Income Tax Act 2007

1 April 2008
(1) This Act comes into force on 1 April 2008.
Charitable entities
(1B) Despite subsection (1), sections CW 41(2) and CW 42(1)(b) come into force on 1 July 2008.
Act effective for 2008–09 income year and later
(2) However, except when the context requires otherwise, this Act applies only with respect to the tax on income derived in the 2008–09 income year and later income years.
Defined in this Act: income year, tax,
Compare: 2004 No 35 s A 2
Section A 2(1B) heading: inserted, on 1 April 2008, by section 307 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section A 2(1B): inserted, on 1 April 2008, by section 307 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Part A
Purpose and interpretation

AA 1 Purpose of Act

The main purpose of this Act are—
- (a) to define, and impose tax on, net income:
- (b) to impose obligations concerning tax:
- (c) to set out rules for calculating tax and for satisfying the obligations imposed.
Defined in this Act: net income, tax,
Compare: 2004 No 35 s AA 1

AA 2 Interpretation

Aids to interpretation
(1) Diagrams, flowcharts, readers’ notes, and the lists of defined terms following sections are included in this Act only as interpretational aids. If there is conflict between an interpretational aid and a provision of this Act, the provision prevails.
Defined terms
(2) If a defined term is used in a section and is not included in the list of defined terms following the section, the term is nevertheless used in the section as defined.
Compare: 1994 No 164 s AA 2

AA 3 Definitions

Role of Part Y
(1) Definitions of terms that apply generally for the purposes of this Act, and general provisions on the interpretation and construction of this Act, appear in Part Y (Definitions and related matters).
Role of Interpretation Act
(2) The Interpretation Act 1999 also contains definitions of terms, including in particular the term person, and other provisions that apply to the interpretation and construction of this Act.
Compare: 2004 No 35 s AA 3(2)

AA 4 Crown bound

This Act binds the Crown.

Part B
Core provisions

Flowchart B1—Outline of Part

Subpart BA—Purpose

BA 1 Purpose

The purposes of this Part are—
- (a) to impose income tax, provisional tax, withholding liabilities, and other tax obligations concerning taxes:
- (b) to set out procedures to be followed for calculating tax and satisfying the obligations imposed under this Act:
- (c) to provide a basis for applying the other Parts:
- (d) generally to set up the scheme of the Act and the main links between its Parts.
Defined in this Act: income tax, provisional tax, tax,
Compare: 2004 No 35 s BA 1

Subpart BB—Income tax and resulting obligations

BB 1 Imposition of income tax

Income tax is imposed on taxable income, at the rate or rates of tax fixed by an annual taxing Act, and is payable to the Crown under this Act and the Tax Administration Act 1994.
Defined in this Act: annual taxing Act, income tax, pay, tax, taxable income,
Compare: 2004 No 35 s BB 1

BB 2 Main obligations

Income tax liability
(1) A person's income tax liability for a tax year must be calculated, and satisfied by the person, under subpart BC (Calculating and satisfying income tax liabilities).
Non-filing taxpayer
(2) Despite subsection (1), a non-filing taxpayer is not required to file a return of income.
Provisional tax
(3) A person liable to pay provisional tax must pay provisional tax for a tax year under the provisional tax rules.
Withholding liabilities
(4) A person who has a withholding liability must satisfy it under subpart BE (Withholding liabilities).
Other obligations
(5) A person who has an obligation in relation to another ancillary tax under subpart BF (Other obligations) must satisfy it under that subpart.
Defined in this Act: ancillary tax, income tax liability, non-filing taxpayer, pay, provisional tax rules, provisional tax, return of income, tax year,
Compare: 2004 No 35 s BB 2

BB 3 Overriding effect of certain matters

Tax avoidance arrangements: subpart BG
(1) Under Part G (Avoidance and non-market transactions), the Commissioner may counteract a tax advantage from a tax avoidance arrangement.
Double tax agreements: subpart BH
(2) Under subpart BH (Double tax agreements) a double tax agreement has effect in relation to—
- (a) income tax; or
- (b) any other tax imposed by this Act; or
- (c) the exchange of information that relates to a tax, as defined in paragraphs (a)(i) to (v) of the definition of tax in section 3 of the Tax Administration Act 1994.
Defined in this Act: Commissioner, double tax agreement, income tax, tax, tax avoidance arrangement,
Compare: 2004 No 35 s BB 3

Subpart BC—Calculating and satisfying income tax liabilities

Flowchart B2—Calculating and satisfying income tax liabilities

Flowchart B2: amended (with effect on 1 April 2008), on 7 December 2009, by section 4 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

BC 1 Non-filing and filing taxpayers

Non-filing taxpayer
(1) The income tax liability of a non-filing taxpayer for a tax year is the total tax withheld from amounts of income included in the taxpayer's annual gross income for the year.
Filing taxpayer
(2) The income tax liability of a filing taxpayer for a tax year is calculated under sections BC 2 to BC 6.
Filing taxpayer with schedular income
(3) If a filing taxpayer has schedular income, their income tax liability calculation is modified by section BC 7.
Defined in this Act: amount, annual gross income, filing taxpayer, income, income tax liability, non-filing taxpayer, schedular income, tax, tax year,
Compare: 2004 No 35 s BC 1

BC 2 Annual gross income

A person's annual gross income for a tax year is the total of their assessable income that is allocated to the corresponding income year.
Defined in this Act: annual gross income, assessable income, corresponding income year, tax year,
Compare: 2004 No 35 s BC 2

BC 3 Annual total deduction

A person's annual total deduction for a tax year is the total of their deductions that are allocated to the corresponding income year.
Defined in this Act: annual total deduction, corresponding income year, deduction, tax year,
Compare: 2004 No 35 s BC 3

BC 4 Net income and net loss

Income more than deductions
(1) If, for a tax year, a person's annual gross income is more than their annual total deduction, the difference is their net income for the year.
Income equal to deductions
(2) If, for a tax year, a person's annual gross income equals their annual total deduction, their net income for the year is zero.
Deductions more than income
(3) If, for a tax year, a person's annual total deduction is more than their annual gross income, the difference is their net loss for the year, and their net income for the year is zero.
Treatment of net loss
(4) A person's net loss for a tax year is included under Part I (Treatment of tax losses) in their tax loss for the tax year that may, under Part I, be—
- (a) subtracted from their net income for a future tax year:
- (b) made available to another person to subtract from that other person's net income for that or a future tax year:
- (c) used in certain other ways.
Defined in this Act: annual gross income, annual total deduction, net income, net loss, tax loss, tax year,
Compare: 2004 No 35 s BC 4

BC 5 Taxable income

A person's taxable income for a tax year is determined by subtracting any available tax loss that the person has from their net income under Part I (Treatment of tax losses).
Defined in this Act: available tax loss, net income, tax loss, taxable income, tax year,
Compare: 2004 No 35 s BC 5

BC 6 Income tax liability of filing taxpayer

Flowchart B3—Calculating income tax liability
Calculation of amount
(1) The income tax liability of a filing taxpayer for a tax year is the amount calculated by multiplying their taxable income for the tax year by the basic tax rate. The income tax liability of a filing taxpayer with schedular income is determined under section BC 7.
When liability zero or negative
(2) If the income tax liability calculated under subsection (1) is zero or negative, the filing taxpayer's income tax liability for the tax year is zero.
Defined in this Act: amount, basic tax rate, filing taxpayer, income tax liability, schedular income, tax year, taxable income,
Compare: 2004 No 35 s BC 6

BC 7 Income tax liability of person with schedular income

Modified income tax liability
(1) The income tax liability for a tax year of a person who has schedular income for the year is the total of—
- (a) their schedular income tax liability for the year calculated under subsection (2) or (3); and
- (b) the amount that would be their income tax liability for the year if they had no schedular income.
Schedular income tax liability
(2) If a person has 1 kind of schedular income for a tax year, their schedular income tax liability for the year is the amount that would be the income tax liability for the year if their only income for the year were that schedular income.
Multiple schedular income
(3) If a person has more than 1 kind of schedular income for a tax year, their schedular income tax liability for the year is the total of the amounts calculated for each kind of schedular income.
Income tax liability of multi-rate PIEs
(4) The income tax liability for a tax year of a multi-rate PIE is determined under subpart HM (Portfolio investment entities).
Defined in this Act: amount, income, income tax liability, multi-rate PIE, schedular income, schedular income tax liability, tax year,
Compare: 2004 No 35 s BC 7
Section BC 7(4) heading: added, on 1 April 2010 (applying for the 2010–11 and later income years), by section 4(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BC 7(4): added, on 1 April 2010 (applying for the 2010–11 and later income years), by section 4(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BC 7 list of defined terms multi-rate PIE: inserted, on 1 April 2010, by section 4(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

BC 8 Satisfaction of income tax liability

Flowchart B4—Satisfying income tax liability
Use of tax credits
(1) Credits for tax paid, tax withheld, or other circumstances, calculated under Parts L (Tax credits and other credits) and M (Tax credits paid in cash), satisfy a person's income tax liability for a tax year as far as the credits extend.
Ordering rule
(2) The order in which the person uses their credits is set out in section LA 4 (When total tax credit more than income tax liability).
Terminal tax
(3) If the person's income tax liability is more than the total of their credits, the difference is the person's terminal tax. The person must pay the terminal tax to complete the satisfaction of their income tax liability.
Remaining credits
(4) The treatment of any credits remaining after the person's income tax liability is satisfied is dealt with in section LA 5 (Treatment of remaining credits).
Defined in this Act: income tax liability, pay, tax, tax credit, tax year, terminal tax,
Compare: 2004 No 35 s BC 9

Subpart BD—Income, deductions, and timing

BD 1 Income, exempt income, excluded income, nonresidents' foreign-sourced income, and assessable income

