserted (with effect on 1 April 2020), on 30 March 2021, by section 98(3) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IA 8 list of defined terms non-resident entertainer: repealed, on 29 March 2018 (with effect on 1 April 2008), by section 144 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 8 list of defined terms schedular policyholder base income: inserted, on 1 July 2010, by section 297(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
IA 9 Ordering rules
Tax loss components
(1)
Tax loss components that are included in a tax loss must be used in the order in which they arose.
Ring-fenced tax losses
(2)
Ring-fenced tax losses must be used in the order in which they arose.
Losses in same tax year: consolidated groups and amalgamated companies
(3)
For a consolidated group or on the amalgamation of companies, tax loss components that the consolidated group or the companies have for the same tax year must be used in the order decided, as applicable, by the consolidated group or the amalgamated company, who must also notify the Commissioner of the decision. Without notification, the amounts must be used on a pro rata basis.
Order for tax loss component from unused specified activity net loss
(4)
For the purposes of subsection (1), the tax loss component under section IA 2(4)(g) arose when the specified activity net loss, that is referred to in the definition of unused specified activity net loss and that makes up the tax loss component, arose.
Defined in this Act: amalgamated company, amalgamation, amount, Commissioner, company, consolidated group, notify, ring-fenced tax loss, tax loss, tax loss component, tax year, unused specified activity net loss
Compare: 2004 No 35 ss IE 1(3)(b), IF 5, IG 6(5)
Section IA 9(4) heading: inserted, on 1 April 2018, by section 145(1) (and see section 145(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 9(4): inserted, on 1 April 2018, by section 145(1) (and see section 145(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IA 9 list of defined terms unused specified activity net loss: inserted, on 1 April 2018, by section 145(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
IA 10 Amended assessments
When this section applies
(1)
This section applies if, in a tax year, the Commissioner amends under section 113 of the Tax Administration Act 1994 a person’s assessment for an earlier tax year, and the amendment adjusts the amount of a tax loss component or a ring-fenced tax loss for the earlier tax year.
Reduced losses
(2)
If the amount is reduced in the adjustment, the person must reduce their loss balance or ring-fenced tax loss for the earlier tax year by the amount of the adjustment. If the loss balance or ring-fenced tax loss has been used in earlier tax years, they must similarly apply the reduction to the use of the loss balance or ring-fenced tax loss.
Increased losses
(3)
If the amount is increased in the adjustment, the person must add an amount to their loss balance or ring-fenced tax loss for the earlier tax year.
Defined in this Act: amount, assessment, Commissioner, loss balance, ring-fenced tax loss, tax loss component, tax year
Subpart IB—Carrying forward companies’ loss balances: continuity of business activities
Subpart IB: inserted (with effect on 1 April 2020), on 30 March 2021, by section 99(1) (and see section 99(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Contents
IB 1 Purpose
The purpose of this subpart and sections GB 3BA to GB 3BAC (which relate to arrangements involving tax losses) is—
(a)
to enable companies to carry forward tax loss components in loss balances despite not meeting the requirements for continuity of ownership of section IA 5 (Restrictions on companies’ loss balances carried forward: continuity of ownership), in order to reduce impediments to—
(i)
innovation and economic growth:
(ii)
corporate reorganisations:
(iii)
changes in the direct or indirect ownership of companies:
(iv)
companies accessing new sources of share capital:
(v)
companies adapting their business activities in order to grow or be resilient; but
(b)
not to encourage tax avoidance arrangements involving the acquisition of ownership interests in companies.
Defined in this Act: business, company, loss balance, ownership interest, tax avoidance arrangement, tax loss component
Section IB 1: inserted (with effect on 1 April 2020), on 30 March 2021, by section 99(1) (and see section 99(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
IB 2 Meaning of ownership continuity breach
In this subpart, an ownership continuity breach, for a company, means a breach of the requirements for continuity of ownership of section IA 5 (Restrictions on companies’ loss balances carried forward: continuity of ownership) that, if met, enable a tax loss component of the company to be carried forward in a loss balance.
Defined in this Act: company, loss balance, ownership continuity breach, tax loss component, tax year
Section IB 2: inserted (with effect on 1 April 2020), on 30 March 2021, by section 99(1) (and see section 99(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
IB 2B When subsequent ownership continuity breach regarded as occurring
For the purposes of this subpart, once an ownership continuity breach has occurred for a company that, in the absence of section IB 3, prevents a tax loss component of the company from being carried forward to a tax year in a loss balance, a subsequent change in the holders of voting interests or market value interests in the company is not regarded as resulting in a subsequent ownership continuity breach unless the company would not meet the minimum continuity requirements of section IA 5(2) and (3) for the carrying forward of the tax loss component to the tax year in a loss balance if the meaning of continuity period in that section is modified by replacing the words “the start of the income year that corresponds to the tax year in which a tax loss component is included in the tax loss” with the words “immediately after the company’s last ownership continuity breach occurred that, in the absence of section IB 3, prevents the tax loss component from being carried forward to the tax year in a loss balance”.
Defined in this Act: company, continuity period, income year, loss balance, market value interest, ownership continuity breach, tax loss, tax loss component, tax year, voting interest
Section IB 2B: inserted (with effect on 1 April 2020), on 31 March 2023, by section 83(1) (and see section 83(2) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
IB 3 When tax loss components of companies carried forward despite ownership continuity breach
When this section applies
(1)
This section applies when an ownership continuity breach occurs for a company.
Tax loss components for earlier income years carried forward
(2)
Despite the ownership continuity breach, a tax loss component arising in an earlier income year is carried forward to a tax year in a loss balance under section IA 3(4) (Using tax losses in tax year) if—
(a)
the earlier income year is the 2013–14 income year or a later income year; and
(b)
the company does not cease to carry on business activities during the relevant period described in section IB 4 (the business continuity period); and
(c)
no major change in the nature of the business activities carried on by the company occurs during the business continuity period, other than 1 or more major changes that are permitted under subsection (5); and
(d)
subsection (3) does not apply to prevent the tax loss component being carried forward to the tax year.
Tax loss components for earlier income years not carried forward
(3)
The tax loss component is not carried forward to the tax year if—
(a)
before the beginning of the business continuity period,—
(i)
the business activities carried on by the company have ceased; and
(ii)
the business activities have not been revived:
(b)
the company has had another ownership continuity breach—
(i)
since the later of the beginning of the earlier income year and the beginning of the 2020–21 income year; and
(ii)
in relation to which the requirements of subsection (2)(b) and (c) for the carrying forward to the tax year of the tax loss component are not met:
(c)
the earlier income year is before the 2020–21 income year and the tax loss component could not be carried forward to the 2020–21 tax year in the absence of this subpart.
Major change: factor that must be taken into account
(4)
For the purposes of subsection (2), without limiting the factors that may be taken into account in determining whether a major change in the nature of the business activities carried on by the company has occurred during the business continuity period, the extent to which the assets used in deriving the company’s assessable income have remained the same or similar over the business continuity period must be taken into account.
Permitted major changes
(5)
A major change in the nature of the business activities carried on by the company during the business continuity period does not breach the requirement set out in subsection (2)(c) if the major change is—
(a)
made to increase the efficiency of a business activity that the company carried on immediately before the beginning of the business continuity period:
(b)
made to keep up to date with advances in technology relating to a business activity that the company carried on immediately before the beginning of the business continuity period:
(c)
caused by an increase in the scale of a business activity that the company carried on immediately before the beginning of the business continuity period, including as a result of the company entering a new market for a product or service that it produced or provided at that time:
(d)
caused by a change in the type of products or services the company produces or provides that involves the company starting to produce or provide a product or service using the same, or mainly the same, assets as, or that is otherwise closely connected with, a product or service that the company produced or provided immediately before the beginning of the business continuity period.
Exclusion: mining net losses
(5B)
This section does not apply to an amount referred to in section IA 7(7) (Restrictions relating to ring-fenced tax losses) that is treated by subsection (1B) of that section as if it were a tax loss component.
Avoidance arrangements
(6)
Section GB 3BA (Arrangements for carrying forward loss balances: companies’ business activities) may apply to treat a company as not meeting the requirements of subsection (2).
A definition
(7)
In subsection (5), asset does not include land other than buildings and fixtures.
Defined in this Act: amount, assessable income, asset, business, company, income year, land, loss balance, ownership continuity breach, tax loss component, tax year
Section IB 3: inserted (with effect on 1 April 2020), on 30 March 2021, by section 99(1) (and see section 99(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IB 3(3)(b): replaced (with effect on 1 April 2020), on 30 March 2022, by section 119(1) (and see section 119(7) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IB 3(3)(c): replaced (with effect on 1 April 2020), on 30 March 2022, by section 119(1) (and see section 119(7) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IB 3(5)(a): amended (with effect on 1 April 2020), on 30 March 2022, by section 119(2) (and see section 119(7) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IB 3(5)(b): amended (with effect on 1 April 2020), on 30 March 2022, by section 119(3) (and see section 119(7) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IB 3(5)(c): replaced (with effect on 1 April 2020), on 30 March 2022, by section 119(4) (and see section 119(7) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IB 3(5B) heading: inserted (with effect on 1 April 2020), on 30 March 2022, by section 119(5) (and see section 119(7) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IB 3(5B): inserted (with effect on 1 April 2020), on 30 March 2022, by section 119(5) (and see section 119(7) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IB 3 list of defined terms amount: inserted (with effect on 1 April 2020), on 30 March 2022, by section 119(6) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
IB 4 Business continuity period
Period
(1)
The period referred to in section IB 3(2)(b), for an ownership continuity breach and a tax loss component of a company, is the period beginning immediately before the ownership continuity breach occurs and ending on,—
(a)
for a company for which the amount calculated using the formula in subsection (2) is 0.50 or greater, the last day of the income year that corresponds to the tax year in which the company uses the tax loss component; or
(b)
in any other case, the earlier of—
(i)
the last day of the income year that corresponds to the tax year in which the company uses the tax loss component; and
(ii)
the last day of the income year in which the fifth anniversary of the ownership continuity breach falls.
Formula
(2)
The formula is—
(bad debt deductions – bad debt repayment income) ÷ (total deductions – bad debt repayment income).
Definition of items in formula
(3)
In the formula,—
(a)
bad debt deductions is the total amount of deductions that the company has been allowed under section DB 31(3) (Bad debts) for income years between the 2013–14 income year and the income year corresponding to the tax year immediately preceding the ownership continuity breach, both income years inclusive, in which a tax loss component included in the company’s tax loss for that tax year arose:
(b)
bad debt repayment income is the total amount of income that the company has under section CG 3 (Bad debt repayment)—
(i)
for income years between the earliest and the latest of the income years described in paragraph (a), both income years inclusive; and
(ii)
that relates to deductions that the company has been allowed under section DB 31(3):
(c)
total deductions is the total amount of deductions that the company has been allowed for the income years described in paragraph (a).
Defined in this Act: amount, company, deduction, income, income year, ownership continuity breach, tax loss, tax loss component, tax year
Section IB 4: inserted (with effect on 1 April 2020), on 30 March 2021, by section 99(1) (and see section 99(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
IB 5 When group companies treated as single company
New Zealand resident companies that are part of the same group of companies immediately before and immediately after an ownership continuity breach occurs for each of the companies are treated as a single company for the purposes of this subpart and sections GB 3BA to GB 3BAC (which relate to arrangements involving tax losses).
Defined in this Act: company, group of companies, New Zealand resident, ownership continuity breach
Section IB 5: inserted (with effect on 1 April 2020), on 30 March 2021, by section 99(1) (and see section 99(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IB 5: amended (with effect on 1 April 2020), on 30 March 2022, by section 120(1) (and see section 120(3) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IB 5 list of defined terms New Zealand resident: inserted (with effect on 1 April 2020), on 30 March 2022, by section 120(2) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Subpart IC—Grouping tax losses
Contents
Introductory provisions
IC 1 Company A making tax loss available to company B
When this subpart applies
(1)
This subpart applies if 1 company that is part of a group of companies (company A) has a tax loss for a tax year that it makes available to another group company (company B) to subtract from its net income for the tax year.
Requirements for grouping tax losses
(2)
The amount of a tax loss that company A has for a tax year may be made available to company B to subtract from its net income for the tax year only if—
(a)
the threshold levels in section IC 2 are met; and
(b)
the companies meet all the requirements of section IC 5.
Losing continuity or commonality in tax year
(3)
If company A or company B fail to meet 1 or both of the threshold levels referred to in subsection (2)(a), a tax loss may not be grouped unless section IP 4 or IP 5 (which relate to the grouping of part-year losses) applies.
References to years
(4)
In this subpart, a reference to a tax year of a company includes a reference to a non-standard accounting year of the company that corresponds with the tax year.
Relationship with sections IA 3 and IA 4
(5)
This section overrides sections IA 3 and IA 4 (which relate to the general use of tax losses).
Defined in this Act: amount, company, group of companies, net income, non-standard accounting year, tax loss, tax year
Compare: 2004 No 35 ss IG 1(1), (3), IG 2(1), (2)(c), (e)
IC 2 Threshold levels for grouping tax losses in tax year
Company A: continuity of ownership or business activities
(1)
Company A may group a tax loss in a tax year under section IC 5 only if the requirements of section IA 5(2) and (3) or IB 3(2) (which relate to the carrying forward of tax losses for companies) are met.
Company A and company B: common ownership
(2)
In addition to meeting the requirements referred to in subsection (1), company A and company B must have the required common ownership under section IC 3 for the period referred to in section IC 6.
Part years: relationship with subpart IP
(3)
Subpart IP (Meeting requirements for part-years) applies in a tax year that is part of the commonality period if the following requirements are met for the relevant part-year:
(a)
continuity of ownership in company A for the purposes of subsection (1); and
(b)
common ownership of company A and company B for the purposes of subsection (2).
Defined in this Act: commonality period, company, tax loss, tax year
Compare: 2004 No 35 ss IG 1(1), (3), IG 2(1), (2)(c), (e)
Section IC 2(1) heading: amended (with effect on 1 April 2020), on 30 March 2021, by section 100(1) (and see section 100(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IC 2(1): amended (with effect on 1 April 2020), on 30 March 2021, by section 100(2) (and see section 100(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
IC 3 Common ownership: group of companies
Meaning
(1)
A group of companies means 2 or more companies, none of which is a multi-rate PIE or a listed PIE, in relation to which a group of persons holds—
(a)
common voting interests that add up to at least 66%; and
(b)
if a market value circumstance exists for a company that is part of a group of companies, common market value interests that add up to at least 66%.
Part of group at time or for period
(2)
A company is treated as part of a group of companies at a particular time or for a particular period if the minimum common interests referred to in subsection (1) exist at the relevant time or are kept for the whole of the relevant period. But it is not necessary that the group of persons holding the interests stays the same for the whole of the relevant period.
Restriction for mixed-ownership enterprises
(2A)
A mixed-ownership enterprise may be included in a group of companies only if, at the particular time or for the particular period, no other company in the group is a mixed-ownership enterprise.
When multi-rate PIEs included in group
(2B)
In relation to 2 or more companies of which 1 is a multi-rate PIE, the companies are treated as a group of companies at a particular time or for a particular period if—
(a)
the PIE owns 100% of the voting interests in the other companies; and
(b)
the other companies in the group are—
(i)
multi-rate PIEs:
(ii)
land investment companies:
(iii)
subsidiary companies that meet the requirements of section HM 7(a) and (d) (Requirements):
(iv)
foreign PIE equivalents.