Amounts of income
(1) An amount is income of a person if it is their income under a provision in Part C (Income).
Exempt income
(2) An amount of income of a person is exempt income if it is their exempt income under a provision in subpart CW (Exempt income) or CZ (Terminating provisions).
Excluded income
(3) An amount of income of a person is excluded income if—
- (a) it is their excluded income under a provision in subpart CX (Excluded income) or CZ; and
- (b) it is not their non-residents' foreign-sourced income.
Non-residents' foreign-sourced income
(4) An amount of income of a person is non-residents' foreign-sourced income if—
- (a) the amount is a foreign-sourced amount; and
- (b) the person is a non-resident when it is derived; and
- (c) the amount is not income of a trustee to which section HC 25(2) (Foreign-sourced amounts: non-resident trustees) applies.
Assessable income
(5) An amount of income of a person is assessable income in the calculation of their annual gross income if it is not income of any of the following kinds:
- (a) their exempt income:
- (b) their excluded income:
- (c) their non-residents' foreign-sourced income.
Defined in this Act: amount, annual gross income, assessable income, excluded income, exempt income, foreign-sourced amount, income, non-resident, non-residents' foreign-sourced income,
Compare: 2004 No 35 s BD 1

BD 2 Deductions

An amount is a deduction of a person if they are allowed a deduction for the amount under Part D (Deductions).
Defined in this Act: amount, deduction,
Compare: 2004 No 35 s BD 2

BD 3 Allocation of income to particular income years

Application
(1) Every amount of income must be allocated to an income year under this section.
General rule
(2) An amount of income is allocated to the income year in which the amount is derived, unless a provision in any of Parts C or E to I provides for allocation on another basis.
Interpretation of derive
(3) When the time of derivation of an amount of income is being determined, regard must be had to case law, which—
- (a) requires some people to recognise income on an accrual basis; and
- (b) requires other people to recognise income on a cash basis; and
- (c) more generally, defines the concept of derivation.
Income credited in account
(4) Despite subsection (3), income that has not previously been derived by a person is treated as being derived when it is credited in their account or, in some other way, dealt with in their interest or on their behalf.
Role of Part E
(5) Part E (Timing and quantifying rules) contains a number of provisions that—
- (a) specifically modify the allocation of income or have the effect of modifying the allocation of income; or
- (b) allocate income as part of the process of quantifying it.
Single allocation
(6) An amount of income may be allocated only once.
Defined in this Act: amount, income, income year,
Compare: 2004 No 35 s BD 3

BD 4 Allocation of deductions to particular income years

Application
(1) Every deduction must be allocated to an income year under this section.
General rule
(2) A deduction for an amount of expenditure or loss is allocated to the income year in which the expenditure or loss is incurred, unless a provision in any of Parts D to I provides for allocation on another basis.
Interpretation of incur
(3) When the time of incurrence of an amount of expenditure or loss is being determined, regard must be had to case law, which—
- (a) requires some people to recognise expenditure or loss on an accrual basis; and
- (b) requires other people to recognise expenditure or loss on a cash basis; and
- (c) more generally, defines the concept of incurrence.
Role of Part E
(4) Part E (Timing and quantifying rules) contains a number of provisions that—
- (a) specifically modify the allocation of deductions or have the effect of modifying the allocation of deductions; or
- (b) allocate deductions as part of the process of quantifying them.
Allocation
(5) If an expenditure or loss gives rise to more than 1 deduction, the deductions are allocated to income years to the extent that their total is no more than the amount of the expenditure or loss.
Defined in this Act: amount, deduction, income year, loss,
Compare: 2004 No 35 s BD 4

Subpart BE—Withholding liabilities

BE 1 Withholding liabilities

PAYE income payments
(1) A person who makes a PAYE income payment must withhold an amount from the payment under the PAYE rules.
Resident passive income
(2) A person who makes a payment of resident passive income must withhold an amount from the payment under the RWT rules.
Non-resident passive income
(3) A person who makes a payment of non-resident passive income must withhold an amount from the payment under the NRWT rules.
Fringe benefits
(4) A person who provides a fringe benefit to another person must pay fringe benefit tax under the FBT rules.
Employer's superannuation cash contributions
(5) A person who makes an employer's superannuation cash contribution must pay ESCT under the ESCT rules.
Retirement scheme contributions
(5B) A person who makes a retirement scheme contribution to a retirement savings scheme must pay RSCT under the RSCT rules.
FDP
[Repealed]
(6) [Repealed]
Defined in this Act: amount, dividend, employer's superannuation cash contribution, ESCT, ESCT rules, FBT rules, fringe benefit, fringe benefit tax, non-resident passive income, NRWT rules, pay, PAYE income payment, PAYE rules, resident passive income, retirement savings scheme, retirement scheme contribution, , RSCT, RSCT rules, RWT rules, superannuation fund,
Compare: 2004 No 35 s BE 1
Section BE 1(1) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 5(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BE 1(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 5(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BE 1(5) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 5(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BE 1(5): substituted (with effect on 1 April 2008), on 6 October 2009, by section 5(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BE 1(5B) heading: inserted, on 1 April 2008, by section 308(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section BE 1(5B): inserted, on 1 April 2008, by section 308(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section BE 1(6) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 5(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BE 1(6): repealed (with effect on 30 June 2009), on 6 October 2009, by section 5(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BE 1 list of defined terms employer's superannuation cash contribution: inserted (with effect on 1 April 2008), on 6 October 2009, by section 5(5)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BE 1 list of defined terms employer's superannuation contribution: repealed (with effect on 1 April 2008), on 6 October 2009, by section 5(5)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BE 1 list of defined terms FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 5(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BE 1 list of defined terms FDP rules: repealed (with effect on 30 June 2009), on 6 October 2009, by section 5(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BE 1 list of defined terms PAYE income payment: inserted (with effect on 1 April 2008), on 6 October 2009, by section 5(5)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BE 1 list of defined terms PAYE payment: repealed (with effect on 1 April 2008), on 6 October 2009, by section 5(5)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BE 1 list of defined terms retirement savings scheme: inserted, on 1 April 2008, by section 308(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section BE 1 list of defined terms retirement scheme contribution: inserted, on 1 April 2008, by section 308(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section BE 1 list of defined terms RSCT: inserted, on 1 April 2008, by section 308(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section BE 1 list of defined terms RSCT rules: inserted, on 1 April 2008, by section 308(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subpart BF—Other obligations

BF 1 Other obligations

A person must pay the following types of income or ancillary tax under the relevant Part:
- (a) qualifying company election tax under Part H (Taxation of certain entities):
- (b) income tax on taxable distributions from non-complying trusts under Part H:
- (c) further income tax under Part O (Memorandum accounts):
- (d) [Repealed]
- (e) withdrawal tax under Part R (General collection rules).
Defined in this Act: ancillary tax, further income tax, income tax, non-complying trust, pay, qualifying company election tax, taxable distribution, withdrawal tax,
Compare: 2004 No 35 s BF 1
Section BF 1(d): repealed (with effect on 30 June 2009), on 6 October 2009, by section 6(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section BF 1 list of defined terms further FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 6(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Subpart BG—Avoidance

BG 1 Tax avoidance

Avoidance arrangement void
(1) A tax avoidance arrangement is void as against the Commissioner for income tax purposes.
Reconstruction
(2) Under Part G (Avoidance and non-market transactions), the Commissioner may counteract a tax advantage that a person has obtained from or under a tax avoidance arrangement.
Defined in this Act: Commissioner, income tax, tax avoidance arrangement,
Compare: 2004 No 35 s BG 1

Subpart BH—Double tax agreements

BH 1 Double tax agreements

Meaning
(1) Double tax agreement means an agreement that—
- (a) has been negotiated for 1 or more of the purposes set out in subsection (2); and
- (b) has been agreed between—
  - (i) the government of any territory outside New Zealand and the government of New Zealand; or
  - (ii) the Taipei Economic and Cultural Office in New Zealand and the New Zealand Commerce and Industry Office; and
- (c) has entered into force as a result of a declaration by the Governor-General by Order in Council under subsection (3).
Purposes
(2) The following are the purposes for which a double tax agreement may be negotiated:
- (a) to provide relief from double taxation:
- (b) to provide relief from tax:
- (c) to tax the income derived by non-residents from any source in New Zealand:
- (d) to determine the income to be attributed to non-residents or their agencies, branches, or establishments in New Zealand:
- (e) to determine the income to be attributed to New Zealand residents who have special relationships with non-residents:
- (f) to prevent fiscal evasion:
- (g) to facilitate the exchange of information:
- (h) to assist in recovering unpaid tax.
Entry into force
(3) An agreement to which subsection (1)(a) and (b) apply enters into force on the date specified by the Governor-General by Order in Council.
Overriding effect
(4) Despite anything in this Act, except subsection (5), or in any other Inland Revenue Act or the Official Information Act 1982 or the Privacy Act 1993, a double tax agreement has effect in relation to—
- (a) income tax:
- (b) any other tax imposed by this Act:
- (c) the exchange of information that relates to a tax, as defined in paragraphs (a)(i) to (v) of the definition of tax in section 3 of the Tax Administration Act 1994.
Agreement for recovery of tax
(5) An agreement that provides for the recovery of unpaid tax is subject to Part 10A of the Tax Administration Act 1994.
Reference to profits
(6) A reference in a double tax agreement to the profits of an activity or business is to be read, if possible, as a reference to the amount that would be a person's net income if that activity or business were their only activity or business.
Reference to unrelated persons
(7) A reference in a double tax agreement to 2 persons being unrelated is to be read, if possible, as a reference to 2 persons being not associated.
Defined in this Act: associated, business, double tax agreement, income, income tax, Inland Revenue Acts, net income, New Zealand, New Zealand resident, non-resident, pay, source in New Zealand, tax
Compare: 2004 No 35 s BH 1
Section BH 1(7) heading: added, on 8 December 2009, by section 5 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section BH 1(7): added, on 8 December 2009, by section 5 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section BH 1 list of defined terms associated: inserted, on 8 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Part C
Income

Subpart CA—General rules

CA 1 Amounts that are income

Amounts specifically identified
(1) An amount is income of a person if it is their income under a provision in this Part.
Ordinary meaning
(2) An amount is also income of a person if it is their income under ordinary concepts.
Defined in this Act: amount, income,
Compare: 2004 No 35 s CA 1

CA 2 Amounts that are exempt income or excluded income

What this section does
(1) This section identifies the subparts in this Act that deal with exempt income and excluded income.
Exempt income
(2) An amount of income of a person is exempt income if it is their exempt income under a provision in subpart CW (Exempt income) or CZ (Terminating provisions).
Excluded income
(3) An amount of income of a person is excluded income if—
- (a) it is their excluded income under a provision in subpart CX (Excluded income) or CZ; and
- (b) it is not their non-residents’ foreign-sourced income.
Defined in this Act: amount, excluded income, exempt income, non-residents’ foreign-sourced income,
Compare: 2004 No 35 s CA 2

Subpart CB—Income from business or trade-like activities

Business generally

CB 1 Amounts derived from business

Income
(1) An amount that a person derives from a business is income of the person.
Exclusion
(2) Subsection (1) does not apply to an amount that is of a capital nature.
Defined in this Act: amount, business, income,
Compare: 2004 No 35 s CB 1

CB 2 Amounts received on disposal of business assets that include trading stock

When this section applies
(1) This section applies in an income year when—
- (a) a person (person A) who owns or carries on a business disposes of some or all of the assets of the business to another person (person B); and
- (b) the disposal is made outside the ordinary course of the business, or to put an end to the business or a part of it; and
- (c) the assets consist of or include trading stock of the business, or a share or interest in trading stock.
Assessable income of person A
(2) An amount that person A receives from the disposal of the trading stock is taken into account in determining their income for the income year. The amount is derived at the time of disposal referred to in subsection (1).
Price of acquisition by person B
(3) In the calculation of the taxable income of person B for the income year or a later income year, person B is treated as acquiring the trading stock for the amount of the disposal referred to in subsection (2).
Disposal
(4) In this section, a disposal—
- (a) includes the passing of property by an exchange, gift, distribution under a will or on intestacy; and
- (b) does not include a disposal under any of sections FC 3 to FC 8 (which relate to distributions after death) that is not at market value.
Relationship with section CB 1
(5) This section overrides section CB 1.
Defined in this Act: amount, assessable income, business, dispose, distribution, income year, market value, property, taxable income, trading stock,
Compare: 2004 No 35 s FB 3

Schemes for profit

CB 3 Profit-making undertaking or scheme

An amount that a person derives from carrying on or carrying out an undertaking or scheme entered into or devised for the purpose of making a profit is income of the person.
Defined in this Act: amount, income,
Compare: 2004 No 35 s CB 2

Personal property

CB 4 Personal property acquired for purpose of disposal

An amount that a person derives from disposing of personal property is income of the person if they acquired the property for the purpose of disposing of it.
Defined in this Act: amount, income, personal property
Compare: 2004 No 35 s CB 3

CB 5 Business of dealing in personal property

An amount that a person derives from disposing of personal property is income of the person if their business is to deal in property of that kind.
Defined in this Act: amount, business, income, personal property
Compare: 2004 No 35 s CB 4

Land

CB 6 Disposal: land acquired for purpose or with intention of disposal

Income
(1) An amount that a person derives from disposing of land is income of the person if they acquired the land—
- (a) for 1 or more purposes that included the purpose of disposing of it:
- (b) with 1 or more intentions that included the intention of disposing of it.
Exclusions
(2) Subsection (1) is overridden by the exclusions for residential land in section CB 16 and for business premises in section CB 19.
Land partially sold or sold with other land
(3) This section and sections CB 7 to CB 23 apply whether the land disposed of—
- (a) is part only of the land to which the relevant section applies:
- (b) is the whole of the land to which the relevant section applies:
- (c) is the whole of the land to which the relevant section applies, together with other land.
Defined in this Act: amount, business, dispose, income, land
Compare: 2004 No 35 ss CB 5, OB 1 land paragraph (a)(i)

CB 7 Disposal: land acquired for purposes of business relating to land

Income
(1) An amount that a person (person A) derives from disposing of land is income of person A if—
- (a) both the following apply:
  - (i) at the time person A acquired the land they, or an associated person, carried on a business of dealing in land; and
  - (ii) person A acquired the land for the purpose of the business; or
- (b) both the following apply:
  - (i) at the time person A acquired the land they, or an associated person, carried on a business of developing land or dividing land into lots; and
  - (ii) person A acquired the land for the purpose of the business; or
- (c) all the following apply:
  - (i) at the time person A acquired the land they, or an associated person, carried on a business of erecting buildings; and
  - (ii) person A acquired the land for the purpose of the business; and
  - (iii) before or after acquiring the land person A, or the associated person, made improvements to it.
Exclusions
(2) Subsection (1) is overridden by the exclusions for residential land in section CB 16 and for business premises in section CB 19.
Defined in this Act: amount, associated person, business, dispose, improvements, income, land
Compare: 2004 No 35 s CB 6

CB 8 Disposal: land used for landfill, if notice of election

An amount that a person derives from disposing of land is income of the person if—
- (a) the person uses the land as a landfill before disposing of the land; and
- (b) at the time of disposal, the land is not being used as a landfill; and
- (c) the person acquiring the land is not an associated person; and
- (d) the person gives written notice to the Commissioner of an election that the land be subject to this section by the day that is the later of the following:
  - (i) the day that is 12 months after the day on which the person acquires the land:
  - (ii) 24 June 2006; and
- (e) the person makes an election under paragraph (d) for all land that the person acquires and uses as a landfill; and
- (f) any person associated with the person makes an election under paragraph (d) for all land that the associated person acquires and uses as a landfill.
Defined in this Act: associated person, Commissioner, dispose
Compare: 2004 No 35 s CB 6B
Section CB 8(c): substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 7(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CB 9 Disposal within 10 years: land dealing business

Income
(1) An amount that a person derives from disposing of land is income of the person if—
- (a) they dispose of the land within 10 years of acquiring it; and
- (b) at the time they acquired the land, they carried on a business of dealing in land, whether or not the land was acquired for the purpose of the business.
Income: associated person in business of dealing in land
(2) An amount that a person (person A) derives from disposing of land within 10 years of acquiring it is income of person A if a person (person B) associated with them at the time the land was acquired carried on a business of dealing in land, whether or not—
- (a) person A carried on a business of dealing in land; or
- (b) the land was acquired for the purpose of person B’s business.
Exclusions
(3) Subsections (1) and (2) are overridden by the exclusions for residential land in section CB 16 and for business premises in section CB 19.
Defined in this Act: amount, associated person, business, dispose, income, land, year
Compare: 2004 No 35 s CB 7

CB 10 Disposal within 10 years: land development or subdivision business

Income
(1) An amount that a person derives from disposing of land is income of the person if—
- (a) they dispose of the land within 10 years of acquiring it; and
- (b) at the time they acquired the land, they carried on a business of developing land or dividing land into lots, whether or not the land was acquired for the purpose of the business.
Income: associated person in business of developing or subdividing land
(2) An amount that a person (person A) derives from disposing of land within 10 years of acquiring it is income of person A if a person (person B) associated with them at the time the land was acquired carried on a business of developing land or dividing land into lots, whether or not—
- (a) person A carried on a business of developing land or dividing land into lots:
- (b) the land was acquired for the purpose of person B’s business.
Exclusions
(3) Subsections (1) and (2) are overridden by the exclusions for residential land in section CB 16 and for business premises in section CB 19.
Defined in this Act: amount, associated person, business, dispose, income, land, year
Compare: 2004 No 35 s CB 8

CB 11 Disposal within 10 years of improvement: building business

Income
(1) An amount that a person derives from disposing of land is income of the person if—
- (a) they dispose of the land within 10 years of completing improvements to it; and
- (b) at the time they began the improvements, they carried on a business of erecting buildings, whether or not the land was acquired for the purpose of the business.
Income: associated person in business of erecting buildings
(2) An amount that a person (person A) derives from disposing of land within 10 years of completing improvements on it is income of person A if another person (person B) associated with person A at the time the improvements were begun carried on a business of erecting buildings, whether or not—
- (a) person A carried on a business of erecting buildings; or
- (b) the land was acquired for the purpose of person B’s business.
Exclusions
(3) Subsections (1) and (2) are overridden by the exclusions for residential land in section CB 16 and for business premises in section CB 19.
Defined in this Act: amount, associated person, business, dispose, improvements, income, land, year
Compare: 2004 No 35 s CB 9

CB 12 Disposal: schemes for development or division begun within 10 years

Income
(1) An amount that a person derives from disposing of land is income of the person if the amount is derived in the following circumstances:
- (a) an undertaking or scheme, which is not necessarily in the nature of a business, is carried on; and
- (b) the undertaking or scheme involves the development of the land or the division of the land into lots; and
- (c) the person, or another person for them, carries on development or division work on or relating to the land; and
- (d) the development or division work is not minor; and
- (e) the undertaking or scheme was begun within 10 years of the date on which the person acquired the land.
Exclusions
(2) Subsection (1) is overridden by the exclusions for residential land in section CB 17, for business premises in section CB 20, for farm land in section CB 21, and for investment land in section CB 23.
Defined in this Act: amount, business, dispose, income, land, year
Compare: 2004 No 35 s CB 10

CB 13 Disposal: amount from major development or division and not already in income