When listed PIEs included in group
(2C)
In relation to 2 or more companies of which 1 is a listed PIE, the companies are treated as a group of companies at a particular time or for a particular period if the PIE owns 100% of the voting interests in the other companies.
When foreign investment PIEs included in group
(2D)
For the purposes of subsection (2B)(b), a multi-rate PIE that chooses under section HM 71B (Choosing to become foreign investment PIE) to become a foreign investment PIE, must not be part of a group of companies that includes a land investment company.
Measuring common voting interests
(3)
In subsection (1)(a) and section IC 4(1)(a), a person’s common voting interest in the relevant companies at a particular time is the percentage of their voting interests under sections YC 2, YC 4(1) to (3), YC 5, and YC 6 (which relate to voting interests) in each of the companies at the time.
Measuring common market value interests
(4)
In subsection (1)(b), a person’s common market value interest in the relevant companies at a particular time is the percentage of their market value interests under sections YC 3, YC 4(1) to (3), YC 5, and YC 6 (which relate to market value interests) in each of the companies at the time.
Common interest percentages
(5)
For the purposes of this section, in measuring a person’s common voting interest or common market value interest in 2 or more companies at a particular time,—
(a)
for percentages that are the same in relation to each company, the person’s percentage interest at the time:
(b)
for percentages that differ as between the companies, the lowest percentage interest in each company at the time.
Defined in this Act: common market value interest, common voting interest, company, foreign investment PIE, foreign PIE equivalent, group of companies, group of persons, listed PIE, land investment company, market value circumstance, market value interest, mixed-ownership enterprise, multi-rate PIE, voting interest
Compare: 2004 No 35 s IG 1(2), (5)
Section IC 3(1): amended, on 29 August 2011, by section 90(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IC 3(1): amended (with effect on 1 April 2010), on 21 December 2010 (applying for the 2010–11 and later income years), by section 105(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section IC 3(2A) heading: inserted, on 30 June 2012, by section 11 of the Public Finance (Mixed Ownership Model) Amendment Act 2012 (2012 No 45).
Section IC 3(2A): inserted, on 30 June 2012, by section 11 of the Public Finance (Mixed Ownership Model) Amendment Act 2012 (2012 No 45).
Section IC 3(2B) heading: substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 298(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IC 3(2B): substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 298(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IC 3(2B)(b): substituted, on 29 August 2011, by section 90(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IC 3(2C) heading: inserted, on 29 August 2011, by section 90(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IC 3(2C): inserted, on 29 August 2011, by section 90(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IC 3(2D) heading: inserted, on 29 August 2011, by section 90(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IC 3(2D): inserted, on 29 August 2011, by section 90(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IC 3(3) heading: substituted (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 82(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section IC 3(3): replaced, on 29 March 2018 (with effect on 1 April 2008 and applying for the 2008–09 and later income years), by section 146(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IC 3(4) heading: substituted (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 82(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section IC 3(4): substituted (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 82(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section IC 3(4): amended, on 29 March 2018 (with effect on 1 April 2008), by section 146(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section IC 3(5) heading: added (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 82(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section IC 3(5): added (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 82(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section IC 3 list of defined terms foreign investment PIE: inserted, on 29 August 2011, by section 90(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IC 3 list of defined terms foreign PIE equivalent: inserted, on 29 August 2011, by section 90(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IC 3 list of defined terms land investment company: inserted, on 1 April 2010, by section 298(3)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IC 3 list of defined terms listed PIE: inserted, on 29 August 2011, by section 90(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IC 3 list of defined terms mixed-ownership enterprise: inserted, on 30 June 2012, by section 11 of the Public Finance (Mixed Ownership Model) Amendment Act 2012 (2012 No 45).
Section IC 3 list of defined terms multi-rate PIE: inserted, on 1 April 2010, by section 298(3)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IC 3 list of defined terms portfolio land company: repealed, on 1 April 2010, by section 298(3)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IC 3 list of defined terms portfolio land company: inserted, on 1 April 2008, by section 432(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section IC 3 list of defined terms portfolio tax rate entity: repealed, on 1 April 2010, by section 298(3)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IC 3 list of defined terms voting interest: inserted, on 1 April 2010, by section 298(3)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
IC 4 Common ownership: wholly-owned groups of companies
Interests held
(1)
A wholly-owned group of companies means 2 or more companies in relation to which a group of persons holds, for the relevant period,—
(a)
common voting interests that add up to 100%; and
(b)
if a market value circumstance exists for a company that is part of a group of companies, common market value interests that add up to 100%.
Exempt employee share schemes
(2)
In subsection (1), company shares held by the trustee of, or by employees or former employees of the company as a consequence of the operation of, an exempt ESS are disregarded to the extent to which they represent voting interests in the company that add up to no more than 3%, or, as applicable, market value interests in the company that add up to no more than 3%.
Defined in this Act: common market value interest, common voting interest, company, employee, exempt ESS, group of companies, group of persons, market value circumstance, market value interest, share, trustee, voting interest, wholly-owned group of companies
Compare: 2004 No 35 s IG 1(3)
Section IC 4(2) heading: replaced (with effect on 29 March 2018), on 31 March 2023, by section 84(1) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section IC 4(2): amended (with effect on 29 March 2018), on 31 March 2023, by section 84(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section IC 4 list of defined terms exempt ESS: inserted (with effect on 29 March 2018), on 31 March 2023, by section 84(3)(a) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section IC 4 list of defined terms share purchase scheme: repealed (with effect on 29 March 2018), on 31 March 2023, by section 84(3)(b) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Requirements and methods
IC 5 Company B using company A’s tax loss
Requirements
(1)
Company A may make a tax loss available to company B to subtract from its net income under section IA 3(2) (Using tax losses in tax year) only if—
(a)
company A and company B have minimum common ownership for the relevant period as set out in sections IC 2(2) and IC 6; and
(b)
company A meets the requirements of section IC 7; and
(c)
company A has the required continuity of ownership or business activities under section IC 2(1) and, if it applies, section IC 10(2)(a); and
(d)
the amount falls within the limits set by section IC 8(1) and (2); and
(e)
the payment and notification requirements of section IC 9 are met.
Method: election or subvention payment
(2)
Having met all the requirements set out in subsection (1), company A may—
(a)
choose to make a tax loss that it has in a tax year available to company B to use in the tax year, notifying the Commissioner as described in section IC 9; or
(b)
agree with company B that company B should bear the amount of company A’s tax loss, or take a share in it, in return for a payment by company B to company A by the date set out in section IC 9; or
(c)
apply both paragraphs (a) and (b) in relation to the tax loss.
Amounts used in tax year
(3)
Company B must subtract the amount of the tax loss referred to in subsection (2)(a) or the payment referred to in subsection (2)(b), as applicable, from its net income for the tax year in relation to which company A makes the amount available or receives the payment.
When decisions made
(4)
If company A chooses to make the amount available to company B under subsection (2)(a), the decision is irrevocable.
Nature of payment
(5)
To the extent to which an amount of tax loss is subtracted from net income, a payment from company B to company A under subsection (2)(b) is not a dividend.
Part-year tax losses
(6)
Sections IP 4 and IP 5 (which relate to losses in part-years) modify this section for part-year calculations.
Tax years before 1981–82 and between 1981–82 and 1991–92
(7)
Section IZ 7 (Grouping tax losses for tax years before 1981–82 and between 1981–82 and 1991–92) modifies the requirements of—
(a)
subsection (1)(a) for a tax loss component that arises in tax years between 1981–82 and 1991–92; and
(b)
subsection (1)(b) for a tax loss component that arises in tax years before the 1991–92 tax year; and
(c)
subsection (1)(a) for a tax loss component that arises in tax years before the 1981–82 tax year.
Commonality periods starting before 15 March 2017 for tax years after 1990–91
(8)
Section IZ 7B (Grouping tax losses for commonality periods starting before 15 March 2017 for tax years after 1990–91) modifies the requirements of subsection (1)(b) for a commonality period starting before 15 March 2017 for a tax loss component that arises after the 1990–91 tax year.
Defined in this Act: amount, Commissioner, commonality period, company, dividend, net income, notify, pay, tax loss, tax loss component, tax year
Compare: 2004 No 35 s IG 2(2)
Section IC 5(1)(b): amended (with effect on 15 March 2017), on 31 March 2023, by section 85(1) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section IC 5(1)(c): amended (with effect on 1 April 2020), on 30 March 2021, by section 101(1) (and see section 101(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IC 5(8) heading: inserted (with effect on 15 March 2017), on 31 March 2023, by section 85(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section IC 5(8): inserted (with effect on 15 March 2017), on 31 March 2023, by section 85(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section IC 5 list of defined terms commonality period: inserted (with effect on 15 March 2017), on 31 March 2023, by section 85(3) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
IC 6 Common ownership for period
Commonality period
(1)
For the purposes of section IC 2(2), common ownership under section IC 3 must exist from the start of the income year in which company A has a tax loss component that is included in the tax loss to the end of the income year in which company B subtracts the amount of the tax loss component from its net income. In this Part, this length of time is called the commonality period.
Multiple net losses
(2)
The requirement set out in subsection (1) applies to net losses as they arise in an income year on an individual basis.
When companies have different balance dates
(3)
If the balance dates of company A and company B are different, section IC 10(2)(b) applies to extend the commonality period.
Relationship with section IZ 7
(4)
Section IZ 7(1) and (2)(Grouping tax losses for tax years before 1981–82 and between 1981–82 and 1991–92) overrides subsections (1) and (2).
Defined in this Act: commonality period, company, income year, net income, tax loss, tax loss component
Compare: 2004 No 35 ss IG 1(1), (2), IG 2(2)(c), (4)(d)(ii), (5)(c)(ii)
IC 7 Place of incorporation or carrying on business
Incorporation or carrying on business
(1)
Company A, for the commonality period, must be either—
(a)
incorporated in New Zealand; or
(b)
carrying on a business in New Zealand through a fixed establishment in New Zealand.
Residence in New Zealand[Repealed]
(2)
[Repealed]Relationship with section IZ 7
(3)
Section IZ 7(4) (Grouping tax losses for tax years before 1981–82 and between 1981–82 and 1991–92) overrides this section.
Defined in this Act: business, commonality period, company, fixed establishment, New Zealand
Compare: 2004 No 35 s IG 2(2)(d), (11)
Section IC 7 heading: replaced (with effect on 15 March 2017), on 31 March 2023, by section 86(1) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section IC 7(2) heading: repealed (with effect on 15 March 2017), on 31 March 2023, pursuant to section 86(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section IC 7(2): repealed (with effect on 15 March 2017), on 31 March 2023, by section 86(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section IC 7 list of defined terms double tax agreement: repealed (with effect on 15 March 2017), on 31 March 2023, by section 86(3) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section IC 7 list of defined terms income tax: repealed (with effect on 15 March 2017), on 31 March 2023, by section 86(3) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section IC 7 list of defined terms resident in New Zealand: repealed (with effect on 15 March 2017), on 31 March 2023, by section 86(3) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
IC 8 Limitations on amounts used
Limit on amounts
(1)
A tax loss made available, or a payment made, under section IC 5(2) must be no more than the amount that would be company B’s net income for the tax year in which it subtracts the amount of the tax loss.
Limit for payments
(2)
An amount that company B agrees to pay company A under section IC 5(2)(b) must be no more than the amount of company A’s tax loss.
No accounting for amount by companies
(3)
Company A and company B must ignore this section in calculating their net incomes, but for the purposes of grouping tax losses, company B’s net income is found after taking into account—
(a)
first, its own losses; and
(b)
secondly, a tax loss made available to company B by another company.
Defined in this Act: amount, company, loss, net income, pay, tax loss, tax year
Compare: 2004 No 35 s IG 2(2)(f), (g)
IC 9 Date for payment and notice to Commissioner
Last date for payment
(1)
A payment under section IC 5(2)(b) must be made no later than the extended return date, or by a later date if the Commissioner allows.
Date and method for notifying Commissioner
(2)
Company A must notify the Commissioner of an election or payment under section IC 5(2) by the extended return date or, if applicable, a later date allowed by the Commissioner for the notice. The notification may be made in the company’s annual return of income.
Extended return date
(3)
In subsections (1) and (2), extended return date means the 31 March that, for company A and the tax year in which the amount of the tax loss is subtracted, is the latest date to which the time for providing the return of income may be extended under section 37(5) of the Tax Administration Act 1994.
Exception for payment arising from election under section IZ 8
(4)
Despite subsection (3), for a company that is a member of a group of companies and a tax year in which the company uses a tax loss that arises from an election by another group member under section IZ 8 (Election to use net loss for 2019–20 or 2020–21 year as tax loss in preceding year) and is made available by the other group member, the extended return date is determined using the tax year in which the net loss affected by the election arises for the other group member.
Defined in this Act: amount, Commissioner, company, extended return date, group of companies, net loss, notice, notify, pay, return of income, tax loss, tax year
Compare: 2004 No 35 s IG 2(2)(g), (3)
Section IC 9(2): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 30 March 2017, by section 150(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section IC 9(4) heading: inserted (with effect on 15 April 2020), on 30 April 2020, by section 9(1) of the COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020 (2020 No 10).
Section IC 9(4): inserted (with effect on 15 April 2020), on 30 April 2020, by section 9(1) of the COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020 (2020 No 10).
Section IC 9 list of defined terms group of companies: inserted (with effect on 15 April 2020), on 30 April 2020, by section 9(2) of the COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020 (2020 No 10).
Section IC 9 list of defined terms net loss: inserted (with effect on 15 April 2020), on 30 April 2020, by section 9(2) of the COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020 (2020 No 10).
Section IC 9 list of defined terms notice: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
IC 10 When companies have different balance dates
When this section applies
(1)
This section applies in a tax year when company A and company B do not have the same balance date.
Extensions for continuity and common ownership
(2)
If company B’s income year ends after the last day of company A’s income year, for section IC 5 to apply to a tax loss in a corresponding tax year,—
(a)
continuity of ownership in company A, or continuity of company A’s business activities, under section IC 2(1) must extend to the end of company B’s income year; and
(b)
common ownership of company A and company B under section IC 3 or IC 4 must extend to the end of company B’s income year.
Part-year tax losses
(3)
This section applies for part-year calculations through section IP 2(2) (Group companies’ common span).
Defined in this Act: company, income year, tax loss, tax year
Compare: 2004 No 35 s IG 2(2)(c), (e)
Section IC 10(2)(a): amended (with effect on 1 April 2020), on 30 March 2021, by section 102(1) (and see section 102(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
IC 11 Reduction of amounts used by companies
When this section applies
(1)
This section applies in a tax year if—
(a)
company A has a tax loss for the tax year that is made available to, and subtracted by, more than 1 company that is part of the group of companies; and
(b)
the Commissioner determines under section 113 of the Tax Administration Act 1994 that the actual total tax loss for the tax year is less than the sum of the amounts subtracted by the companies in the group, and notifies company A.
Reduced amounts
(2)
The relevant companies must reduce the amounts they subtracted either in the way company A allocates under subsection (3) or, if no allocation is made, proportionately under subsection (4).