Income
(1) An amount that a person derives from disposing of land is income of the person if—
- (a) the amount is not income under any of sections CB 6 to CB 12 and CB 14; and
- (b) the amount is derived in the following circumstances:
  - (i) an undertaking or scheme, which is not necessarily in the nature of a business, is carried on; and
  - (ii) the undertaking or scheme involves the development of the land or the division of the land into lots; and
  - (iii) the person, or another person for them, carries on development or division work on or relating to the land; and
  - (iv) the development or division work involves significant expenditure on channelling, contouring, drainage, earthworks, kerbing, levelling, roading, or any other amenity, service, or work customarily undertaken or provided in major projects involving the development of land for commercial, industrial, or residential purposes.
Exclusions
(2) Subsection (1) is overridden by the exclusions for residential land in section CB 17, for business premises in section CB 20, for farm land in section CB 21, and for investment land in section CB 23.
Relationship with section DB 27
(3) Section DB 27 (Amount from major development or division and not already in income) deals with a deduction for the value of the land.
Defined in this Act: amount, business, deduction, dispose, income, land
Compare: 2004 No 35 s CB 11
Section CB 13(2) heading: substituted, on 1 April 2008, by section 309 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CB 13(2): substituted, on 1 April 2008, by section 309 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

CB 14 Disposal: amount from land affected by change and not already in income

Income
(1) An amount that a person derives from disposing of land is income of the person if—
- (a) the amount is not income under any of sections CB 6 to CB 12; and
- (b) the person disposed of the land within 10 years of acquiring it; and
- (c) the total amount that they derive from its disposal is more than the cost of the land; and
- (d) at least 20% of the excess arises from a factor, or more than 1 factor, that—
  - (i) relates to the land; and
  - (ii) is described in subsection (2); and
  - (iii) occurs after the person acquired the land, for the factors described in subsection (2)(c), (e), (g), and (i).
Factors for purposes of subsection (1)(d)
(2) The factors referred to in subsection (1)(d) are—
- (a) the rules of an operative district plan under the Resource Management Act 1991:
- (b) the likelihood of the imposition of rules:
- (c) a change to the rules:
- (d) the likelihood of a change to the rules:
- (e) a consent granted under the Resource Management Act 1991:
- (f) the likelihood of a consent being granted:
- (g) a decision of the Environment Court made under the Resource Management Act 1991:
- (h) the likelihood of a decision being made:
- (i) the removal of a condition, covenant, designation, heritage order, obligation, prohibition, or restriction under the Resource Management Act 1991:
- (j) the likelihood of the removal of a condition, covenant, designation, heritage order, obligation, prohibition, or restriction:
- (k) an occurrence of a similar nature to any of the occurrences described in any of paragraphs (a) to (j):
- (l) the likelihood of an occurrence of a similar nature to any of the occurrences described in any of paragraphs (a) to (j).
Exclusions
(3) Subsection (1) is overridden by the exclusions for residential property in section CB 18 and for farm land in section CB 22.
Defined in this Act: amount, dispose, income, land, year
Compare: 2004 No 35 s CB 12

CB 15 Transactions between associated persons

Income
(1) An amount that a person (the transferee) derives from disposing of land is income of the transferee under whichever is applicable of sections CB 6 to CB 14 if—
- (a) the land has been transferred to the transferee from another person (the transferor); and
- (b) the transferor and the transferee are associated persons at the time of the transfer; and
- (c) the amount derived is more than the cost of the land to the transferee; and
- (d) the amount derived would have been income of the transferor under any of sections CB 6 to CB 14 if the transferor had retained and disposed of the land.
Date on which some transferees acquire land
(2) For the purposes of sections CB 7 to CB 12 and CB 14, if the transferor and transferee are associated persons at the time of the transfer, the transferee is treated as having acquired the land on the date on which the transferor acquired it.
Defined in this Act: amount, associated person, dispose, income, land
Compare: 2004 No 35 s CB 13

Exclusions for residential land

CB 16 Residential exclusion from sections CB 6 to CB 11

Exclusion
(1) Sections CB 6 to CB 11 do not apply if—
- (a) the person—
  - (i) acquired the land with a dwellinghouse on it; or
  - (ii) acquired the land and erected a dwellinghouse on it; and
- (b) the dwellinghouse was occupied mainly as a residence by—
  - (i) the person and any member of their family living with them; or
  - (ii) if the person is a trustee, 1 or more beneficiaries of the trust.
What exclusion applies to
(2) The exclusion applies to the land that has the dwellinghouse on it. It also applies to land related to the land that has the dwellinghouse on it if the total area of the related land is—
- (a) 4,500 square metres or less; or
- (b) more than 4,500 square metres, if the larger area is required for the reasonable occupation and enjoyment of the dwellinghouse.
Who exclusion does not apply to
(3) The exclusion does not apply to a person who has engaged in a regular pattern of acquiring and disposing, or erecting and disposing, of dwellinghouses.
Defined in this Act: dispose, land, trustee
Compare: 2004 No 35 s CB 14

CB 17 Residential exclusion from sections CB 12 and CB 13

Exclusion: developing or dividing land for residential use
(1) Sections CB 12 and CB 13 do not apply if—
- (a) the work involved in the undertaking or scheme is to create or effect a development, division, or improvement; and
- (b) the development, division, or improvement is for use in, and for the purposes of, the residing on the land of the person or any member of their family living with them.
Exclusion: dividing residential land
(2) Sections CB 12 and CB 13 do not apply if—
- (a) the land is a lot that came out of a larger area of land that the person divided into 2 or more lots; and
- (b) the larger area of land—
  - (i) was 4,500 square metres or less immediately before it was divided; and
  - (ii) was occupied by the person mainly as residential land for themselves and a member of their family living with them.
Defined in this Act: land
Compare: 2004 No 35 s CB 15
Section CB 17(1): amended, on 1 April 2008, by section 310 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

CB 18 Residential exclusion from section CB 14

Exclusion
(1) Section CB 14 does not apply if—
- (a) the person acquired the land and used it or intended to use it for residential purposes; and
- (b) they disposed of the land to another person who acquired it for residential purposes.
Purpose of acquisition for purposes of subsection (1)(b)
(2) For the purposes of subsection (1)(b), the purpose of the acquisition by the other person is ascertained from the circumstances of the disposal and other relevant matters.
Meaning of residential purposes
(3) In this section, residential purposes—
- (a) means a purpose that the person has of using the land or intending to use the land mainly as a residence for themselves and members of their family living with them; and
- (b) includes the purpose of erecting a dwellinghouse on the land to be occupied as such a residence.
Defined in this Act: dispose, land, residential purposes
Compare: 2004 No 35 s CB 16

Exclusions for business premises

CB 19 Business exclusion from sections CB 6 to CB 11

Exclusion
(1) Sections CB 6 to CB 11 do not apply to a disposal of land if—
- (a) the land is the premises of a business; and
- (b) the person acquired and occupied, or erected and occupied, the premises mainly to carry on a substantial business from them.
Who exclusion does not apply to
(2) The exclusion does not apply to a person who has engaged in a regular pattern of acquiring and disposing, or erecting and disposing, of premises for businesses.
Meaning of land
(3) In this section, land includes land that—
- (a) is reserved, with the premises, for the use of the business; and
- (b) is of an area no greater than that required for the reasonable occupation of the premises and the carrying on of the business.
Defined in this Act: business, dispose, land
Compare: 2004 No 35 s CB 17

CB 20 Business exclusion from sections CB 12 and CB 13

Sections CB 12 and CB 13 do does not apply if—
- (a) the work involved in the undertaking or scheme is to create or effect a development, division, or improvement; and
- (b) the development, division, or improvement is for use in, and for the purposes of, the carrying on of a business by the person on the land; and
- (c) the business does not consist of the undertaking or scheme.
Defined in this Act: business, land
Compare: 2004 No 35 s CB 18
Section CB 20: amended, on 1 April 2008, by section 311(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CB 20 heading: amended, on 1 April 2008, by section 311(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Exclusions for farm land

CB 21 Farm land exclusion from sections CB 12 and CB 13

Exclusion
(1) Sections CB 12 and CB 13 do not apply if—
- (a) the land is a lot resulting from the division of a larger area of land into 2 or more lots; and
- (b) immediately before the land was divided, the larger area of land was occupied or used by the person, their spouse, civil union partner or de facto partner, or both of them, mainly for the purposes of a farming or agricultural business carried on by either or both of them; and
- (c) the area and nature of the land disposed of mean that it is then capable of being worked as an economic unit as a farming or agricultural business; and
- (d) the land was disposed of mainly for the purpose of using it in a farming or agricultural business.
Circumstances for purposes of subsection (1)(d)
(2) The circumstances of the disposal of the land are relevant to the decision on whether the land was disposed of mainly for the purpose of using it in a farming or agricultural business. The circumstances include—
- (a) the consideration for the disposal of the land:
- (b) current prices paid for land in that area:
- (c) the terms of the disposal:
- (d) a zoning or other classification relating to the land:
- (e) the proximity of the land to any other land being used or developed for uses other than farming or agricultural uses.
Defined in this Act: business, dispose, land, pay
Compare: 2004 No 35 s CB 19

CB 22 Farm land exclusion from section CB 14

Exclusion
(1) Section CB 14 does not apply if—
- (a) the person (person A) acquired the land, and they, their spouse, civil union partner or de facto partner, or both of them used or intended to use the land mainly for the purposes of a farming or agricultural business carried on by them, their spouse, civil union partner, or de facto partner, or both of them; and
- (b) they disposed of the land to another person (person B) mainly for the purposes of the continuing use of the land in a farming or agricultural business.
Purposes of acquisition for purposes of subsection (1)(b)
(2) For the purposes of subsection (1)(b), person B’s purposes in acquiring the land are ascertained from circumstances of the disposal arising after person A acquired the land and other relevant matters, not including the factors described in CB 14(1).
Defined in this Act: business, dispose, land
Compare: 2004 No 35 s CB 20

Exclusion for investment land

CB 23 Investment exclusion from sections CB 12 and CB 13

Sections CB 12 and CB 13 do does not apply if—
- (a) the work involved in the undertaking or scheme is to create or effect a development, division, or improvement; and
- (b) the development, division, or improvement is for use in, and for the purposes of, the person’s deriving from the land income of the kind described in section CC 1 (Land).
Defined in this Act: income, land
Compare: 2004 No 35 s CB 21
Section CB 23: amended, on 1 April 2008, by section 312(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CB 23 heading: amended, on 1 April 2008, by section 312(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

CB 23B Land partially sold or sold with other land

Sections CB 6 to CB 23 apply to an amount derived from the disposal of land if the land is—
- (a) part of the land to which the relevant section applies:
- (b) the whole of the land to which the relevant section applies:
- (c) disposed of together with other land.
Defined in this Act: amount, dispose, land
Compare: 2004 No 35 s CB 5A
Section CB 23B: inserted, on 1 April 2008, by section 313 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Timber

CB 24 Disposal of timber or right to take timber

Income
(1) An amount is income of a person if they derive it from—
- (a) disposing of timber; or
- (b) disposing of a right to take timber.
Whether or not person owns land
(2) Subsection (1) applies whether or not the person owns the land on which the timber is situated.
Disposal for below market value
(3) Section GC 2 (Disposals of timber rights or standing timber) may apply to treat a person as deriving an amount on the grant of a right to take timber or disposal of standing timber.
Defined in this Act: amount, dispose, income, own, right to take timber, standing timber
Compare: 2004 No 35 s CB 22

CB 25 Disposal of land with standing timber

When this section applies
(1) This section applies when a person disposes of land with standing timber on it.
Exclusions
(2) This section does not apply when the standing timber is of 1 of the following kinds:
- (a) trees that are ornamental or incidental, as evidenced by a certificate given under section 44C of the Tax Administration Act 1994; or
- (b) trees in a crop subject to a forestry right, as defined in section 2 of the Forestry Rights Registration Act 1983, registered under the Land Transfer Act 1952; or
- (c) trees subject to a right to take a benefit (in the form of a profit a prendre) granted before 1 January 1984.
Income
(3) The amount that the person derives from disposing of the standing timber is income of the person.
Defined in this Act: amount, dispose, income, standing timber
Compare: 2004 No 35 s CB 23

Investments

CB 26 Disposal of certain shares by portfolio investment entities

When this section applies
(1) This section applies when—
- (a) the income from the disposal by a person (the entity) of the share is excluded income under section CX 55 (Proceeds from disposal of investment shares); and
- (b) a dividend from the share is—
  - (i) declared before the disposal; and
  - (ii) paid to a holder of the share who, after the disposal, becomes entitled to the dividend.
Income
(2) The entity is treated as deriving an amount of income calculated using the formula—
(shares at declaration – shares on distribution) × dividend.
Definition of items in formula
(3) In the formula,—
- (a) shares at declaration is the number of shares held by the entity when the dividend is declared:
- (b) shares on distribution is the number of shares for which the entity derives a dividend:
- (c) dividend is the amount of the dividend per share or, for a share issued by an ICA company, the amount of the dividend per share that is not fully imputed.
Positive result
(4) The result of the formula must be a positive amount.
Defined in this Act: amount, company, dividend, excluded income, fully imputed, ICA company, income, pay, portfolio investment entity, share
Compare: 2007 No 97 s CB 26
Section CB 26: substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 8(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Farming, forestry, or fishing

CB 27 Income equalisation schemes

Income derived by a person, as timed and quantified under any of the following provisions, is income of the person:
- (a) sections EH 11, EH 14, EH 16, EH 18, EH 20 to EH 22, EH 24, and EH 26 (which relate to the main income equalisation scheme):
- (b) sections EH 46, EH 48, EH 50 to EH 52, EH 54, and EH 56 (which relate to the adverse event income equalisation scheme):
- (c) sections EH 72, EH 74, and EH 76 (which relate to the thinning operations income equalisation scheme).
Defined in this Act: adverse event income equalisation scheme, income, main income equalisation scheme, person, thinning operations income equalisation scheme
Compare: 2004 No 35 s CB 24

CB 27B Entering partners’ livestock income

[Repealed]
Section CB 27B: repealed (with effect on 1 April 2009), on 6 October 2009, by section 9(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CB 27B: inserted, on 1 April 2008, by section 4(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).

Environmental restoration

CB 28 Environmental restoration accounts

Income from refund
(1) A person who receives a refund for a tax year under section EK 12 (Refund if request or excess balance) derives for the person’s corresponding income year an amount of income calculated using the formula—
Income from transfer from environmental restoration account
(2) If there is a transfer from a person’s environmental restoration account under section EK 15, EK 16, or EK 19 (which relate to environmental restoration accounts), the person derives for the corresponding income year an amount of income calculated using the formula—
Definitions of items in formulas
(3) The items in the formulas are defined in subsections (4) to (6).
Refund
(4) Refund is the amount of the refund.
Tax rate
(5) Tax rate is the highest rate of income tax on taxable income that—
- (a) is set out in schedule 1 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits); and
- (b) would apply to the person for the tax year if the person had sufficient taxable income.
Transfer
(6) Transfer is the amount in the environmental restoration account that is transferred.
Income arising from renewal of resource consent
(7) A person who incurs expenditure of a type listed in schedule 19, part A, clauses 2 to 5 (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant) and not in schedule 19, part C derives income under subsection (8) if—
- (a) the deduction under section DB 46 (Avoiding, remedying, or mitigating effects of discharge of contaminant) for the expenditure is determined by the period for which a resource consent is granted; and
- (b) the period of the grant of the resource consent is extended by more than 50% in a later income year or a new resource consent is granted for a period that is more than 50% of the total period of the resource consent.
Amount of income
(8) The person derives for the income year in which the period of the resource consent is extended, or the new resource consent is granted, an amount of income equal to the greater of zero and the difference between—
- (a) the total deduction under section DB 46 for the person for the period from the grant of the resource consent to the beginning of the income year:
- (b) the total deduction for the expenditure that the person would have had under section DB 46 for the period referred to in paragraph (a), if the period of the resource consent at the time of the grant had been 35 years.
Defined in this Act: corresponding income year, environmental restoration account, income, income tax, resource consent, taxable income, tax year
Compare: 2004 No 35 s CB 24B
Section CB 28(5)(a): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Minerals

CB 29 Disposal of minerals

Income
(1) An amount that a person derives from disposing of minerals taken from land is income of the person.
Whether or not person owns land
(2) Subsection (1) applies whether or not the person owns the land from which the minerals are taken.
Defined in this Act: amount, dispose, income, mineral, own
Compare: 2004 No 35 s CB 25

Intellectual property

CB 30 Sale of patent applications or patent rights

If a person derives an amount from the sale of a patent application with a complete specification or from the sale of patent rights, the amount is income of the person.
Defined in this Act: amount, income, patent rights
Compare: 2004 No 35 s CB 26

Transfer of business

CB 31 Sale of business: transferred employment income obligations

When this section applies
(1) This section applies when section DC 10 (Sale of business: transferred employment income obligations) applies and the reduction in the consideration is more than the amount the buyer actually pays for the transferred obligation.
Income
(2) The excess is income of the buyer.
Timing of income
(3) The income is allocated to the income year in which the reduction of the transferred provision is required to be recognised by the buyer under generally accepted accounting practice.
Defined in this Act: amount, generally accepted accounting practice, income, income year, pay
Compare: 2004 No 35 s CB 27

Stolen property

CB 32 Property obtained by theft

Income
(1) If a person obtains possession or control of property without claim of right, an amount equal to the market value of the property is income of the person.
Timing of income
(2) The income is allocated to the income year in which the person obtains possession or control of the property.
Whether or not constructive trust
(3) Subsection (1) applies whether or not the person holds the property as a trustee under a constructive trust.
Defined in this Act: amount, claim of right, income, income year, possession, property, trustee
Compare: 2004 No 35 s CB 28

Mutual associations

CB 33 Amounts derived by mutual associations

When this section applies
(1) This section applies when an association enters into a transaction of a kind described in section HE 2 (Classes of mutual transaction) with—
- (a) 1 or more members; or
- (b) 1 or more members along with 1 or more persons who are not members of the association.
Income
(2) If the association derives from the transaction an amount that would be income under ordinary concepts but for the mutual character of the transaction, the amount is income of the association.
Defined in this Act: amount, association, income, income year, member,
Compare: 2004 No 35 s HF 1(1)

CB 34 Amounts derived by members from mutual associations

When this section applies
(1) This section applies when an association, in relation to a mutual transaction, pays an association rebate to a member in an income year in circumstances where a payment for the transaction would be taken into account in determining the taxable income of the member.
Income
(2) The amount of the association rebate is income of the member in the income year but only to the extent of the amount of the association’s deduction under section DV 19 (Association rebates).
Statutory producer boards: timing of payment
(3) If a statutory producer board pays an association rebate to a member that is a mutual association, the association is treated as deriving the amount in the income year in which the producer board chooses under section DV 19(7) to have the amount as the deduction.
When amount paid
(4) For the purposes of this section, an amount is treated as having been paid to a person when it is credited in account or dealt with in some way in their interest or on their behalf. Subsection (3) overrides this subsection.
Relationship with dividend rules
(5) An association rebate—
- (a) is not a dividend to the extent to which it is a payment of the kind described in subsection (2) and is no more than the amount of the deduction the association is allowed under section DV 19; and
- (b) for an association that is not a company, and to the extent to which it is more than the amount of the deduction the association is allowed under section DV 19, is income of the member.
Defined in this Act: amount, association, association rebate, deduction, dividend, income, income year, member, pay, statutory producer board
Compare: 2004 No 35 s HF 1(3)(c), (5), (6)

Partners and partnerships

Heading: added, on 1 April 2008, by section 5(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).