Company A’s allocation
(3)
Company A may choose how the amount by which the total must be reduced is allocated between or among the companies. But if company A allocates an amount to a company that is no longer part of the group at the time of the allocation, and the amount is more than a proportionate amount, the allocation is disregarded. Subsection (6) sets out the notice requirements for this subsection.
Proportionate amounts
(4)
If company A does not allocate the amounts by which the total must be reduced, the amounts subtracted by the group companies are reduced in the same proportion as that by which the total amount was reduced in determining the actual total tax loss.
Subvention payments
(5)
If the reduction results in a payment under section IC 5(2)(b) being treated as a dividend, the dividend is reduced to the extent to which the payment is repaid by company A within the notification period referred to in subsection (6).
Notifying Commissioner
(6)
For the purposes of subsections (3) and (5), company A must notify the Commissioner of the allocation within 6 months after the date on which the Commissioner notifies company A that the reduction is required. However, the Commissioner may agree to extend this notification period.
Defined in this Act: amount, Commissioner, company, dividend, group of companies, notify, tax loss, tax year
Compare: 2004 No 35 s IG 2(7)
IC 12 Bad debts or decline in value of shares
When this section applies
(1)
This section applies to companies that are part of a group of companies in a tax year when—
(a)
a company (company C) in the group has in the tax year a deduction—
(i)
under section DB 31 (Bad debts) for a loan to another company in the group:
(ii)
for a decline in the value of shares in another company in the group; and
(b)
a company (company A) in the group, other than company C, has a tax loss for the tax year that includes a tax loss component arising from a deduction—
(i)
for expenditure funded by the loan referred to in paragraph (a)(i) or by the issue to company A of the shares referred to in paragraph (a)(ii); and
(ii)
taken into account in calculating company A’s tax loss for the 1993–94 tax year or a later tax year.
Limitation on loss grouping
(2)
The amount of company A’s tax loss cannot be made available to another company in the group to use except to the extent to which the amount of the tax loss is more than the total amount of the deductions referred to in subsection (1)(a). To that extent, company A may choose to make the excess amount available to a group company to use under sections IA 3(2), IA 5, and IB 3 (which relate to using and carrying forward tax losses) if the requirements for grouping tax losses are met.
Determining decline in value of shares
(3)
For the purposes of this section, shares are treated as declining in value if,—
(a)
on the disposal of the shares, the amount for which they were disposed of is less than the deduction for the cost of the shares; or
(b)
when the shares have not been disposed of, their value as calculated under subpart EB (Valuation of trading stock (including dealer’s livestock)) or otherwise declines.
Defined in this Act: amount, company, deduction, group of companies, loan, loss balance, pay, share, tax loss, tax year
Compare: 2004 No 35 s IG 2(6)
Section IC 12(1): substituted (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 83(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section IC 12(2) heading: substituted (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 83(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section IC 12(2): substituted (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 83(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section IC 12(2): amended (with effect on 1 April 2020), on 30 March 2021, by section 103(1) (and see section 103(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IC 12 list of defined terms loan: inserted (with effect on 1 April 2008), on 7 September 2010, by section 83(3) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
IC 13 Variation of requirements for development companies in Niue
When this section applies
(1)
This section applies in relation to the required common ownership of group companies set out in sections IC 2(2), IC 3, and IC 5(1)(a) for the purposes of providing relief to company A for losses incurred in connection with development work in Niue.
Order in Council
(2)
The Governor-General may make an Order in Council varying the threshold in section IC 3(1)(a) and (b) applying to company A if satisfied that the company—
(a)
is carrying on a business or enterprise that—
(i)
has been or is carried on wholly or mainly for the development of Niue:
(ii)
has been or is important to the development of Niue; and
(b)
has incurred expenditure wholly or mainly in deriving income from Niue or in the course of carrying on a business or enterprise in Niue for the purpose of deriving income.
Named company
(3)
For the purposes of subsection (2), company A must be a company named in the order.
Application of order
(4)
The order may specify a period or periods to which it applies. If no period is specified, the order applies to the whole commonality period.
Secondary legislation
(5)
An Order in Council under subsection (2) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Defined in this Act: business, commonality period, company, group of companies, income
| Legislation Act 2019 requirements for secondary legislation made under this section | ||||
| Publication | PCO must publish it on the legislation website and notify it in the Gazette | LA19 s 69(1)(c) | ||
| Presentation | The Minister must present it to the House of Representatives | LA19 s 114, Sch 1 cl 32(1)(a) | ||
| Disallowance | It may be disallowed by the House of Representatives | LA19 ss 115, 116 | ||
| This note is not part of the Act. | ||||
Section IC 13: added (with effect on 1 April 2008), on 6 October 2009, by section 299 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IC 13(5) heading: inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
Section IC 13(5): inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
Subpart ID—Use of tax losses by consolidated groups
Contents
ID 1 Treatment of tax losses by consolidated groups
Consolidated group’s net losses
(1)
A tax loss of a consolidated group of companies is treated as the consolidated group’s tax loss, not the tax loss of a company that is part of the consolidated group. Subparts IA to IC (which relate to the general use and grouping of tax losses) and section IZ 8 (Election to use net loss for 2019–20 or 2020–21 year as tax loss in preceding year), as modified by this subpart, apply as if the consolidated group were 1 company.
Ring-fenced tax losses
(2)
Nothing in this subpart applies to a consolidated group whose companies are mining companies or mineral miners.
Defined in this Act: company, consolidated group, mineral miner, mining company, tax loss
Compare: 2004 No 35 s IG 6(1A)–(3)
Section ID 1(1): amended (with effect on 1 April 2020), on 30 March 2021, by section 104(1) (and see section 104(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section ID 1(1): amended (with effect on 15 April 2020), on 30 April 2020, by section 10 of the COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020 (2020 No 10).
Section ID 1(2): amended, on 1 April 2014, by section 95(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section ID 1 list of defined terms mineral miner: inserted, on 1 April 2014, by section 95(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
ID 2 Pre-consolidation losses: general treatment
When this section applies
(1)
This section applies in a tax year when a company that meets the requirements of section IA 5(2) and (3) or IB 3(2) (which relate to the carrying forward of tax losses for companies) and is part of a consolidated group has a pre-consolidation loss balance carried forward to the tax year.
First use
(2)
The first use of the loss balance must be to make the amount of the loss balance available to the consolidated group to subtract from its net income, so far as it extends, for the tax year.
Second use
(3)
If, after subsection (2) is applied, some of the loss balance remains, the company may choose to do 1 or more of the following:
(a)
subtract the remaining amount from its net income for the tax year:
(b)
make the remaining amount available to another consolidated group to subtract from its net income for the tax year:
(c)
make the remaining amount available under section IC 5 (Company B using company A’s tax loss).
Third use
(4)
If, after subsections (2) and (3) are applied, a loss balance remains, the remaining amount is carried forward to the next tax year.
Relationship with sections IA 3, IA 4, IC 5, and provisions in this subpart
(5)
This section overrides sections IA 3, IA 4, and IC 5 (which relate to the general use and grouping of tax losses). Sections ID 3 to ID 5 override this section.
Defined in this Act: amount, company, consolidated group, net income, loss balance, tax year
Compare: 2004 No 35 s IG 6(4), (6), (7)
Section ID 2(1): amended (with effect on 1 April 2020), on 30 March 2021, by section 105(1) (and see section 105(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
ID 3 Pre-consolidation losses: use by group companies
When this section applies
(1)
This section applies in a tax year when—
(a)
a company (company A) that is part of a consolidated group has a loss balance to which section ID 2 applies; and
(b)
company A, in the continuity period relating to a tax loss component included in the loss balance, does not have the required common ownership under section IC 3 (Common ownership: group of companies) with 1 or more companies in the consolidated group.
Limit on amount available
(2)
The amount made available under section ID 2(2) to the consolidated group is limited as follows:
(a)
if all the companies, including company A, in the consolidated group meet the requirements of section IC 6(1) (Common ownership for period): the amount available is limited to the amount of the loss balance to the extent of the net income of the consolidated group for the tax year:
(b)
if some of the companies in the consolidated group meet the requirements of section IC 6(1): the amount available is limited to the total of—
(i)
the amount that company A could subtract from its net income for the tax year if it were not in the tax year part of a consolidated group; and
(ii)
the amount that could be made available under section IC 5 (Company B using company A’s tax loss) to the other group companies in the tax year, ignoring the consolidation of the companies and presuming all steps required under section IC 5 were taken in order for the section to apply.
Relationship with section FM 3
(3)
In subsection (2), the calculation of the consolidated group’s net income must be made in accordance with section FM 3 (Liability of consolidated groups and group companies).
Relationship with section ID 2
(4)
This section overrides section ID 2.
Defined in this Act: amount, company, consolidated group, continuity period, group of companies, loss balance, net income, tax loss component, tax year
Compare: 2004 No 35 s IG 6(6)
Section ID 3(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 300(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ID 3 list of defined terms tax loss component: inserted (with effect on 1 April 2008), on 6 October 2009, by section 300(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
ID 4 Pre-consolidation losses on entry: part-year rule
When this section applies
(1)
This section applies if a company that is part of a consolidated group has a loss balance to which section ID 2 applies in a tax year when the company joins the consolidated group.
Limit on amount available
(2)
The amount of the loss balance to be made available to the consolidated group under section ID 2(2) is the lesser of the amount the company establishes in financial statements under subsection (3), or the amount calculated using the formula in subsection (4), but in either case, it must not be more than the limit set out in section ID 3(2).
Financial statements
(3)
The company may establish the amount to be made available by providing the Commissioner, at the time of providing the consolidated group’s return of income, with adequate financial statements that—
(a)
relate to the part of the tax year when the company was part of the consolidated group; and
(b)
disclose the amount that would be the net income attributable to the part of the tax year when the company was part of the consolidated group, determined on a fair and reasonable basis of attribution.
Formula
(4)
The amount that may be made available under section ID 2(2) and referred to in subsection (2) is calculated using the formula—
unused amount − (part-year net income + part-year net loss).
Definition of items in formula
(5)
In the formula,—
(a)
unused amount is the loss balance carried forward from an earlier tax year or years that would be subtracted from the consolidated group’s net income for the tax year in the absence of section ID 3 or this section:
(b)
part-year net income is the company’s net income for the part of the tax year before the company joins the consolidated group:
(c)
part-year net loss is the amount of a pre-consolidation tax loss that must be subtracted under section ID 2 from the net income of another consolidated group of which the company was part in the tax year before joining the consolidated group referred to in subsection (1).
Relationship with section ID 2
(6)
This section overrides section ID 2.
Defined in this Act: amount, Commissioner, company, consolidated group, loss balance, net income, return of income, tax loss, tax year
Compare: 2004 No 35 s IG 6(7)
ID 5 Pre-consolidation losses on exit: part-year rule
When this section applies
(1)
This section applies if a company that is part of a consolidated group has a loss balance to which section ID 2 applies in a tax year when the company leaves the consolidated group.
Limit on amount available
(2)
In addition to the amount available under section IP 3(3) or IP 3B(3) (which relate to the carrying forward of tax losses for companies) but subject to the limit in section ID 3(2), the amount of the company’s loss balance that is carried forward to the tax year must be no more than the consolidated group’s net income for the relevant part of the tax year. For part-year calculations, see subpart IP (Meeting requirements for part-years).
Financial statements
(3)
The consolidated group must provide the Commissioner with adequate financial statements that disclose the amount that would be the consolidated group’s net income for the relevant part of the tax year, determined on a fair and reasonable basis of attribution. The statements must be filed with the consolidated group’s return of income for the tax year.
Continuity requirements
(4)
For the purposes of this section, the company must meet the threshold level set out in section IC 2(1) (Threshold levels for grouping tax losses in tax year) for the relevant part of the tax year.
Relationship with section ID 2
(5)
This section overrides section ID 2.
Defined in this Act: amount, Commissioner, company, consolidated group, loss balance, net income, return of income, tax year
Compare: 2004 No 35 s IG 6(8)
Section ID 5(2): amended (with effect on 1 April 2020), on 30 March 2022, by section 121(1) (and see section 121(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Subpart IE—Treatment of tax losses on amalgamation of companies
Contents
IE 1 When this subpart applies
This subpart applies if, in an amalgamation,—
(a)
either the amalgamating company or the amalgamated company has, before the date of the amalgamation, a tax loss component or ring-fenced tax loss:
(b)
a company that is part of a group of companies has a tax loss for the tax year of amalgamation that may be made available to the amalgamated company to subtract from its net income for the tax year.
Defined in this Act: amalgamated company, amalgamating company, amalgamation, group of companies, net income, ring-fenced tax loss, tax loss, tax loss component, tax year
Compare: 2004 No 35 ss IF 4–IF 6
IE 2 Treatment of tax losses by amalgamating company
When this section applies
(1)
This section applies if an amalgamating company that meets the requirements of section IA 5(2) and (3) or IB 3(2) (which relate to the carrying forward of tax losses for companies) ends its existence on a resident’s restricted amalgamation, and has a tax loss for a tax year that—
(a)
has not, before the date of amalgamation, been used by the company; and
(b)
could be made available and subtracted from the amalgamated company’s net income for the part of the tax year that ends with the date of amalgamation.
Attributing losses to amalgamated company
(2)
If the amalgamated company meets the requirements of section IE 5, the tax loss is attributed to the amalgamated company. The amalgamated company may, after the date of amalgamation, subtract the amount of the tax loss from its net income for the tax year, or make it available to another company to subtract from its net income for the tax year.
Other amalgamating companies
(3)
In subsection (1)(b), the amalgamated company includes a company that has amalgamated with the amalgamated company before or during the tax year in which the amount is used. The tax year referred to in that subsection means the tax year of the relevant company.
New companies
(4)
Subsection (1)(b) does not apply if the amalgamated company is incorporated only on the amalgamation.
Defined in this Act: amalgamated company, amalgamating company, amount, company, net income, resident’s restricted amalgamation, tax loss, tax year
Compare: 2004 No 35 s IF 4
Section IE 2(1): amended (with effect on 1 April 2020), on 30 March 2021, by section 106(1) (and see section 106(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IE 2(3): amended (with effect on 1 April 2008), on 30 March 2021, by section 106(2) (and see section 106(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
IE 3 Treatment of tax losses by amalgamated company
When this section applies
(1)
This section applies for an amalgamated company, and the tax year (the amalgamation tax year) corresponding to the income year in which the amalgamation takes place, when the amalgamated company has, for the part of the amalgamation tax year (the pre-amalgamation part year) that corresponds to the part of the income year ending with the date of the amalgamation, tax loss components (the pre-amalgamation loss) that—
(a)
arise from the pre-amalgamation part year:
(b)
meet the requirements of section IA 5(2) and (3) or IB 3(2) (which relate to the carrying forward of tax losses for companies) for being carried forward from the tax year before the amalgamation tax year to the pre-amalgamation part year.
Requirements for tax loss components to be used or made available before amalgamation
(2)
A tax loss component included in the pre-amalgamation loss may be used or made available by the amalgamated company for subtraction from net income calculated for the pre-amalgamation part year, if the requirements of sections IA 5, IB 3, IC 2, and IC 5 (which relate to the use and grouping of tax losses) for the use or availability are met.