CB 35 Amounts of income for partners

A person who is a partner has an amount of income to the extent to which an amount of income results from the application of subpart HG (Joint venturers, partners, and partnerships) to them and their partnership.
Defined in this Act: amount, income, partner, partnership
Section CB 35: added, on 1 April 2008, by section 5(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).

Emissions units under Climate Change Response Act 2002

Heading: substituted (with effect on 1 January 2009), on 6 October 2009, by section 10 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Heading: added, on 26 September 2008, by section 68 of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).

CB 36 Disposal of emissions units

When this section applies
(1) This section applies when a person disposes of an emissions unit.
Income
(2) The amount that the person derives on the disposal is income.
Surrender of unit: deemed sale at given value
(3) If the disposal is by surrender under the Climate Change Response Act 2002, the person is treated as having sold the unit, at the time of the surrender, to an unrelated person for an amount equal to—
- (a) the unit's cost, if none of paragraphs (b) to (f) applies; or
- (b) the unit's value under section ED 1(7B) (Valuation of excepted financial arrangements), if that subsection applies and none of paragraphs (c) to (f) apply; or
- (c) zero, if subsection (4) applies; or
- (d) zero, if subsection (5) applies; or
- (e) the unit's market value, if subsection (6) applies; or
- (f) the unit's market value, if subsection (7) applies.
Surrender of unit: emissions relating to post-1989 forest land
(4) The person is treated as selling the unit for an amount of zero if the person surrenders the emissions unit for emissions in relation to post-1989 forest land.
Surrender of unit: deforestation of some pre-1990 forest land
(5) The person is treated as selling the unit for an amount of zero if—
- (a) the person surrenders the emissions unit in relation to the deforestation of pre-1990 forest land; and
- (b) the person would derive income, other than exempt income or excluded income, from a disposal of the land without timber at the time of the surrender.
Surrender of post-1989 forest land unit: emissions not relating to post-1989 forest land
(6) The person is treated as selling a post-1989 forest land emissions unit for an amount equal to the unit's market value if the person surrenders the emissions unit other than for emissions in relation to post-1989 forest land.
Surrender of unit: free unit other than forest land unit
(7) The person is treated as selling a unit that is not a forest land unit for an amount equal to the unit's market value if—
- (a) the person surrenders the unit before the period of the emissions to which the unit relates; and
- (b) the unit was transferred to the person under Part 4, subpart 2 of the Climate Change Response Act 2002 at a price of zero.
Converted unit treated as sold
(8) If a person converts a New Zealand emissions unit, other than a forest land emissions unit, into a Kyoto unit as defined in section 4(1) of the Climate Change Response Act 2002, the person is treated as having sold the converted unit for an amount equal to—
- (a) the unit's value under section ED 1(7B), if that subsection applies; or
- (b) the unit's cost, otherwise.
Excluded income: post-1989 forest land emissions unit
(9) Section CX 51B (Disposal of pre-1990 forest land emissions units) applies to the disposal to another person of a pre-1990 forest land emissions unit.
Defined in this Act: amount, employee, employer, exempt income, overtime, pay
Section CB 36: substituted (with effect on 1 January 2009), on 6 October 2009, by section 10 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CB 36: added, on 26 September 2008, by section 68 of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).

Subpart CC—Income from holding property (excluding equity)

Land use

CC 1 Land

Income
(1) An amount described in subsection (2) is income of the owner of land if they derive the amount from—
- (a) a lease, licence, or easement affecting the land; or
- (b) the grant of a right to take the profits of the land.
Amounts
(2) The amounts are—
- (a) rent:
- (b) a fine:
- (c) a premium:
- (d) a payment for the goodwill of a business:
- (e) a payment for the benefit of a statutory licence:
- (f) a payment for the benefit of a statutory privilege:
- (g) other revenues.
Relationship with section GC 5
(3) The treatment of leases of property to related parties for less than an adequate rent is dealt with in section GC 5 (Leases for inadequate rent).
Defined in this Act: amount, business, income, lease, own, pay
Compare: 2004 No 35 s CC 1

CC 2 Non-compliance with covenant for repair

When this section applies
(1) This section applies when a person who is a lessor of land derives an amount for non-compliance by the lessee with an obligation under a lease of the land—
- (a) to maintain the land; or
- (b) to make repairs to improvements on the land.
Income
(2) The amount is income of the lessor.
Timing of income
(3) The income is allocated to the income year in which the lessor receives the amount.
Relationship with sections EI 5 and EI 6
(4) Subsection (3) is overridden by sections EI 5 (Amount paid to lessor for non-compliance with covenant for repair) and EI 6 (Amount paid for non-compliance: when lessor ceases to own land).
Defined in this Act: amount, income, income year, lease, repairs
Compare: 2004 No 35 s CC 2

Financial instruments

CC 3 Financial arrangements

Income: party to financial arrangement
(1) If a person who is a party to a financial arrangement is treated as deriving an amount of income under the financial arrangement under subpart EW (Financial arrangements rules), the amount is income of the person.
Income: trustee
(2) Income derived by a trustee in the circumstances described in section EW 50 (Income when debt forgiven to trustee) is income of the trustee.
Defined in this Act: amount, financial arrangement, income, trustee
Compare: 2004 No 35 s CC 3

CC 4 Payments of interest

Income
(1) Interest derived by a person is income of the person.
Apportionment
(2) Interest due but unpaid on the date on which a person disposes of a security is apportioned between the person disposing of the security and the person acquiring it.
Defined in this Act: income, interest, pay
Compare: 2004 No 35 s CC 4

CC 5 Annuities

Income
(1) An annuity derived by a person is income of the person.
Apportionment
(2) Income under an annuity due but unpaid on the date on which a person disposes of the annuity is apportioned between the person disposing of the annuity and the person acquiring it.
Relationship with sections CW 4 and CW 30
(3) This section is overridden by sections CW 4 (Annuities under life insurance policies) and CW 30 (Annuities from Crown Bank Accounts).
Defined in this Act: income, pay
Compare: 2004 No 35 s CC 5

CC 6 Prizes received under Building Societies Act 1965

Income
(1) A prize received by a person under section 31A of the Building Societies Act 1965 is income of the person, whether they take it as cash or as an advance.
Timing of income
(2) The income is allocated as follows:
- (a) a cash prize is allocated to the day on which the bonus ballot giving rise to the prize is held; and
- (b) an advance is allocated to the day on which the advance is made or, if the advance is made in a series of advances, to the first day on which an advance is made.
Defined in this Act: income
Compare: 2004 No 35 s CC 6

CC 7 Consideration other than in money

When this section applies
(1) This section applies when—
- (a) a lender provides money to a borrower for use in a business that the borrower carries on in New Zealand; and
- (b) the borrower provides to the lender, as some or all of the consideration, a tangible or intangible benefit that—
  - (i) is not interest; and
  - (ii) may or may not be relief from an obligation; and
  - (iii) may or may not be convertible into money; and
- (c) the borrowing is a commercial transaction under which the borrower would have been liable to pay interest at the current commercial rate, given the nature and term of the loan, if the borrower had not provided the benefit, whether or not the contract between the borrower and the lender provides for the payment of interest if the benefit is not provided.
Income
(2) The amount described in subsection (3) is income of the lender.
Amount of income
(3) The amount is the interest that the borrower would have been liable to pay if the lender had lent the money to the borrower in consideration of the payment of interest at the current commercial rate, given the nature and term of the loan, reduced by the amount of any interest that the borrower pays.
Defined in this Act: amount, business, income, interest, New Zealand, pay
Compare: 2004 No 35 s CC 7

CC 8 Use of money interest payable by Commissioner

Income
(1) Interest payable by the Commissioner to a person under Part 7 of the Tax Administration Act 1994 is income of the person.
Timing of income
(2) Interest to which this section applies is allocated under section EF 4 (Use of money interest payable by Commissioner).
Relationship with financial arrangements rules
(3) Interest to which this section applies is disregarded for the purposes of the financial arrangements rules.
Defined in this Act: Commissioner, financial arrangements rules, income, interest, pay
Compare: 2004 No 35 s CC 8

CC 8B Certain commercial bills: non-resident holders

When this section applies
(1) This section applies when a non-resident holder of a commercial bill who is required to calculate and allocate income and expenditure under neither the financial arrangements rules nor the old financial arrangements rules because of the application of section EW 9(2) to (4) or EZ 45(e) (which relate to the application of the rules)—
- (a) disposes of the commercial bill other than by redemption; or
- (b) redeems a commercial bill whose issuer is an associated person of the non-resident.
Income: disposal
(2) The value of the commercial bill on the day the non-resident holder disposes of it is income of the person.
Income: redemption
(3) The amount that the non-resident holder receives on redemption is income of the person.
Defined in this Act: amount, commercial bill, financial arrangements rules, income, non-resident, old financial arrangements rules
Compare: 2004 No 35 s CZ 8
Section CC 8B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 11(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Royalties

CC 9 Royalties

Income
(1) A royalty derived by a person is income of the person.
Meaning of royalty
(2) Royalty includes a payment of any kind derived as consideration for—
- (a) the use of, or right to use, a copyright, patent, plant variety rights, trademark, design or model, plan, secret formula or process, or other similar property or right:
- (b) the use of, or right to use, a mine or quarry:
- (c) the extraction, removal, or other exploitation of standing timber or a natural resource:
- (d) the right to extract, remove, or otherwise exploit standing timber or a natural resource:
- (e) the use of, or right to use, a film, a videotape, or a tape in connection with radio broadcasting:
- (f) the supply of scientific, technical, industrial, or commercial knowledge or information:
- (g) the total or partial forbearance of the use of, or the grant of a right to use, property or a right referred to in any of paragraphs (a) to (e):
- (h) the supply of assistance that enables the application or use of anything in any of paragraphs (a) to (f):
- (i) the total or partial forbearance of the supply of knowledge or information or assistance referred to in paragraph (f) or (h).
Relevance of description of payment
(3) For the purposes of subsection (2), none of the following is relevant:
- (a) how the payment is described or computed:
- (b) whether the payment is periodical or otherwise:
- (c) whether the payment is an instalment of the purchase price of real property:
- (d) whether the payment is an instalment of the purchase price of personal property.
Defined in this Act: income, natural resource, pay, royalty, standing timber
Compare: 2004 No 35 s CC 9
Section CC 9 list of defined terms natural resource: 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).

CC 10 Films

When this section applies
(1) This section applies when a person has a right or interest of any of the kinds described in subsection (2) in or to—
- (a) a film; or
- (b) a print of the film; or
- (c) publicity material for the film; or
- (d) any other tangible asset relating to the film.
Right or interest
(2) The right or interest is a right or interest, including a future or contingent right or interest, of any of the following kinds:
- (a) copyright in the film:
- (b) a licence relating to the copyright:
- (c) an equitable right in the copyright:
- (d) an equitable right in a licence relating to the copyright:
- (e) any other right existing in or attaching to the film:
- (f) a right to income, or a share of income, from the rental, sale, use, or other exploitation of the film.
Income
(3) The following amounts are income of the person:
- (a) an amount received or receivable by the person for—
  - (i) the use of, or the right to use, the film or a right or interest in a right in the film:
  - (ii) the granting of a licence for a future right in the film:
  - (iii) the disposal of some or all of a right or interest in a right in the film:
  - (iv) the assignment of a right or an interest in a right:
  - (v) the assignment of a right to derive income from the use of a right or interest; and
- (b) an amount derived by the person from the rental, sale, use, or other exploitation of the film.
Relationship with sections CV 17 and YD 7
(4) This section is overridden by sections CV 17 and YD 7 (which relate to film rental income).
Defined in this Act: amount, film, income
Compare: 2004 No 35 s CC 10

Finance leases

CC 11 Lessee acquiring lease asset on expiry of term of lease

When this section applies
(1) This section applies for the purposes of section FA 9 (Treatment when lease ends: lessee acquiring asset), when, after the term of a finance lease, a lessee acquires the personal property lease asset and then disposes of it.
Income of lessee
(2) If the lessee disposes of the lease asset for an amount that is more than the consideration paid for it, the difference is income of the lessee in the income year in which they dispose of the asset.
Defined in this Act: consideration, finance lease, income, lessee, pay, personal property lease asset, tax year
Compare: 2004 No 35 s FC 8E

CC 12 Lessor acquiring lease asset on expiry of term of lease

When this section applies
(1) This section applies for the purposes of section FA 10(3) (Treatment when lease ends: lessor acquiring asset), when, after the term of a finance lease,—
- (a) a lessor under the lease sells, assigns, or leases the personal property lease asset to another person under another finance lease; and
- (b) the consideration is more than the amount determined under section FA 10(2).
Income of lessor
(2) To the extent to which the difference between the amount determined under section FA 10(2) and the consideration is not paid by the lessor to the lessee under the original finance lease, the amount is income of the lessor in the income year in which the original lease term ends.
Defined in this Act: consideration, finance lease, income, lessee, lessor, pay, personal property lease asset, tax year
Compare: 2004 No 35 s FC 8D(2)

Hire purchase agreements

CC 13 Amounts paid in income years after hire purchase agreement ends

When this section applies
(1) This section applies for the purposes of section FA 18 (Treatment of amounts paid in income years after agreement ends), when an amount that is liable to be paid under a hire purchase agreement is paid in an income year that is later than the income year in which the agreement ends.
Income of seller
(2) An amount that the buyer is liable to pay under the terms of the agreement is income of the seller in the income year in which they receive it.
Income of buyer
(3) An amount paid by the seller to the buyer under section FA 18(3)(b) is income of the buyer in the income year in which the amount is paid.
Defined in this Act: amount, hire purchase agreement, income, income year, pay
Compare: 2004 No 35 s FC 10(5)(d)-(f)

Subpart CD—Income from equity

Income

CD 1 Dividend

A dividend derived by a person is income of the person.
Defined in this Act: dividend, income
Compare: 2004 No 35 s CD 1

CD 2 Distribution excluded from being dividend

A distribution, derived by a member of a co-operative company, that is excluded by section CD 34 from being a dividend is income of the member.
Defined in this Act: co-operative company, dividend, income
Compare: 2004 No 35 s CD 1B

What is a dividend?

CD 3 Meaning of dividend

Sections CD 4 to CD 21 define what is a dividend.
Defined in this Act: dividend
Compare: 2004 No 35 s CD 2

CD 4 Transfers of value generally

Transfers of value from company
(1) A transfer of value from a company to a person is a dividend if—
- (a) the cause of the transfer is a shareholding in the company, as described in section CD 6; and
- (b) none of the exclusions in sections CD 22 to CD 37 applies to the transfer.
Calculation rules
(2) Sections CD 38 to CD 42 apply for the purposes of calculating the amount of the dividend.
Defined in this Act: company, dividend, transfer of value
Compare: 2004 No 35 s CD 3

CD 5 What is a transfer of value?

General test
(1) A transfer of value from a company to a person occurs when—
- (a) the company provides money or money’s worth to the person; and
- (b) if the person provides any money or money’s worth to the company under the same arrangement, the market value of what the company provides is more than the market value of what the person provides.
Release of debt
(2) A company provides money’s worth to a person if the person is released from an obligation to pay money to the company, either by agreement or by operation of law.
When shares are cancelled
(2B) The market value of any transfer from the shareholder to the company on the cancellation of a share of the shareholder's rights as a shareholder is zero.
Provision of services for less than market value
(3) Despite subsection (1), a transfer of value does not occur to the extent to which the money’s worth provided by the company is only the provision of services.
Limit to subsection (3)
(4) Subsection (3) does not apply to the provision of services by a company that is a close company, if the provision is the benefit of expenditure of the company.
Defined in this Act: arrangement, close company, company, market value, pay, services, share, shareholder, transfer of value
Compare: 2004 No 35 s CD 4
Section CD 5(2B) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 12(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 5(2B): inserted (with effect on 1 April 2008), on 6 October 2009, by section 12(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 5 list of defined terms market value: inserted (with effect on 1 April 2008), on 6 October 2009, by section 12(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 5 list of defined terms share: inserted (with effect on 1 April 2008), on 6 October 2009, by section 12(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 5 list of defined terms shareholder: inserted (with effect on 1 April 2008), on 6 October 2009, by section 12(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 6 When is a transfer caused by a shareholding relationship?

General test
(1) A transfer of value from a company to a person (the recipient) is caused by a shareholding in the company if—
- (a) the recipient at any relevant time—
  - (i) holds shares in the company; or
  - (ii) is associated with a shareholder; and
  - (iii) [Repealed]
- (b) the company makes the transfer because of that shareholding of the relevant shareholder.
Indication that test met
(2) One indication that a transfer is caused by a shareholding is if the terms of the arrangement that results in the transfer are different from the terms on which the company would enter into a similar arrangement if no shareholding were involved.
Deductible distributions of producer boards
(3) Despite subsection (1), a transfer of value by a statutory producer board to a member is not caused by a shareholding if—
- (a) the transfer is a cash distribution; and
- (b) the distribution is a deduction under subpart HE (Mutual associations) or any other provision of this Act; and
- (c) the board does not choose to treat the distribution as a dividend under section OB 73 (Statutory producer boards attaching imputation credits to cash distributions).
Deductible distributions of co-operative companies
(4) Despite subsection (1), a transfer of value by a co-operative company to a shareholder is not caused by a shareholding if—
- (a) the transfer is a cash distribution; and
- (b) the distribution is a deduction under subpart HE or any other provision of this Act; and
- (c) the company does not choose to treat the distribution as a dividend under section OB 82 (When and how co-operative company makes election).
Relationship with section DV 18 and subpart HE
(5) For the purposes of subsections (3)(b) and (4)(b), subpart HE is not overridden by section DV 18 (Statutory producer boards and co-operative companies).
Defined in this Act: arrangement, associated person, company, co-operative company, deduction, share, shareholder, statutory producer board, transfer of value, trustee
Compare: 2004 No 35 s CD 5
Section CD 6(1)(a)(ii): amended, on 1 April 2010 (applying for the 2010–11 and later income years), by section 13(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 6(1)(a)(iii): repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 13(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 7 Bonus issues in lieu of dividend

Bonus issues in lieu
(1) A bonus issue in lieu is a dividend.
Amount of dividend
(2) The amount of the dividend is the money or money’s worth offered as an alternative, minus any resident withholding tax (RWT) payable in relation to the dividend.
Defined in this Act: amount, bonus issue in lieu, dividend, pay, RWT
Compare: 2004 No 35 s CD 6

CD 8 Elections to make bonus issue into dividend

Treating bonus issues as dividends
(1) A bonus issue that is not a bonus issue in lieu is a dividend if—
- (a) the bonus issue—
  - (i) is issued fully paid from reserves of the company:
  - (ii) if a dividend, would not be exempt income under section CW 10 (Dividend within New Zealand wholly-owned group) or CW 11 (Dividend of conduit tax relief holding company); and
- (b) the company chooses under this section to treat the bonus issue as a dividend.
Form of election
(2) A company chooses to treat a bonus issue as a dividend by—
- (a) resolving, when it makes the bonus issue, that it is a dividend; and
- (b) resolving, when it makes the bonus issue, the amount to be treated as a dividend, which must be more than zero; and
- (c) giving notice to the Commissioner under section 63 of the Tax Administration Act 1994 of the election and the amount.
Amount of dividend
(3) The amount of the dividend is the amount chosen by the company.
Defined in this Act: amount, bonus issue, bonus issue in lieu, Commissioner, company, dividend, notice, pay
Compare: 2004 No 35 s CD 7