Requirements for amounts to be used or made available after amalgamation
(3)
A tax loss component included in the pre-amalgamation loss may be used or made available by the amalgamated company for subtraction from net income calculated for the part of the amalgamation tax year (the post-amalgamation part year) that corresponds to the part of the income year beginning from the date of amalgamation, if—
(a)
section IA 5 or IB 3 allows the tax loss component to be carried forward from the pre-amalgamation part year to the post-amalgamation part year; and
(b)
sections IC 2 and IC 5 would have allowed the tax loss component to be made available to an amalgamating company for subtraction from net income calculated for the pre-amalgamation part year; and
(c)
for a tax loss component that is an attributed CFC net loss or a FIF net loss and is made available by the amalgamated company, the tax loss component is made available to a wholly-owned group of companies.
Treatment of part years
(4)
The pre-amalgamation part year and the post-amalgamation part year are treated as separate tax years for the purposes of applying this section.
Relationship with sections IA 3, IA 4, IA 5, and IB 3
(5)
This section overrides—
(a)
sections IA 3 and IA 4 (which relate to the general use of tax losses); and
(b)
sections IA 5 and IB 3 (which relate to the carrying forward of tax losses for companies).
Defined in this Act: amalgamated company, amalgamating company, amalgamation, attributed CFC net loss, FIF net loss, income year, net income, tax loss component, tax year, wholly-owned group of companies
Section IE 3: replaced (with effect on 1 April 2008), on 30 March 2017, by section 151(1) (and see section 151(2)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section IE 3(1)(b): amended (with effect on 1 April 2020), on 30 March 2021, by section 107(1) (and see section 107(5) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IE 3(2): amended (with effect on 1 April 2020), on 30 March 2021, by section 107(2) (and see section 107(5) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IE 3(3)(a): amended (with effect on 1 April 2020), on 30 March 2021, by section 107(3) (and see section 107(5) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IE 3(5) heading: replaced (with effect on 1 April 2020), on 30 March 2021, by section 107(4) (and see section 107(5) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IE 3(5): replaced (with effect on 1 April 2020), on 30 March 2021, by section 107(4) (and see section 107(5) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
IE 4 Group companies’ treatment of tax losses on amalgamation
When this section applies
(1)
This section applies on an amalgamation if a company that is part of a group of companies—
(a)
meets the requirements of section IA 5(2) and (3) or IB 3(2) (which relate to the carrying forward of tax losses for companies); and
(b)
has a tax loss for part of a tax year before the date of amalgamation; and
(c)
may use the tax loss under section IC 5, IQ 4, or IQ 5 (which relate to a company’s use of another company’s loss, including foreign losses).
Use by amalgamated company
(2)
The amount of the tax loss may be subtracted from the net income of the amalgamated company for the tax year only if both the company and the amalgamated company, and each company that before or during the amalgamation amalgamated with the amalgamated company, meet the requirements of subparts IA, IC, and IQ (which relate to the general loss rules and certain foreign losses) that allow companies to group tax losses.
Defined in this Act: amalgamated company, amalgamation, amount, company, group of companies, net income, tax loss, tax year
Compare: 2004 No 35 s IG 9
Section IE 4(1)(a): amended (with effect on 1 April 2020), on 30 March 2021, by section 108(1) (and see section 108(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
IE 5 Applying the continuity provisions when companies amalgamate
The provisions of this Act apply as if the amalgamated company did not exist separately before amalgamation, and was instead the amalgamating companies with the same holders of shares and options over shares, each with the same number and class of shares and options over shares, as they held in the amalgamating company, to determine whether a tax loss or loss balance,—
(a)
may be used or is carried forward under sections IA 3 and IA 4 (which relate to the general use of tax losses):
(b)
may be subtracted from the net income of another company under section IC 5, IQ 4, or IQ 5 (which relate to a company’s use of another company’s loss, including foreign losses):
(c)
in the case of a group company, may be subtracted from the net income of the amalgamated company under section IC 5, IQ 4, or IQ 5.
Defined in this Act: amalgamated company, amalgamating company, amalgamation, company, loss balance, net income, share, tax loss
Subpart IP—Meeting requirements for part-years
Contents
Introductory provisions
IP 1 When this subpart applies
Breaches of continuity and commonality
(1)
This subpart applies if 1 or more of the following breaches occur:
(a)
when commonality of ownership required by section IC 5(1)(a) (Company B using company A’s tax loss) is not met during a tax year (a commonality breach):
(b)
when continuity of ownership required by section IA 5(1) (Restrictions on companies’ loss balances carried forward: continuity of ownership) is broken during a tax year, or when a new or existing company joins a group of companies during a tax year (an ownership continuity breach):
(c)
when a company to which section IB 3 (When tax loss components of companies carried forward despite ownership continuity breach) applies breaches, during an income year, the requirement of section IB 3(2)(b) or (c) for the carrying forward of a tax loss component to the tax year that corresponds to the income year (a business continuity breach).
Relationship with subparts IA, IB, IC, and ID: part-year calculations
(2)
The general rules for the treatment of tax losses in subparts IA, IB, IC, and ID (which relate to the general use and grouping of tax losses) apply, as modified or overridden by the provisions of this subpart, to—
(a)
a part-year tax loss as if it were a tax loss for a tax year:
(b)
part-year net income as if it were net income for a tax year:
(c)
the common span as if the period of time were a tax year.
Defined in this Act: common span, company, income year, net income, tax loss, tax loss component, tax year
Compare: 2004 No 35 s IG 2(4)(e), (f), (5)(e), (f)
Section IP 1(1): amended (with effect on 1 April 2020), on 30 March 2022, by section 122(1)(a) (and see section 122(5) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IP 1(1)(a): substituted (with effect on 1 April 2009), on 6 October 2009, by section 301(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IP 1(1)(b): substituted (with effect on 1 April 2009), on 6 October 2009, by section 301(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IP 1(1)(b): amended (with effect on 1 April 2020), on 30 March 2022, by section 122(1)(b) (and see section 122(5) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IP 1(1)(b): amended (with effect on 1 April 2020), on 30 March 2021, by section 109 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IP 1(1)(c): inserted (with effect on 1 April 2020), on 30 March 2022, by section 122(1)(c) (and see section 122(5) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IP 1(2) heading: amended (with effect on 1 April 2020), on 30 March 2022, by section 122(2) (and see section 122(5) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IP 1(2): amended (with effect on 1 April 2020), on 30 March 2022, by section 122(3) (and see section 122(5) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IP 1 list of defined terms company: inserted (with effect on 1 April 2020), on 30 March 2022, by section 122(4) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IP 1 list of defined terms income year: inserted (with effect on 1 April 2020), on 30 March 2022, by section 122(4) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IP 1 list of defined terms tax loss component: inserted (with effect on 1 April 2020), on 30 March 2022, by section 122(4) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
IP 2 Group companies’ common span
Common span
(1)
In this subpart, the corresponding parts of company A’s income year and company B’s income year when the requirements for commonality of ownership under section IC 5(1)(a) (Company B using company A’s tax loss) are met is called the common span.
Common span when balance dates differ
(2)
If the income years of company A and company B do not end on the same date, the common span is that part of company B’s income year or income years in which the requirements for commonality are met. Section IC 10(2)(b) (When companies have different balance dates) may apply to extend the period.
Calculating group companies’ tax losses
(3)
For the purposes of this subpart and the grouping of tax losses, the amount of a tax loss component is found after taking into account any amount of the tax loss component subtracted from the net income of any group company.
Defined in this Act: amount, common span, company, income year, net income, tax loss, tax loss component
Compare: 2004 No 35 s IG 2(2)(e), (4)(c), (d), (5)(b), (c)
Tax loss components carried forward
IP 3 Ownership continuity breach: tax loss components of companies carried forward
When this section applies
(1)
This section applies for the purposes of section IA 4 (Using loss balances carried forward to tax year) if a breach occurs in the requirements for continuity of ownership of section IA 5 (Restrictions on companies’ loss balances carried forward: continuity of ownership) that enable a tax loss component included in a company’s loss balance to be carried forward to or from a tax year.
Tax loss components for earlier income years
(2)
Despite the breach, a tax loss component arising in an earlier income year is carried forward to a tax year (year A) to the extent to which—
(a)
the requirements for continuity of ownership would be met if the continuity period included only part of the income year of the company that corresponds to year A; and
(b)
the company has net income for part of the corresponding income year; and
(c)
the company provides the Commissioner with adequate financial statements under section IP 6 calculating the amount of the company’s net income for the relevant part of the corresponding income year.
Limit on tax loss components carried forward to year A
(3)
The total tax loss components carried forward under subsection (2) must be no more than the amount calculated under subsection (2)(b) and (c), although the amount may be increased if section IP 5 applies.
Tax loss components of year of breach
(4)
Despite the breach, a tax loss component is carried forward to the tax year (year B) from year A to the extent to which—
(a)
the requirements for continuity of ownership would be met if the continuity period included only part of the income year that corresponds to year A; and
(b)
the company provides the Commissioner with adequate financial statements under section IP 6 calculating the amount of the company’s net loss for the part of year A.
Limit on tax loss components carried forward to year B
(5)
The amount of the tax loss component carried forward under subsection (4) must be the least of—
(a)
the part-year net loss calculated under subsection (4)(b):
(b)
if the company has net income for year A, zero:
(c)
if the company has a net loss for year A, the company’s net loss for year A.
Defined in this Act: amount, Commissioner, company, continuity period, corresponding income year, income year, loss balance, net income, net loss, tax loss component, tax year
Compare: 2004 No 35 s IF 1(2), (3)
Section IP 3 heading: amended (with effect on 1 April 2020), on 30 March 2022, by section 123 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IP 3(1): amended (with effect on 1 April 2020), on 30 March 2021, by section 110 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
IP 3B Business continuity breach: tax loss components of companies carried forward
When this section applies
(1)
This section applies for the purposes of section IA 4 (Using loss balances carried forward to tax year) if a tax loss component of a company would have been carried forward under section IB 3 (When tax loss components of companies carried forward despite ownership continuity breach) to a tax year but for a breach or breaches, during the income year that corresponds to the tax year, of either or both of the requirements of section IB 3(2)(b) and (c).
Tax loss components for earlier income years
(2)
Despite the breach or breaches, the tax loss component is carried forward to the tax year to the extent to which—
(a)
the requirements of section IB 3(2)(b) and (c) would be met if the relevant period described in section IB 4 (Business continuity period) included only part of the income year of the company that corresponds to the tax year; and
(b)
the company has net income for part of the corresponding income year; and
(c)
the company provides the Commissioner with adequate financial statements under section IP 6 calculating the amount of the company’s net income for the relevant part of the corresponding income year.
Limit on tax loss components carried forward
(3)
The total tax loss components carried forward under subsection (2) must be no more than the amount calculated under subsection (2)(b) and (c), although the amount may be increased if section IP 5 applies.
Defined in this Act: amount, Commissioner, company, corresponding income year, income year, net income, tax loss component, tax year
Section IP 3B: inserted (with effect on 1 April 2020), on 30 March 2022, by section 124(1) (and see section 124(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Grouping part-year tax losses
IP 4 Breach in income year in which tax loss component arises
When this section applies
(1)
This section applies for the purposes of sections IA 6 and IC 5 (which relate to the use and grouping of tax losses) when company A has a tax loss component arising in an income year in which either the continuity or commonality requirements for grouping tax losses are breached.
Modified requirements
(2)
The tax loss component is included in a tax loss that company A makes available under section IA 3(2) (Using tax losses in tax year) to company B only to the extent to which the following requirements, which modify those set out in section IC 5 (Company B using company A’s tax loss), are met:
(a)
the tax loss component arises in the common span; and
(ab)
the amount of the tax loss component is no more than the net income that company B derives in the common span; and
(b)
continuity of ownership in company A, or continuity of company A’s business activities, under section IC 2(1) (Threshold levels for grouping tax losses in tax year) applies from the beginning to the end of the common span; and
(c)
company A and company B provide the Commissioner with adequate financial statements under section IP 6; and
(d)
company A notifies the Commissioner of the treatment of the tax loss under section IP 7.
Determining amounts
(3)
For the purposes of determining the amount of tax loss that company A and company B may use, sections IC 5 and IC 8 (which relate to the treatment of tax losses by companies) apply as if the common span were a corresponding income year.
Relationship with section IC 8
(4)
Despite subsection (2)(ab), section IC 8 overrides this section in limiting the amount that may be used when the net income derived in the common span is more than the net income of company B for the income year.
Defined in this Act: amount, Commissioner, common span, company, corresponding income year, income year, net income, notify, tax loss, tax loss component
Compare: 2004 No 35 s IG 2(4)
Section IP 4(2)(ab): inserted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 91(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IP 4(4) heading: added (with effect on 1 April 2008), on 29 August 2011, by section 91(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IP 4(4): added (with effect on 1 April 2008), on 29 August 2011, by section 91(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IP 4(2)(b): amended (with effect on 1 April 2020), on 30 March 2022, by section 125(1) (and see section 125(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
IP 5 Breach in tax year in which loss balance is grouped
When this section applies
(1)
This section applies for the purposes of sections IA 6 and IC 5 (which relate to the use and grouping of tax losses) when company A has a loss balance carried forward to a tax year in which either the continuity or commonality requirements for grouping tax losses are breached.
Modified requirements
(2)
The loss balance is included in a tax loss that company A makes available under section IA 3(2) (Using tax losses in tax year) to company B only to the extent to which the following requirements, which modify those set out in section IC 5 (Company B using company A’s tax loss), are met:
(a)
the amount of company A’s loss balance carried forward to the tax year in which the breach occurred is not more than the amount of—
(i)
company B’s net income for the common span, if no company in the group other than company B has net income for the common span of more than zero; or
(ii)
the total of the amounts of net income for the common span of companies in the group; and
(b)
continuity of ownership in company A, or continuity of company A’s business activities, under section IC 2(1) (Threshold levels for grouping tax losses in tax year) applies in the common span; and
(c)
company B provides the Commissioner with adequate financial statements under section IP 6; and
(d)
company A notifies the Commissioner of the treatment of the tax loss under section IP 7.
Determining amounts
(3)
For the purposes of determining the amount of the loss balance that company A and company B may use, sections IC 5 and IC 8 (which relate to the treatment of tax losses by companies) apply as if the common span were a tax year.
Defined in this Act: amount, Commissioner, common span, company, loss balance, notify, tax loss, tax loss component, tax year
Compare: 2004 No 35 s IG 2(2)(b)–(f), (5)
Section IP 5(2)(a): substituted (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 84(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section IP 5(2)(b): amended (with effect on 1 April 2020), on 30 March 2022, by section 126(1) (and see section 126(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Statements and notices
IP 6 Financial statements required
Financial statements required from company: section IP 3
(1)
For the purposes of this subpart, a company must provide the Commissioner with adequate financial statements under section IP 3(2)(c) and (4)(b) relating to the continuity period.
Financial statements required from company: section IP 3B
(1B)
For the purposes of this subpart, a company must provide the Commissioner with adequate financial statements under section IP 3B(2)(c) relating to the continuity period.
Financial statements required from company A: section IP 4
(2)
For the purposes of this subpart, company A must provide the Commissioner with adequate financial statements under section IP 4(2)(c) relating to the common span, calculating the amount of the tax loss component, determined on a fair and reasonable basis of attribution.
Financial statements required from company B: sections IP 4 and IP 5
(3)
For the purposes of this subpart, company B must provide the Commissioner with adequate financial statements under sections IP 4(2)(c) and IP 5(2)(c) relating to the common span, calculating the amount of the net income in the common span, determined on a fair and reasonable basis of attribution.
Different balance dates
(4)
For the purposes of subsections (2) and (3), if the balance dates of company A and company B differ, the common span is taken as the period of time in the tax year in which the tax loss or loss balance is used—
(a)
that includes, but is not limited to, all or part of the tax year in which company A is in the same group of companies as company B; and
(b)
in which company A and company B are at all times part of the same group of companies; and
(c)
in which company A meets the continuity requirements of section IC 2(1) (Threshold levels for grouping tax losses in tax year).
Applying provisions to part-year periods
(5)
In preparing the financial statements described in this section, the company must, to the extent possible, apply the provisions of this Act to the common span as if it were a tax year.
Defined in this Act: amount, Commissioner, common span, company, continuity period, group of companies, loss balance, net income, notify, tax loss, tax loss component, tax year
Compare: 2004 No 35 ss IF 1(2), (3), IG 2(4)(c), (d), (5)(c), (d), (10)
Section IP 6(1B) heading: inserted (with effect on 1 April 2020), on 30 March 2022, by section 127(1) (and see section 127(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IP 6(1B): inserted (with effect on 1 April 2020), on 30 March 2022, by section 127(1) (and see section 127(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
IP 7 Notices required
Notifying Commissioner
(1)
In sections IP 4(2)(d) and IP 5(2)(d), company A must notify the Commissioner by its extended return date that it intends to treat a tax loss or loss balance in the way described in the relevant section.
Meaning of extended return date
(2)
In subsection (1), extended return date has the meaning set out in section IC 9 (Date for payment and notice to Commissioner), and includes a later date allowed by the Commissioner.
Defined in this Act: Commissioner, company, extended return date, loss balance, notice, notify, pay, tax loss
Compare: 2004 No 35 s IG 2(4), (5)
Subpart IQ—Attributed controlled foreign company net losses and foreign investment fund net losses
Contents
IQ 1A When this subpart applies
This subpart applies when, for a country or territory and a tax year, a person has—
(a)
an amount of attributed CFC net loss or FIF net loss—
(i)
for the tax year:
(ii)
carried forward from an earlier tax year:
(b)
an amount of attributed CFC income or FIF income calculated under the branch equivalent method or attributable FIF income method and another person makes available to the person an amount of attributed CFC net loss or FIF net loss.
Defined in this Act: attributable FIF income method, attributed CFC income, attributed CFC net loss, branch equivalent method, company, FIF income, FIF net loss, tax year
Section IQ 1A: inserted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 92(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 1A(b): amended, on 24 February 2016, by section 197(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section IQ 1A(b): amended (with effect on 1 July 2011), on 29 August 2011, by section 92(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 1A list of defined terms attributable FIF income method: inserted, on 24 February 2016, by section 197(2)(b) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section IQ 1A list of defined terms attributed CFC income: inserted, on 24 February 2016, by section 197(2)(b) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section IQ 1A list of defined terms attributed CFC net income: repealed, on 24 February 2016, by section 197(2)(a) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section IQ 1A list of defined terms attributed FIF income method: repealed, on 24 February 2016, by section 197(2)(a) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section IQ 1A list of defined terms group: repealed, on 24 February 2016, by section 197(2)(a) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
IQ 1 General treatment
General statement
(1)
For an amount of a person’s attributed CFC net loss or FIF net loss to be carried forward to a tax year,—
(a)
the person, if a company, must meet the requirements of section IA 5(2) and (3) or IB 3(2) (which relate to the carrying forward of tax losses for companies); and
(b)
the amount must be used in the order required by section IA 9 (Ordering rules); and
(c)
the amount must be adjusted when required by section IA 10 (Amended assessments).
When net losses arise
(2)
An attributed CFC net loss or a FIF net loss arises on the last day of the tax year in which the loss is attributed.
Treatment of net losses by consolidated groups
(3)
If a consolidated group has an amount of attributed CFC net loss or FIF net loss, no part of the amount belongs to a company that is part of the consolidated group.
Treatment of net losses on amalgamation
(4)
The treatment of tax losses, including amounts of attributed CFC net loss and FIF net loss, on the amalgamation of companies is dealt with under subpart IE (Treatment of tax losses on amalgamation of companies) and the provisions of this subpart do not apply.
Defined in this Act: amalgamation, amount, attributed CFC net loss, company, consolidated group, FIF net loss, tax loss, tax year
Compare: 2004 No 35 ss IE 3(1), IE 4(1), IF 3, IF 6, IG 4(1), IG 5(1), IG 7(1)
Section IQ 1(1): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 93(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 1(1)(a): amended (with effect on 1 April 2020), on 30 March 2021, by section 111(1) (and see section 111(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
IQ 1B Losses carried forward to tax year
An attributed CFC net loss or a FIF net loss or both may be carried forward to a tax year. Section IA 5 and subpart IB (which relate to the carrying forward of tax losses for companies) apply for the purposes of this subpart as if the net loss were a tax loss component.
Defined in this Act: attributed CFC net loss, FIF net loss, tax loss component, tax year
Section IQ 1B: inserted (with effect on 1 April 2008), on 7 December 2009, by section 61(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 1B: amended (with effect on 1 April 2020), on 30 March 2021, by section 112(1) (and see section 112(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
IQ 2 Ring-fencing cap on attributed CFC net losses
When this section applies
(1A)
This section applies if a person, for a tax year and a country or territory (the jurisdiction),—
(a)
derives an amount of attributed CFC income or FIF income calculated under the attributable FIF income method; and
(b)
has an amount of attributed CFC net loss or FIF net loss—
(i)
carried forward to the tax year:
(ii)
made available under section IQ 4 to the person by another company in the same group.
Amount subtracted: losses not from elective attributing CFCs or elective attributing FIFs
(1)
The total amount of attributed CFC net loss and FIF net loss, relating to a CFC or FIF (the loss entity) resident in the jurisdiction when the loss arises and not an elective attributing CFC or elective attributing FIF, that is subtracted from the person’s net income for the tax year is the lesser of—
(a)
the total amount of attributed CFC income, and FIF income calculated under the attributable FIF income method or branch equivalent method, that the person derives in the tax year in relation to a CFC or FIF that is resident in the jurisdiction for the accounting period corresponding to the tax year:
(b)
the total amount of attributed CFC net loss and FIF net loss—
(i)
relating to the loss entity and the jurisdiction; and
(ii)
carried forward to the tax year or made available in the tax year to the person by another company in the same group; and
(iii)
available to the person under subsection (1B), (1C), or section IQ 3.
Amount subtracted: losses from elective attributing CFCs or elective attributing FIFs
(1BA)
The total amount of attributed CFC net loss and FIF net loss, relating to an elective attributing CFC or elective attributing FIF (the loss entity) resident in the jurisdiction when the loss arises, that is subtracted from the person’s net income for the tax year is the lesser of—
(a)
the total amount of attributed CFC income, and FIF income calculated under the attributable FIF income method or branch equivalent method, that the person derives in the tax year in relation to an elective attributing CFC or elective attributing FIF—
(i)
with the same election commencement date as the loss entity; and
(ii)
resident in the jurisdiction for the accounting period corresponding to the tax year:
(b)
the total amount of attributed CFC net loss and FIF net loss—
(i)
relating to the loss entity and the jurisdiction; and
(ii)
carried forward to the tax year or made available in the tax year to the person by another company in the same group; and
(iii)
available to the person under subsection (1B), (1C), or section IQ 3.
Losses from year after transition
(1B)
If an amount of attributed CFC net loss or FIF net loss arises for a person in an income year for which section IQ 2B applies to the person, or is made available to the person by a company for which the loss arises in an income year for which section IQ 2B applies to the company, all of the attributed CFC net loss or FIF net loss is available for subtracting from the person’s net income for the tax year.
Attributed CFC net losses from income year before transition
(1C)
If an amount of attributed CFC net loss of a person, or made available to the person, relates to an income year before section IQ 2B applies to the person and is carried forward to a tax year in which section IQ 2B applies to the person,—
(a)
the amount of the attributed CFC net loss available in the tax year for subtracting from the person’s net income is equal to the equivalent CFC loss under section IQ 2B:
(b)
the amount of the attributed CFC net loss is reduced by the converted BE loss under section IQ 2B.
Income only once
(2)
In subsection (1), the person may take into account an amount of attributed CFC income or FIF income only to the extent to which they have not accounted for it in—
(a)
calculating a deduction under sections DN 4 or DN 8 (which relate to ring-fencing caps); or
(b)
establishing their entitlement to make available, under section IC 5 (Company B using company A’s tax loss) or IQ 4, an amount of attributed CFC net loss or FIF net loss carried forward; or
(c)
applying subsection (1) in relation to another attributed CFC net loss or FIF net loss.
Treatment of excess
(3)
If the person cannot use all of the maximum amount referred to in subsection (1) because there is insufficient net income, the surplus is no longer available to them as a CFC net loss, but becomes a tax loss component under section IA 2(4) (Tax losses).
Defined in this Act: amount, attributable FIF income method, attributed CFC income, attributed CFC net loss, branch equivalent method, CFC, company, deduction, elective attributing CFC, elective attributing FIF, FIF, FIF income, FIF net loss, income year, net income, tax loss component, tax year
Compare: 2004 No 35 s IE 3(2), (3), (5)
Section IQ 2(1A) heading: inserted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 94(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2(1A): inserted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 94(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2(1A)(a): amended (with effect on 1 July 2011), on 29 August 2011 (applying for income years beginning on or after 1 July 2011), by section 94(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2(1) heading: replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 114(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section IQ 2(1): replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 114(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section IQ 2(1BA) heading: inserted (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 114(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section IQ 2(1BA): inserted (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 114(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section IQ 2(1B) heading: substituted (with effect on 30 June 2009), on 29 August 2011 (applying for income years beginning on or after 1 July 2009), pursuant to section 94(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2(1B): substituted (with effect on 30 June 2009), on 29 August 2011 (applying for income years beginning on or after 1 July 2009), by section 94(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2(1C) heading: inserted (with effect on 30 June 2009), on 6 October 2009, by section 302(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IQ 2(1C): inserted (with effect on 30 June 2009), on 6 October 2009, by section 302(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IQ 2(1C): amended (with effect on 30 June 2009), on 29 August 2011 (applying for income years beginning on or after 1 July 2009), by section 94(6)(a) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2(1C)(a): amended (with effect on 30 June 2009), on 29 August 2011 (applying for income years beginning on or after 1 July 2009), by section 94(6)(b) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2(1C)(b): amended (with effect on 30 June 2009), on 29 August 2011 (applying for income years beginning on or after 1 July 2009), by section 94(6)(c) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2(2)(b): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 94(7) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2(2)(c): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 94(7) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 302(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IQ 2 list of defined terms attributable FIF income: repealed, on 24 February 2016, by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section IQ 2 list of defined terms attributable FIF income method: inserted, on 24 February 2016, by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section IQ 2 list of defined terms company: inserted (with effect on 1 April 2008), on 29 August 2011, by section 94(8) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2 list of defined terms elective attributing CFC: inserted (with effect on 30 June 2009), on 2 November 2012, by section 114(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section IQ 2 list of defined terms elective attributing FIF: inserted (with effect on 30 June 2009), on 2 November 2012, by section 114(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section IQ 2 list of defined terms FIF net loss: inserted (with effect on 1 April 2008), on 29 August 2011, by section 94(8) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2 list of defined terms income year: inserted (with effect on 1 April 2008), on 29 August 2011, by section 94(8) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2 list of defined terms tax loss: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IQ 2B Effect of attributed CFC net loss and FIF net loss from before first affected year
When this section applies
(1)
This section applies for a person and a country (the jurisdiction) when the person has an amount (the available BE loss) of attributed CFC net loss, or FIF net loss calculated using the branch equivalent method, that—
(a)
relates to a tax year (the loss year) before the first tax year for which this section applies to the person; and
(b)
relates to a CFC or FIF that is resident in the jurisdiction in the loss year; and
(c)
is carried forward to a tax year (the conversion year) in which this section applies to the person or is made available to the person for the conversion year by another company in the same group.
What this section does
(2)
In this section, subsection (3) gives the person an option that available BE loss for a jurisdiction not be carried forward and subsections (4) to (7) give, for whichever of the 4 possible alternative situations is relevant for the person,—
(a)
the amount of the available BE loss (the converted BE loss) for the jurisdiction that is—
(i)
treated as being converted into an amount referred to in paragraph (b) in the conversion year; and
(ii)
not available to the person to be carried forward as available BE loss for the jurisdiction and a later tax year:
(b)
the amount (the equivalent CFC loss) of attributed CFC net loss or FIF net loss for the jurisdiction that, for the purposes of the rest of this subpart, is treated as arising on the last day of the conversion year.
Option: loss not carried forward
(3)
A person may choose by giving a notice in a form and at a time acceptable to the Commissioner that the available BE loss for a jurisdiction not be carried forward under this section.
Person not resident group member: more jurisdictional BE income
(4)
For a person who is not a resident group member and has jurisdictional BE income for the conversion year that is greater than zero and greater than the person’s jurisdictional attributed income for the conversion year,—
(a)
the person’s converted BE loss in the conversion year is the lesser of—
(i)
the person’s jurisdictional BE income for the conversion year:
(ii)
the person’s available BE loss for the conversion year:
(b)
the person’s equivalent CFC loss is the lesser of—
(i)
the person’s jurisdictional attributed income for the conversion year:
(ii)
the amount calculated by dividing the person’s available BE loss for the conversion year by the person’s jurisdictional income ratio for the conversion year.
Person not resident group member: more jurisdictional attributed income
(5)
For a person who is not a resident group member and has jurisdictional attributed income for the conversion year that is greater than or equal to zero and greater than or equal to the person’s jurisdictional BE income for the conversion year,—
(a)
the person’s converted BE loss for the conversion year is the lesser of—
(i)
the person’s available BE loss for the conversion year:
(ii)
the person’s jurisdictional attributed income for the conversion year:
(b)
the person’s equivalent CFC loss is equal to the person’s converted BE loss for the conversion year.
Resident group member: more jurisdictional BE income
(6)
For a person who is a resident group member for a wholly-owned group of companies and has jurisdictional BE income for the conversion year that is greater than zero and greater than the person’s jurisdictional attributed income for the conversion year,—
(a)
the person’s converted BE loss for the conversion year is the lesser of—
(i)
the person’s available BE loss for the conversion year:
(ii)
the greater of the person’s jurisdictional BE income for the conversion year and the amount calculated by multiplying the group’s jurisdictional income ratio for the conversion year by the person’s jurisdictional attributed income for the conversion year:
(b)
the person’s equivalent CFC loss is the amount calculated by dividing the person’s converted BE loss for the conversion year by the group’s jurisdictional income ratio for the conversion year.
Resident group member: more jurisdictional attributed income
(7)
For a person who is a resident group member and has jurisdictional attributed income for the conversion year that is greater than or equal to zero and greater than or equal to the person’s jurisdictional BE income for the conversion year,—
(a)
the person’s converted BE loss for the conversion year is the lesser of—
(i)
the person’s available BE loss for the conversion year:
(ii)
the person’s jurisdictional attributed income for the conversion year multiplied by the group’s jurisdictional income ratio for the conversion year:
(b)
the person’s equivalent CFC loss is equal to the amount calculated by dividing the person’s converted BE loss for the conversion year by the group’s jurisdictional income ratio for the conversion year.
Election by person or group to fix jurisdictional income ratio
(8)
A person or wholly-owned group may choose under this subsection by notice, in a form and at a time acceptable to the Commissioner, that the person or members of the group use a jurisdictional income ratio—
(a)
equal to the average of the jurisdictional income ratios for the person or group, under paragraph (b) of the definition in subsection (9), for 2 consecutive tax years—
(i)
corresponding to an income year beginning on or after 1 July 2011; and
(ii)
in each of which the person or group has jurisdictional BE income; and
(b)
for all tax years after the 2 tax years referred to in paragraph (a).
Some definitions
(9)
For a person or wholly-owned group and a tax year for which the person or members of the wholly-owned group have an income interest in a CFC that is resident in a country or territory (the jurisdiction),—
jurisdictional attributed income means,—
(a)
for a person and the tax year, the amount that is the greater of zero and the amount calculated by—
(i)
finding, for each CFC resident in the jurisdiction, the attributed CFC income or loss of the person from the CFC for the tax year:
(ii)
finding, for each FIF resident in the jurisdiction for which the person uses the attributable FIF income method, the FIF income or loss of the person from the FIF for the tax year:
(iii)
subtracting the total of loss amounts under subparagraphs (i) and (ii) from the total of income amounts under subparagraphs (i) and (ii):
(b)
for a wholly-owned group and the tax year, the amount that is the greater of zero and the attributed CFC income or loss and FIF income or loss, treating losses as negative, of members of the group who are New Zealand residents from CFCs and FIFs that are resident in the jurisdiction for the tax year, consolidated for the purposes of the financial statements of the group
jurisdictional BE income means,—
(a)
for a person and the tax year, the amount that is the greater of zero and the amount calculated by—
(i)
multiplying, for each CFC resident in the jurisdiction, the person’s income interest in the CFC for the tax year by the branch equivalent income or loss of the CFC for the tax year or, if the person chooses, by the amount given by subsection (10) for the CFC for the tax year:
(ii)
finding, for each FIF resident in the jurisdiction for which the person uses the attributable FIF income method, the FIF income or loss calculated under the branch equivalent method of the person from the FIF for the tax year:
(iii)
subtracting the total of loss amounts under subparagraphs (i) and (ii) from the total of income amounts under subparagraphs (i) and (ii):
(b)
for a wholly-owned group and the tax year, the amount that is the greater of zero and the amount calculated, treating losses as negative, by—
(i)
multiplying, for each CFC resident in the jurisdiction, the income interest in the CFC of members of the group who are New Zealand residents for the tax year by the branch equivalent income or loss of the CFC for the tax year or, if the group chooses, by the amount given by subsection (10) for the CFC for the tax year:
(ii)
consolidating the results for the purposes of the financial statements of the group
jurisdictional income ratio,—
(a)
for a person that has not made an election under subsection (8), means the greater of 1 and the amount calculated by dividing the person’s jurisdictional BE income for the tax year by the person’s jurisdictional attributed income for the tax year:
(b)
for a wholly-owned group that has not made an election under subsection (8) for the tax year, means the greater of 1 and the amount calculated by dividing the group’s jurisdictional BE income for the tax year by the group’s jurisdictional attributed income for the tax year:
(c)
for a person or wholly-owned group that has made an election under subsection (8) for the tax year, means the amount given by subsection (8) for the person or group and the tax year
resident group member means a person who is a member of a wholly-owned group that has other New Zealand residents as members.
Option to determine jurisdictional BE income from accounts
(10)
In determining the jurisdictional BE income of a person or wholly-owned group, the person or group may choose to use, instead of the branch equivalent income or loss of a CFC, the profit or loss of the CFC before taxation given by accounts—
(a)
complying with generally accepted accounting practice in New Zealand or an equivalent standard for the consistent and undistorted reporting of net profits in the country in which the accounts are prepared; and
(b)
audited by an accountant who is—
(i)
a chartered accountant or an accountant of equivalent professional standard in the country in which the accounts are prepared; and
(ii)
independent of the CFC and the person or wholly-owned group; and
(c)
are given an unqualified opinion or an opinion of equivalent standard in the country in which the accounts are prepared.
Conversion of income from accounts into New Zealand currency
(11)
If a person or wholly-owned group chooses under subsection (10) to use the profit or loss before taxation of a CFC given by accounts expressed in a currency other than New Zealand currency, the person or group must convert the profit or loss into New Zealand currency—
(a)
by applying the close of trading spot exchange rate on the last day of the accounting period for the accounts; or
(b)
applying the average of the close of trading spot exchange rates for the 15th day of each complete month that falls in the accounting period.
Defined in this Act: accounting period, attributed CFC income, attributed CFC loss, attributable FIF income method, branch equivalent income, branch equivalent loss, CFC, close of trading spot exchange rate, company, FIF net loss, group of companies, income interest, jurisdictional attributed income, jurisdictional BE income, jurisdictional income ratio, New Zealand resident, notice, resident group member, tax year, wholly-owned group, wholly-owned group of companies
Section IQ 2B: inserted (with effect on 30 June 2009), on 6 October 2009, by section 303(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IQ 2B heading: substituted (with effect on 30 June 2009), on 29 August 2011, by section 95(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2B(1): replaced (with effect on 1 July 2009 and applying for income years beginning on or after that date), on 7 May 2012, by section 77(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section IQ 2B(2): replaced (with effect on 1 July 2009 and applying for income years beginning on or after that date), on 7 May 2012, by section 77(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section IQ 2B(8)(a)(i): replaced (with effect on 1 July 2009 and applying for income years beginning on or after that date), on 7 May 2012, by section 77(3) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section IQ 2B(9) jurisdictional attributed income paragraph (a)(ii): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 77(4) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section IQ 2B(9) jurisdictional BE income paragraph (a)(ii): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 77(5) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section IQ 2B(11) heading: inserted (with effect on 1 July 2009 and applying for income years beginning on or after that date), on 7 May 2012, by section 77(6) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section IQ 2B(11): inserted (with effect on 1 July 2009 and applying for income years beginning on or after that date), on 7 May 2012, by section 77(6) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section IQ 2B list of defined terms accounting period: inserted (with effect on 1 July 2009), on 7 May 2012, by section 77(7) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section IQ 2B list of defined terms attributable FIF income method: inserted (with effect on 1 July 2011), on 7 May 2012, by section 77(8) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section IQ 2B list of defined terms close of trading spot exchange rate: inserted (with effect on 1 July 2009), on 7 May 2012, by section 77(7) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section IQ 2B list of defined terms company: inserted (with effect on 30 June 2009), on 29 August 2011, by section 95(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2B list of defined terms FIF net loss: inserted (with effect on 30 June 2009), on 29 August 2011, by section 95(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 2B list of defined terms notice: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section IQ 2B list of defined terms tax loss: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IQ 2C Effect of FIF net loss if attributed FIF income method not available
When this section applies
(1)
This section applies for a person and a country (the jurisdiction) when—
(a)
the person has an amount (the available BE loss) of FIF net loss calculated using the branch equivalent method—
(i)
relating to a tax year (the loss year) before the first tax year for which this section applies to the person; and
(ii)
relating to a FIF that is resident in the jurisdiction in the loss year; and
(iii)
carried forward to a tax year (the current year) in which this section applies to the person; and
(b)
the person is not able to use the attributable FIF income method in the current year for the person’s interest in the FIF; and
(c)
the person would be able to use the attributable FIF income method in the current year for the person’s interest in the FIF if the interest met the requirements of section EX 46(3)(a)(ii) (Limits on choice of calculation methods); and
(d)
the person does not have an income interest of 10% or more in a CFC in the jurisdiction in the current year; and
(e)
the person does not have an attributing interest in a FIF in the jurisdiction in the current year for which the person can use the attributable FIF income method.
Use of FIF net loss
(2)
The person’s available BE loss is available to be subtracted from the person’s FIF income, to the extent of the FIF income, in the current year from the FIF, if the FIF is resident in the jurisdiction in the current year.
Treatment of surplus
(3)
If the person cannot use all of the available BE loss in the current year, the surplus is available to be carried forward for use under subsection (2) in another tax year.
Defined in this Act: amount, attributable FIF income method, attributing interest, branch equivalent method, CFC, FIF, FIF income, FIF net loss, income interest, tax year
Section IQ 2C: inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 17 July 2013, by section 67(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
IQ 3 Ring-fencing cap on FIF net losses
Limit on amount: branch equivalent method
(1)
If a person’s FIF net loss is carried forward to a tax year (the current tax year) or FIF net loss is made available to the person in the current tax year,—
(a)
FIF net loss relating to a tax year for which section IQ 2B applies to the person is available to be subtracted under section IQ 2 from the person’s net income for the current tax year; and
(b)
FIF net loss relating to a tax year for which section IQ 2B does not apply to the person—
(i)
is available to be subtracted from the person’s net income for the current tax year to the extent of the equivalent CFC loss under section IQ 2B; and
(ii)
is reduced in the current tax year by the converted BE loss under section IQ 2B.
Relationship with section CQ 5
(2)
Despite subsection (1) and section IQ 2, if the person’s FIF net loss is carried forward to a tax year and section CQ 5(1)(d) or (e) (When FIF income arises) applies, they may subtract the amount from their net income for the tax year, but only to the extent to which the amount is no more than their assessable income from interests that would be interests in a FIF for the tax year in the absence of that section.
Treatment of excess
(3)
If the person cannot use all of the amount that is available tax loss under section IQ 2(1) because there is insufficient net income, the surplus is no longer available to them as a FIF net loss, but becomes a tax loss component under section IA 2(4) (Tax losses).
Defined in this Act: amount, assessable income, attributed CFC income, branch equivalent method, CFC, deduction, FIF, FIF income, FIF net loss, net income, tax year
Compare: 2004 No 35 s IE 4(2)–(6)
Section IQ 3(1): substituted (with effect on 30 June 2009), on 29 August 2011 (applying for income years beginning on or after 1 July 2009), by section 96(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 3(2): amended (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 96(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 3(3) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 304(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IQ 3(3): added (with effect on 1 April 2008), on 6 October 2009, by section 304(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IQ 3(3): amended (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 96(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 3 list of defined terms attributed CFC income: inserted (with effect on 1 April 2008), on 6 October 2009, by section 304(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IQ 3 list of defined terms CFC: inserted (with effect on 1 April 2008), on 6 October 2009, by section 304(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IQ 3 list of defined terms tax loss: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 34).
IQ 4 Group companies using attributed CFC net losses
What this section does
(1)
This section supplements the general rules relating to the grouping of net losses when, for a tax year (the current tax year), a company (company A) that is part of a group of companies has an amount—
(a)
of attributed CFC net loss for the current tax year or carried forward from an earlier tax year, or FIF net loss for the current tax year or carried forward from an earlier tax year; and
(b)
remaining after section IQ 2 is applied for the current tax year and before any amount is made available to another company under this section.
Modifications to general rules for grouping net losses
(2)
For determining whether company A may make available an amount of attributed CFC net loss or FIF net loss to another company (company B) in the group of companies, the general rules relating to the grouping of net losses are modified as follows:
(a)
the group of companies must be a wholly-owned group of companies; and
(b)
subpart IC (Grouping tax losses) and section GB 4 (Arrangements for grouping tax losses: companies) apply as if an amount of attributed CFC net loss or FIF net loss were a tax loss component; and
(c)
subsection (3) overrides sections IC 5(1)(d) and IC 8 (which impose limits on the amount of transferred tax loss); and
(d)
section IA 3(2) (Using tax losses in tax year) and subpart IP (Meeting requirements for part-years) do not apply.
Ring-fencing cap rule modified
(3)
The amount of attributed CFC net loss or FIF net loss that company A may make available to company B in the tax year is limited by the following:
(a)
the total amount made available by company A to group companies must not exceed the amount referred to in subsection (1); and
(b)
the resulting reduction in company B’s net income in the tax year must not exceed the total amount that company B derives in the tax year of attributed CFC income from CFCs, or FIF income calculated under the attributable FIF income method from FIFs, resident in the country or territory (the jurisdiction) in which the loss arose, reduced by the total of the following:
(i)
the total amount of the attributed CFC income or FIF income taken into account in calculating a deduction of company B under section DN 4 or DN 8 (which relate to ring-fencing caps on deductions):
(ii)
the total amount of attributed CFC net loss or FIF net loss that company B derives in the tax year from CFCs or FIFs resident in the jurisdiction:
(iii)
the total amount of attributed CFC net loss or FIF net loss, from CFCs or FIFs resident in the jurisdiction, that company B carries forward to the tax year and is available tax loss for company B:
(iv)
the total amount of attributed CFC net loss or FIF net loss, from CFCs or FIFs resident in the jurisdiction, that is made available to company B for the tax year under this section by a company other than company A.
Defined in this Act: amount, attributed CFC income, attributed CFC net loss, available tax loss, branch equivalent method, CFC, company, deduction, FIF, FIF income, FIF net loss, group of companies, net income, net loss, tax loss component, tax year, wholly-owned group of companies
Compare: 2004 No 35 s IG 4
Section IQ 4(1): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 97(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 4(2) heading: substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), pursuant to section 97(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 4(2): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 97(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 4(2)(c): amended (with effect on 1 April 2008), on 23 March 2020, by section 154(1) (and see section 154(2) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
Section IQ 4(3): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 97(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 4(3)(b): amended (with effect on 1 July 2011), on 29 August 2011 (applying for income years beginning on or after 1 July 2011), by section 97(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 4(3)(b)(iii): amended (with effect on 30 June 2009), on 29 August 2011 (applying for income years beginning on or after 1 July 2009), by section 97(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 4 list of defined terms available tax loss: inserted (with effect on 30 June 2009), on 29 August 2011, by section 97(7) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 4 list of defined terms FIF net loss: inserted (with effect on 1 April 2008), on 29 August 2011, by section 97(6) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section IQ 4 list of defined terms tax loss: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IQ 5 Group companies using FIF net losses
[Repealed]Section IQ 5: repealed (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 98(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
IQ 6 Pre-consolidation losses: general treatment
When this section applies
(1)
This section applies if a company that is part of a consolidated group has under section IQ 1B an attributed CFC net loss or FIF net loss carried forward to a tax year.
First use
(2)
The first use of the amount must be by the company under subsection (3) or (4) in making the amount available to the consolidated group to subtract from its net income, so far as it extends, for the tax year.
CFC net losses
(3)
If the amount is an attributed CFC net loss, it may be used only to the extent to which it is no more than the attributed CFC income that the consolidated group derives in the tax year from a CFC resident in the country in which the loss arose.
FIF net losses
(4)
If the amount is a FIF net loss, it may be used only to the extent to which it is no more than the FIF income that the consolidated group derives in the tax year from a FIF resident in the country in which the loss arose.
Second use
(5)
If, after applying subsection (2), some of the amount remains, the company may—
(a)
subtract the remaining amount from its net income for the tax year; or
(b)
make the remaining amount available to another consolidated group to subtract from its net income for the tax year under section IQ 4 or IQ 5; or
(c)
make the remaining amount available under section IC 5 (Company B using company A’s tax loss).
Defined in this Act: amount, attributed CFC income, attributed CFC net loss, CFC, company, consolidated group, FIF, FIF income, FIF net loss, net income, tax year
Compare: 2004 No 35 s IG 7(2)
Section IQ 6(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 65(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IQ 7 When group membership lacking in loss period
When this section applies
(1)
This section applies if—
(a)
a company that is part of a consolidated group has a ring-fenced tax loss consisting of either an attributed CFC net loss or FIF net loss, or both, that is carried forward to a tax year and must be used under section IQ 6; and
(b)
the company was not part of the consolidated group in the earlier tax year in which the net loss arose; and
(c)
the company and 1 or more of the companies in the consolidated group do not meet the requirements for common ownership of section IC 5(1)(a) (Company B using company A’s tax loss) for the loss period.
Limit on amount
(2)
The amount that may be subtracted from the net income of the consolidated group in the tax year under section ID 2(2) must be no more than the total of—
(a)
the amount of ring-fenced tax loss referred to in subsection (1) that the company could use to reduce its net income in the tax year under section IQ 2 or IQ 3 as applicable, if it were not in the tax year part of a consolidated group; and
(b)
the amount of ring-fenced tax loss referred to in subsection (1) that the company could group with other companies in the group under section IQ 4 or IQ 5, as applicable, determining—
(i)
the net income for each of the companies using the group’s calculation of each company’s net income; and
(ii)
the maximum amount of tax loss to be made available, ignoring the consolidation of the companies and presuming all steps required under those sections were taken in order for them to apply.
Relationship with section FM 3
(3)
In subsection (2), the amount of net income must be calculated in accordance with section FM 3 (Liability of consolidated groups and group companies).
Meaning of loss period
(4)
In this section, the loss period means the tax year in which the ring-fenced tax loss arose and any tax years falling between that tax year and the tax year in which the amount is subtracted from net income.
Defined in this Act: amount, attributed CFC net loss, company, consolidated group, FIF net loss, loss period, net income, ring-fenced tax loss, tax loss, tax year
Compare: 2004 No 35 s IG 7(4)
Section IQ 7(1)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(1)(a) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(1)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(1)(b) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(2)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(2)(a)(i) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(2)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(2)(a)(ii) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(2)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(2)(b)(i) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(2)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(2)(b)(ii) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IQ 8 When group membership lacking in tax year of use
When this section applies
(1)
This section applies if a company joins a consolidated group in a tax year with a ring-fenced tax loss consisting of an attributed CFC net loss or FIF net loss, or both, carried forward to the tax year, which must be used in the tax year under section IQ 6.
Limit on amount
(2)
The amount that may be subtracted from the net income of the consolidated group for the tax year under section ID 2(2) is the lesser of—
(a)
the amount of ring-fenced tax loss referred to in section IQ 7(1) that the company could subtract from—
(i)
the amount that would be the company’s net income for the part of the tax year in which it was not part of a consolidated group; and
(ii)
the net income for the tax year of another consolidated group of which the company was part before joining the present group; and
(b)
the amount that would be the group’s net income for the part of the tax year in which the company was part of the consolidated group, established by giving the Commissioner, at the time of providing the group’s return of income for the tax year, adequate financial statements that—
(i)
relate to the part of the tax year when the company was part of the group; and
(ii)
disclose the amount that would be the company’s net income for the part of the tax year in which the company was part of the consolidated group, determined on a fair and reasonable basis of attribution.
Defined in this Act: amount, attributed CFC net loss, Commissioner, company, consolidated group, FIF net loss, net income, return of income, ring-fenced tax loss, tax year
Compare: 2004 No 35 s IG 7(5)
Section IQ 8(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 67(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 8(2)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 67(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IQ 9 When attributed CFC net loss becomes FIF net loss
When this section applies
(1)
This section applies if, in a tax year, a person has an attributed CFC net loss that, under section 38 of the Income Tax Amendment Act (No 2) 1993, becomes a FIF net loss.
Treatment of net losses
(2)
The attributed CFC net loss is treated as a FIF net loss of the person with effect from the tax year, as if the CFC were a FIF.
Calculation methods
(3)
For the purposes of subsection (2) and the calculation of the amount of the loss, the attributable FIF income method is not used unless the person calculates their FIF income or net loss under the attributable FIF income method in relation to the interest on the date of the transition from an attributed CFC net loss to a FIF net loss.
Defined in this Act: amount, attributed CFC net loss, attributable FIF income method, CFC, FIF, FIF income, FIF net loss, tax year
Compare: 2004 No 35 s IE 3(4)
Section IQ 9(3): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 78(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section IQ 9 list of defined terms attributable FIF income method: inserted (with effect on 1 July 2011), on 7 May 2012, by section 78(2)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section IQ 9 list of defined terms branch equivalent method: repealed (with effect on 1 July 2011), on 7 May 2012, by section 78(2)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Subpart IS—Mineral miners’ and petroleum miners’ tax losses
Subpart IS heading: replaced, on 1 April 2014, by section 96 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Contents
IS 1 General treatment of mineral miners’ net losses
Groups of companies
(1)
In a tax year in which a company that is a mineral miner is included in a group of companies, the company may not make a tax loss available under section IC 5 (Company B using company A’s tax loss) to another member of the group of companies.
Consolidated groups
(2)
A net mining loss of a mineral miner that is part of a consolidated group is dealt with under this subpart and not subpart ID (Use of tax losses by consolidated groups).
Meaning of net mining loss
(3)
For the purposes of this subpart, a net mining loss means that part of a net loss of a mineral miner that is described in section IA 7(7) (Restrictions relating to ring-fenced tax losses).
Defined in this Act: company, consolidated group, group of companies, mineral miner, net mining loss, tax loss, tax year
Compare: 2004 No 35 ss IG 6(2), IH 4(2)
Section IS 1 heading: replaced, on 1 April 2014, by section 97(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 1(1): replaced (with effect on 1 April 2014 and applying for the 2014–15 and later income years), on 30 March 2017, by section 152(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section IS 1(2): amended, on 1 April 2014, by section 97(3) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 1(2): amended (with effect on 1 April 2008), on 7 December 2009, by section 68(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 1(3) heading: added (with effect on 1 April 2008), on 7 December 2009, by section 68(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 1(3): replaced, on 1 April 2014, by section 97(4) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 1 list of defined terms mining company: repealed, on 1 April 2014, by section 97(5)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 1 list of defined terms mineral miner: inserted, on 1 April 2014, by section 97(5)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 1 list of defined terms net mining loss: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 1 list of defined terms tax loss: replaced (with effect on 1 April 2014), on 30 March 2017, by section 152(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
IS 2 Treatment of net losses resulting from certain expenditure
When this section applies
(1)
This section applies if a company that is a mineral miner that is a company—
(a)
has a net mining loss for a tax year as a result of incurring mining prospecting expenditure, mining exploration expenditure, mining development expenditure, or operational expenditure in a mining permit area; and
(b)
has an amount of net mining loss carried forward to a later tax year.
What this section does not apply to
(1B)
This section does not apply to an amount of net mining loss to the extent to which it gives rise to a tax credit under section LU 1 (Tax credits for mineral miners).
Using loss balances
(2)
The company may subtract the amount of the net mining loss from its net income for the later tax year, even though the continuity of ownership required under section IA 5 (Restrictions on companies’ loss balances carried forward: continuity of ownership) is broken or is treated as absent under section GB 3 (Arrangements for carrying forward loss balances: companies’ ownership), but only to the extent set out in subsection (3).
Limit on amount
(3)
The amount subtracted under subsection (2) must be no more than the amount that would be the mineral miner’s net income if its only assessable income for the later tax year were from the mining permit area.
Amounts carried forward
(4)
If the company cannot use all the net mining loss in the later tax year, the amount is carried forward to later tax years and subsection (2) applies to the remaining balance.
Use against other income
(5)
The company may subtract the amount of the net mining loss from its net income that is not attributable to the mining permit area but only after meeting for the whole of the continuity period the requirements set out in sections GB 3 and IA 5(2) and (3). For the purposes of applying section IA 5, the net mining loss is treated as if it were a tax loss component.
Defined in this Act: amount, assessable income, company, mineral miner, mining development expenditure, mining exploration expenditure, mining permit area, net income, net mining loss, operational expenditure, tax loss component, tax year
Compare: 2004 No 35 ss IH 1(1), IH 5
Section IS 2 heading: substituted (with effect on 1 April 2008), on 7 December 2009, by section 69(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2(1): amended, on 1 April 2014, by section 98(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 2(1)(a): amended, on 1 April 2014, by section 98(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 2(1)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 69(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2(1)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 69(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2(1B) heading: inserted, on 1 April 2014, by section 98(3) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 2(1B): inserted, on 1 April 2014, by section 98(3) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 2(2): amended (with effect on 1 April 2020), on 30 March 2021, by section 113(1)(a) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IS 2(2): amended (with effect on 1 April 2020), on 30 March 2021, by section 113(1)(b) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IS 2(2): amended (with effect on 1 April 2008), on 7 December 2009, by section 69(4) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2(3): amended, on 1 April 2014, by section 98(4) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 2(4): amended (with effect on 1 April 2008), on 7 December 2009, by section 69(5) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2(5) heading: added (with effect on 1 April 2008), on 7 December 2009, by section 69(6) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2(5): added (with effect on 1 April 2008), on 7 December 2009, by section 69(6) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2(5): amended (with effect on 1 April 2020), on 30 March 2021, by section 113(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IS 2 list of defined terms loss balance: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2 list of defined terms mineral miner: inserted, on 1 April 2014, by section 98(5)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 2 list of defined terms mining company: repealed, on 1 April 2014, by section 98(5)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 2 list of defined terms net mining loss: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2 list of defined terms non-resident mining operator: repealed, on 1 April 2014, by section 98(5)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 2 list of defined terms operational expenditure: inserted, on 1 April 2014, by section 98(5)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 2 list of defined terms resident mining operator: repealed, on 1 April 2014, by section 98(5)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 2 list of defined terms tax loss: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2 list of defined terms tax loss component: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IS 3 Holding companies’ tax losses
[Repealed]Section IS 3: repealed, on 1 April 2014, by section 99 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
IS 4 Adjustments in certain circumstances
[Repealed]Section IS 4: repealed, on 1 April 2014, by section 100 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
IS 5 Petroleum miners’ tax losses
[Repealed]Section IS 5: repealed, on 1 April 2018, by section 148(1) (and see section 148(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
IS 6 When company stops being mineral miner
For the purposes of sections IS 1 and IS 2, if a mineral miner whose loss balance is carried forward to a tax year stops being a mineral miner at or before the end of the tax year, the mineral miner is nevertheless treated for the tax year as if it had continued as a mineral miner.
Defined in this Act: loss balance, mineral miner, tax year
Compare: 2004 No 35 ss IH 1, IH 4(1)(e)
Section IS 6 heading: amended, on 1 April 2014, by section 101(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 6: amended, on 1 April 2014, by section 101(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 6: amended, on 1 April 2014, by section 101(2)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 6: amended, on 1 April 2014, by section 101(2)(c) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 6 list of defined terms mineral miner: inserted, on 1 April 2014, by section 101(3)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section IS 6 list of defined terms mining company: repealed, on 1 April 2014, by section 101(3)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Subpart IT—Cancellation of life insurer’s losses
Subpart IT: substituted, on 1 July 2010, by section 307(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Contents
IT 1 Cancellation of life insurer’s policyholder net losses
What this section applies to
(1)
This section applies to the amount of a life insurer’s tax loss to be carried forward to the tax year corresponding to the income year that includes 1 July 2010 (the tax year), to the extent to which the amount (the cancelled amount) would be a ring-fenced tax loss for policyholder net losses under section IA 7(3) (Restrictions relating to ring-fenced losses) if the enactment of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 were ignored.
Cancellation of life insurer’s policyholder net losses
(2)
The cancelled amount—
(a)
is removed from the life insurer’s available tax loss for the tax year, except as provided by section EY 5(2) (Part-year tax calculations) for the first part-year; and
(b)
must not be subtracted from the life insurer’s net income under section BC 5 (Taxable income) for the tax year, except as provided by section EY 5(2) for the first part-year; and
(c)
is not a tax loss component on and after 1 July 2010; and
(d)
is cancelled on and after 1 July 2010.
Defined in this Act: available tax loss, income year, life insurer, net income, policyholder net loss, ring-fenced tax loss, tax loss, tax loss component, tax year
Section IT 1: substituted, on 1 July 2010, by section 307(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
IT 2 Cancellation of life insurer’s tax loss when allowed into policyholder base
What this section applies to
(1)
This section applies to the amount of a life insurer’s tax loss to be carried forward to a tax year corresponding to an income year that includes 1 July 2010 and later tax years.
Cancellation of life insurer’s tax loss
(2)
When the life insurer has for an income year a policyholder base allowable deduction as provided by section EZ 61 (Allowance for cancelled amount: spreading), an equal amount—
(a)
is removed from the life insurer’s available tax loss for the tax year corresponding to the income year; and
(b)
must not be subtracted from the life insurer’s net income under section BC 5 for the tax year; and
(c)
is not a tax loss component; and
(d)
is cancelled.
Defined in this Act: available tax loss, income year, life insurer, net income, policyholder base allowable deduction, tax loss, tax loss component, tax year
Section IT 2: added, on 1 July 2010, by section 307(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IT 2 list of defined terms tax loss component: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Subpart IV—Treatment of certain supplementary dividends
[Repealed]Subpart IV: repealed, on 1 April 2013 (applying for the 2013–14 and later tax years), by section 73(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Contents
| IV 1 | Supplementary dividend holding companies [Repealed] | ||
IV 1 Supplementary dividend holding companies
[Repealed]Section IV 1: repealed, on 1 April 2013 (applying for the 2013–14 and later tax years), by section 73(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Subpart IW—Use of tax losses to pay shortfall penalties
Contents
IW 1 Shortfall penalties
When this section applies
(1)
This section applies in a tax year when a person has a shortfall penalty for an income tax liability.
Persons choosing to use tax losses
(2)
If the person has a tax loss for the tax year, they may use the amount of the tax loss to pay the penalty, notifying the Commissioner by the due date for payment of the penalty.
Wholly-owned groups choosing to use tax losses
(3)
If a company that is part of a wholly-owned group of companies has a tax loss for a tax year, the wholly-owned group may use the amount of the tax loss to pay the penalty imposed on the company or on another company in the group, notifying the Commissioner by the due date for the payment of the penalty.
Time of use
(4)
The tax loss is used at the time of notification.
Lowest marginal tax rate and availability
(5)
Each dollar of an amount of tax loss that is used under this section—
(a)
is equal to 1 dollar multiplied by the rate of tax or lowest marginal rate of tax that would apply to the person in the return period to which the tax shortfall relates if the person had tax to pay:
(b)
cannot, from the date the tax loss is used, be used or made available for use, or be carried forward to a later tax year.
Tax years and part-years
(6)
In this section, a tax year includes a part of a tax year that may be taken into account under this Part for continuity or grouping purposes.
Defined in this Act: amount, Commissioner, company, income tax liability, notify, pay, shortfall penalty, tax, tax loss, tax year, wholly-owned group of companies
Compare: 2004 No 35 s IG 10
Section IW 1(3): amended (with effect on 1 April 2008), on 30 June 2014, by section 130 of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Subpart IZ—Terminating provisions
Contents
IZ 1 Use of specified activity net losses
[Repealed]Section IZ 1: repealed, on 1 April 2018, by section 149(1) (and see section 149(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
IZ 2 Petroleum mining companies: treatment of payments from shareholders
[Repealed]Section IZ 2: repealed, on 1 April 2018, by section 150(1) (and see section 150(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
IZ 3 Petroleum mining companies: use of loss balances
[Repealed]Section IZ 3: repealed, on 1 April 2018, by section 151(1) (and see section 151(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
IZ 4 Tax losses for tax years before 1977–78 tax year
A person’s loss balance for a tax year before the 1977–78 tax year is carried forward and may be used under section IA 4 (Using loss balances carried forward to tax year) if the person would have been entitled to have the tax loss carried forward for the purpose of assessing income tax under section 137 of the Land and Income Tax Act 1954 if the Income Tax Act 1976, the Income Tax Act 1994, the Income Tax Act 2004, and this Act had not been passed.
Defined in this Act: assessment, loss balance, tax loss, tax year
Compare: 2004 No 35 s IF 1(5)
IZ 5 Companies’ tax losses for tax years before 1991–92 tax year
Loss balances carried forward
(1)
A company’s loss balance for a tax year before the 1991–92 tax year may be used under section IA 4 (Using loss balances carried forward to tax year) if—
(a)
the company would have been entitled to have some or all of the tax loss under section 188 of the Income Tax Act 1976 carried forward to a later tax year, if that section had continued to apply in the later tax year, as modified by section 188AA of that Act and as if the continuity percentage referred to in section 188(7) of that Act were always 40%; and
(b)
for the period starting on the first day of the 1992–93 tax year and ending on the last day of the later tax year, a group of persons holds total minimum voting interests in the company that add up to at least 49%.
Market value circumstances and minimum interests
(2)
For the purposes of subsection (1)(b),—
(a)
if, during the period a market value circumstance exists for the company, the group of persons must also hold for the period total minimum market value interests in the company that add up to at least 49%:
(b)
a minimum interest of any person in the company in the period is equal to the lowest interest that the person has in the period.
Defined in this Act: company, group of persons, loss balance, market value circumstance, minimum market value interest, minimum voting interest, tax loss, tax year
Compare: 2004 No 35 s IF 1(6)
IZ 6 Companies’ tax losses for 1990–91 and 1991–92 tax years
When this section applies
(1)
This section applies to a company that has a tax loss for the 1990–91 or 1991–92 tax year and section 188(7B) of the Income Tax Act 1976 would not have applied to prevent some or all of the tax loss being carried forward if regard were had to only part of the relevant tax year.
Part-year tax losses carried forward
(2)
Section 188(7B) does not apply to prevent the part of the tax loss attributable to the relevant part-period being carried forward under section 188(2).
Financial statements
(3)
For the purposes of subsection (2), the company must provide the Commissioner with adequate financial statements relating to the relevant part-period that disclose the amount that would be the tax loss for the relevant part of the tax year, on a fair and reasonable basis of attribution.
Application of subsection (7B)
(4)
In subsection (1), the reference to subsection (7B) applies to the extent to which regard was required to be had to that part of the period starting with 8.00 pm New Zealand Standard Time on 30 July 1991 which falls within the tax year in which the tax loss component arises, and without prejudice to the application of that subsection to the extent to which it required regard to be had to later periods.
Defined in this Act: amount, Commissioner, company, tax loss, tax loss component, tax year
Compare: 2004 No 35 s IF 2
IZ 7 Grouping tax losses for tax years before 1981–82 and between 1981–82 and 1991–92
Commonality period: between 1981–82 and 1991–92
(1)
For the purposes of section IC 5(1)(a) (Company B using company A’s tax loss), if company A has a tax loss in a tax year between the 1981–82 and 1991–92 tax years, company A and company B may group the tax loss in a tax year that is later than the tax year in which the tax loss component arises only if company B is in the same group of companies as company A in the earlier tax year.
Commonality period: before 1981–82
(2)
For the purposes of section IC 5(1)(a), if company A has a tax loss in a tax year before the 1981–82 tax year, company A and company B may group the tax loss in a tax year that is later than the tax year in which the tax loss component arises only if company B is in the same group of companies as company A in the tax year in which the tax loss is used.
When companies have different balance dates
(3)
For the purposes of subsections (1) and (2), the tax year is extended under section IC 10(2)(b) (When companies have different balance dates) if company B’s balance date is later than company A’s balance date.
Residence of company A
(4)
For the purposes of section IC 5(1)(b), if company A’s tax loss component arose in a tax year before the 1991–92 tax year, company A and company B may group the tax loss component in a tax year that is later than the tax year first referred to only if company A is, in both the earlier and the later tax year—
(a)
incorporated in New Zealand, or carrying on a business in New Zealand through a fixed establishment in New Zealand; and
(b)
resident in New Zealand, and not treated under a double tax agreement, and for the purposes of the agreement, as not resident in New Zealand, or liable by the law of another country or territory to income tax in that country or territory through domicile, residence, or place of incorporation.
Relationship with sections IC 5 and IC 6
(5)
Subsections (1) and (2) override sections IC 5(1)(a) and IC 6 (which relate to grouping requirements) and subsection (4) overrides sections IC 5(1)(b) and IC 6.
Defined in this Act: balance date, business, company, double tax agreement, fixed establishment, group of companies, New Zealand, resident in New Zealand, tax loss, tax loss component, tax year
Compare: 2004 No 35 s IG 2(2)(c), (d)(ii)(B)
IZ 7B Grouping tax losses for commonality periods starting before 15 March 2017 for tax years after 1990–91
For the purposes of section IC 5(1)(b) (Company B using company A’s tax loss), if the commonality period started before 15 March 2017 and company A’s tax loss component arose in a tax year after the 1990–91 tax year, in addition to meeting the requirements of section IC 7(1) (Place of incorporation or carrying on business), company A, for the part of the commonality period that precedes 15 March 2017, must not be a company resident in New Zealand that is—
(a)
treated under a double tax agreement, and for the purposes of the agreement, as not resident in New Zealand; or
(b)
liable by the law of another country or territory to income tax in that country or territory through domicile, residence, or place of incorporation.
Defined in this Act: commonality period, company, double tax agreement, income tax, resident in New Zealand, tax loss component, tax year
Section IZ 7B: inserted (with effect on 15 March 2017), on 31 March 2023, by section 87 of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
IZ 8 Election to use net loss for 2019–20 or 2020–21 year as tax loss in preceding year
Terms used in this section
(1)
This section provides that a person who has taxable income in the 2018–19 or 2019–20 income year, or is in a group of companies with a person who has taxable income in 1 of those years, and has a net loss in the following income year may choose to reduce the taxable income in the first year by an amount, which is treated as being an available tax loss that can be used in the first income year, and subtracting the same amount from the net loss that would otherwise be available in the second income year, subject to restrictions that are expressed in terms of—
(a)
the offset years, which refers to the period of 2 years that is affected by the election and begins with either the 2018–19 or the 2019–20 income year:
(b)
the taxable income year, which refers to the first of the offset years:
(c)
the initial taxable income, which refers to the amount of taxable income given by subsection (2)(a) for the person and the taxable income year:
(d)
the net loss year, which refers to the second of the offset years:
(e)
the elected amount, which refers to the amount by which an election under this section reduces both the initial taxable income and the net loss that, in the absence of the election, the person would have in the net loss year:
(f)
the offset ownership period, which refers to the period in the offset years for which a person that is a company meets requirements relating to continuity of ownership for carrying forward loss balances from 1 tax year to the next:
(g)
the income ownership period, which refers to the part of the offset ownership period that occurs in the taxable income year:
(h)
the loss ownership period, which refers to the part of the offset ownership period that occurs in the net loss year:
(i)
the group loss excess, which is the amount of the excess of net loss given by subsection (3)(b) for the members of a wholly-owned group of companies and the loss ownership period.
Who may make election under this section: general rule
(2)
A person, other than a person who is a member of a group of companies during the offset ownership period, may make an election under this section for the period consisting of 2 income years beginning with the 2018–19 or the 2019–2020 income year if,—
(a)
in the absence of an election under this section, the person would have an amount of taxable income remaining in the taxable income year after subtracting the total amount of charitable donations for which the person has a tax credit for the taxable year under subpart LD (Tax credits for gifts and donations); and
(b)
in the absence of an election under this section, the person would have a net loss in the net loss year; and
(c)
the person is not a qualifying individual, as defined in section 3(1) of the Tax Administration Act 1994, in the net loss year and is not a multi-rate PIE in the offset years; and
(d)
when the person is a company, the person meets the requirements relating to continuity of ownership given by section IA 5 or IP 3 (which give the requirements for companies to carry forward loss balances) during the offset ownership period.
Who may make election under this section: rule for member of group of companies
(3)
A person who is a member of a group of companies during the offset ownership period may make an election under this section for the offset years if,—
(a)
in the absence of an election under this section, the person would have a net loss in the net loss year; and
(b)
for a person who is a member of a wholly-owned group, in the absence of an election under this section, an excess of net loss would remain for the loss ownership period if the total amount of the net loss of the person and the other members of the wholly-owned group were reduced by the total amount of the net income of the person and the other members of the wholly-owned group for which the other members of the wholly-owned group have not used non-refundable tax credits to meet income tax liabilities; and
(c)
the person meets the requirements relating to continuity of ownership given by section IA 5 or IP 3 during the offset ownership period.
Making election
(4)
The person makes the election by including the elected amount, which must not exceed the amount given for the person by subsection (5), (6), or (7), as an available tax loss in calculating the person’s taxable income for the taxable income year, in—
(a)
a return of income for the taxable income year; or
(b)
a request that the Commissioner amend under section 113 of the Tax Administration Act 1994 the assessment for the taxable income year.
Effect of election: person other than company
(5)
If the person is not a company, the person’s net loss for the net loss year is reduced, and the person’s available tax loss for the taxable income year is increased, by an amount that is the smallest of—
(a)
the initial taxable income referred to in subsection (2)(a):
(b)
the amount of the net loss referred to in subsection (2)(b):
(c)
the elected amount.
Effect of election: company not in group
(6)
If the person is a company, other than a company that is a member of a group of companies at a time in the offset ownership period, the person’s net loss for the net loss year is reduced, and the person’s available tax loss for the taxable income year is increased, by an amount that is the smallest of—
(a)
the initial taxable income referred to in subsection (2)(a):
(b)
the amount of the net income of the person for the income ownership period:
(c)
the amount of the net loss referred to in subsection (2)(b):
(d)
the amount of the net loss of the person for the loss ownership period:
(e)
the elected amount.
Effect of election: member of group of companies
(7)
If the person is a member of a group of companies at a time in the offset ownership period, the person’s net loss for the loss ownership period is reduced, and the person’s available tax loss for the income ownership period is increased, by an amount that is the smallest of—
(a)
the total amount of—
(i)
the smaller of the initial taxable income referred to in subsection (2)(a) and the net income of the person for the income ownership period:
(ii)
the part of the elected amount that is made available under subparts IC and IP (which relate to the use and grouping of tax losses) to other members of the group of companies in the taxable income year:
(b)
if the person is a member of a wholly-owned group in the loss ownership period, the group loss excess referred to in subsection (3)(b) reduced by the total amount of the reductions in net loss for the period for the other members of the group from elections under this section:
(c)
the elected amount.
Application of subparts IC and IP to amounts made available to members of group
(8)
In the application of subparts IC and IP to the making available by a person, to another member of a group of companies, of an amount of available tax loss arising for the person under subsection (7),—
(a)
the amount of available tax loss that exceeds the person’s initial taxable income is a tax loss for the taxable income year for the purposes of section IC 1 (Company A making tax loss available to company B):
(b)
the commonality period referred to in section IC 6 (Common ownership for period) is the period consisting of the offset years:
(c)
the requirements in section IP 4(4) and section IP 5 (which relate to breaches of continuity or commonality requirements) are not applied:
(d)
the requirements in section IP 4(2)(a), (ab), and (c) (Breach in income year in which tax loss component arises) are replaced by the requirements given by subsection (9).
Replacement requirements in applying section IP 4(2)
(9)
The replacement requirements in section IP 4(2) are—
(a)
the net loss giving rise to the available tax loss arises in the portion of the loss ownership period that is included in the common span; and
(b)
the amount of the available tax loss is no more than the net income that the group company derives in the portion of the income ownership period that is included in the common span; and
(c)
the person and the group company provide the Commissioner with adequate financial statements under section IP 6 (Financial statements required).
When allocation of net loss effective
(10)
The increase in the person’s available tax loss for the taxable income year is not effective until the person—
(a)
files a return of income for the taxable income year that includes a figure for the elected amount or an updated figure replacing a figure for the elected amount; or
(b)
makes a request that the Commissioner amend under section 113 of the Tax Administration Act 1994 the assessment for the taxable income year based on a figure or an updated figure for the elected amount.
Requests required for some amended assessments
(11)
A person who makes an election under this section must make a request that the Commissioner amend under section 113 of the Tax Administration Act 1994 the assessment for the taxable income year if the elected amount used in the most recent assessment of that income year exceeds the amount permitted by this section in the return of income for the net loss year.
Accounting for part years in ownership continuity period
(12)
If the offset ownership period for a company includes a part, but not all, of an income year, the company must provide to the Commissioner adequate financial statements for the relevant part of the income year complying with the requirements of sections IP 3(2) and (4) (Ownership continuity breach: tax loss components of companies carried forward) and IP 6.
Defined in this Act: assessment, available tax loss, Commissioner, company, continuity period, deduction, group of companies, ICA company, imputation credit account, income, income tax liability, income year, multi-rate PIE, net income, net loss, non-refundable tax credit, return of income, tax loss, tax return, tax year, taxable income, wholly-owned group of companies
Section IZ 8: inserted (with effect on 15 April 2020), on 30 April 2020, by section 11(1) (and see section 11(2) for application) of the COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020 (2020 No 10).
Section IZ 8(1): amended (with effect on 15 April 2020), on 30 March 2021, by section 114(1) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IZ 8(1): amended (with effect on 15 April 2020), on 16 May 2020, by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
Section IZ 8(2): amended (with effect on 15 April 2020), on 30 March 2021, by section 114(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IZ 8(2)(c): amended (with effect on 15 April 2020), on 16 May 2020, by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
Section IZ 8(3) heading: amended (with effect on 15 April 2020), on 30 March 2021, by section 114(3) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IZ 8(3): amended (with effect on 15 April 2020), on 30 March 2021, by section 114(4) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IZ 8(3)(b): amended (with effect on 15 April 2020), on 30 March 2021, by section 114(5) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IZ 8(3)(b): amended (with effect on 15 April 2020), on 30 March 2021, by section 114(6) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section IZ 8(8)(c): amended (with effect on 15 April 2020), on 16 May 2020, by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
Section IZ 8(12): amended (with effect on 15 April 2020), on 30 March 2022, by section 128 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section IZ 8 list of defined terms qualifying individual: repealed (with effect on 15 April 2020), on 16 May 2020, by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
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Income Tax Act 2007
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