CD 9 Interests in money or property of foreign unit trust

Interest absolutely vested in unit holder
(1) If a beneficial interest in money or property of a unit trust that is a foreign company vests absolutely in a unit holder, the money or property is a dividend for the unit holder.
Amount of dividend
(2) The amount of the dividend is the value of the money or property.
Defined in this Act: dividend, foreign company, unit holder, unit trust
Compare: 2004 No 35 s CD 7B

CD 10 Bonus issue by foreign unit trust instead of money or property

Interest absolutely vested in unit holder
(1) A bonus issue made to a unit holder by a unit trust that is a foreign company is a dividend for the unit holder if the issue is made under an arrangement or decision that the unit trust will make the bonus issue instead of causing a beneficial interest in money or property of the unit trust to vest absolutely in the unit holder.
Amount of dividend
(2) The amount of the dividend is the value of the money or property in which a beneficial interest would have vested in the unit holder if the bonus issue had not been made.
Defined in this Act: bonus issue, dividend, foreign company, unit holder, unit trust
Compare: 2004 No 35 s CD 7C

CD 11 Avoidance arrangements

An amount treated as a dividend under any of the following sections is a dividend:
- (a) section GB 1 (Arrangements involving dividend stripping):
- (b) section GB 23(7) (Excessive remuneration to relatives):
- (c) section GB 25 (Close company remuneration to shareholders, directors, or relatives).
Defined in this Act: amount, close company, director, dividend, relative, shareholder
Compare: 2004 No 35 ss GB 1(3), GD 3(1), (2), GD 5

CD 12 Superannuation schemes entering trust rules

When this section applies
(1) This section applies when a superannuation scheme that is treated as a company because it is a unit trust becomes a superannuation fund.
Treatment as liquidated
(2) The company is treated as liquidated immediately before the date on which the scheme becomes a superannuation fund.
Defined in this Act: company, liquidation, superannuation fund, superannuation scheme
Compare: 2004 No 35 s HH 1(9)

CD 13 Notional distributions of producer boards and co-operative companies

Notional distributions of producer boards
(1) A notional distribution of a statutory producer board is a dividend if the board determines to attach an imputation credit to the notional distribution under section OB 74 (Statutory producer boards attaching imputation credits to notional distributions).
Calculation: section OB 75
(2) The amount of the dividend is calculated under section OB 75 (Statutory producer boards’ notional distributions that are dividends).
Notional distributions of co-operative companies
(3) A notional distribution of a co-operative company is a dividend if the company determines to attach an imputation credit to the notional distribution under section OB 79 (Co-operative companies attaching imputation credits to notional distributions).
Calculation: section OB 80
(4) The amount of the dividend is calculated under section OB 80 (Co-operative companies’ notional distributions that are dividends).
Corresponding payments not dividends
(5) Section CD 33 means that a payment that corresponds to a notional distribution may not be a dividend.
Defined in this Act: amount, co-operative company, dividend, imputation credit, pay, statutory producer board
Compare: 2004 No 35 s CD 8

CD 14 Notional distributions of emigrating companies

Dividend
(1) A notional distribution of an emigrating company under section FL 2 (Treatment of emigrating companies and their shareholders) is a dividend for a shareholder of the company.
Amount of dividend
(2) The amount of the dividend is determined by a shareholder’s entitlement in the circumstances set out in section FL 2.
Defined in this Act: amount, dividend, emigrating company, shareholder
Compare: 2004 No 35 s FCB 2(b)

CD 15 Tax credits linked to dividends

Imputation and FDP credits
(1) The amount of a dividend is increased by—
- (a) an imputation credit attached to the dividend:
- (b) a foreign dividend payment (FDP) credit attached to the dividend.
Relationship with sections CD 16 and CD 17
(2) Subsection (1) is overridden by sections CD 16 and CD 17.
When subsection (1) does not apply
(3) Subsection (1) does not apply in—
- (a) Part L (Tax credits and other credits), except for subpart LP (Tax credits for supplementary dividends); or
- (b) Part M (Tax credits paid in cash); or
- (c) Part O (Memorandum accounts); or
- (d) Part R (General collection rules).
Arrangement for dividend from another company
(4) Section GB 37 (Arrangements for payment of dividend by other companies) may apply to treat an imputation credit as not being included in the amount of a dividend.
Defined in this Act: amount, arrangement, dividend, FDP credit, imputation credit, income, tax
Compare: 2004 No 35 s CD 9

CD 16 Certain dividends not increased by tax credits

When this section applies
(1) This section applies when a unit trust manager, in the ordinary course of their management activities for a unit trust,—
- (a) acquires units from unit holders under the terms on which the units were offered to potential unit holders; and
- (b) derives a dividend from the redemption or other cancellation of units in the unit trust.
Credit not included
(2) For the purposes of Parts B, C, E, and F, the dividend derived does not include an amount of imputation credit attached to it to the extent to which the dividend (exclusive of the imputation credit) recovers the price paid by the unit trust manager to acquire the units.
Relationship with section FA 3
(3) To the extent to which subsection (2) applies, section FA 3 (Recharacterisation of certain dividends: recovery of cost of shares held on revenue account) does not apply.
Some definitions
(4) In this section,—
imputation credit includes an FDP credit
unit trust manager includes—
- (a) a person nominated by the unit trust manager; or
- (b) a trustee or a manager of a group investment fund that derives category A income; or
- (c) a person nominated by the trustee or the manager of the group investment fund.
Defined in this Act: amount, cancellation, dividend, FDP credit, imputation credit, pay, tax, unit trust, unit trust manager
Compare: 2004 No 35 s CD 10

CD 17 Credit transfer notice

When this section applies
(1) This section applies when a share user under a share-lending arrangement—
- (a) derives a dividend for the original share, with an imputation credit attached; and
- (b) issues a credit transfer notice for the dividend.
Credit not included
(2) The dividend derived by the share user does not include the amount of the imputation credit.
Income
(3) The amount of the imputation credit is income derived by the share supplier when the credit transfer notice is issued.
Meaning of imputation credit
(4) In this section, imputation credit includes an FDP credit.
Defined in this Act: amount, credit transfer notice, dividend, FDP credit, imputation credit, original share, share-lending arrangement, share supplier, share user
Compare: 2004 No 35 s CD 10B

CD 18 Dividend reduced if foreign tax paid on company’s income

When this section applies
(1) This section applies when a person—
- (a) derives a dividend from a company that is a foreign company; and
- (b) has a liability under the laws of a country or territory outside New Zealand for income tax on income of the company corresponding to the liability that the person would have under the laws of New Zealand for income tax on income of the company if the company were a partnership in which the person were a partner; and
- (c) pays the income tax; and
- (d) provides to the Commissioner upon request, in the time allowed by the Commissioner, sufficient information to satisfy the Commissioner as to the amount of income tax paid.
Amount of dividend reduced
(2) The amount of the dividend is reduced by the greater of zero and the amount calculated using the formula—
total tax paid − earlier reductions.
Definition of items in formula
(3) In the formula,—
- (a) total tax paid is the total amount of income tax on income of the company that the person has paid in the country by the time that the person derives the dividend:
- (b) earlier reductions is the total amount of reductions under this section that, by the time that the person derives the dividend, have affected other dividends derived by the person from the company.
Defined in this Act: Commissioner, company, dividend, foreign company, income, income tax, New Zealand, pay
Compare: 2004 No 35 s CD 10C

CD 19 Foreign tax credits and refunds linked to dividends

Foreign tax credits
(1) If a double tax agreement gives a person a tax credit in a foreign country when they derive a dividend from that country, the amount of the dividend is increased by the tax credit.
Foreign tax refunds
(2) When a person who has derived a dividend from outside New Zealand also derives a refund of income tax of a foreign country, the refund is treated as a dividend if—
- (a) the company paying the dividend was entitled to deduct the tax from the dividend; and
- (b) the person was not personally liable to pay the tax.
Defined in this Act: amount, company, dividend, double tax agreement, income tax, New Zealand, pay, tax
Compare: 2004 No 35 s CD 11

CD 20 Benefits of shareholder-employees or directors

Unclassified fringe benefits
(1) A non-cash benefit provided by a company to an employee is a dividend if—
- (a) the benefit is an unclassified benefit; and
- (b) the employee is a shareholder in the company; and
- (c) the company chooses, under section CX 17(2) (Benefits provided to employees who are shareholders or investors), to treat the benefit as a dividend.
Non-executive directors’ non-cash benefits
(2) A non-cash benefit provided by a company to a non-executive director of the company is a dividend if the director is a shareholder in the company, even if the benefit is provided solely because the director is a non-executive director.
Other shareholder-employee benefits
(3) In any other case of a non-cash benefit provided by a company to a person who is both an employee and a shareholder, the benefit is not a dividend if—
- (a) the application of section CX 17(2) means it is a fringe benefit; and
- (b) section CD 32 accordingly excludes it from being a dividend.
Meaning of non-executive director
(4) In this section, non-executive director means a person whose only services to the company as an employee are the formal occupation of the role of director and compliance with the associated statutory obligations.
Defined in this Act: company, director, dividend, employee, fringe benefit, non-executive director, shareholder, unclassified benefit
Compare: 2004 No 35 s CD 12

CD 21 Attributed repatriations from controlled foreign companies

[Repealed]
Section CD 21: repealed (with effect on 30 June 2009), on 6 October 2009, by section 14(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

What is not a dividend?

CD 22 Returns of capital: off-market share cancellations

When this section applies
(1) This section applies when a company pays an amount to a shareholder because of the off-market cancellation of a share in the company, other than on liquidation of the company.
Ordering rule
(2) The amount is not a dividend to the extent to which it is less than or equal to the available subscribed capital per share calculated under the ordering rule, if—
- (a) 1 of the bright line tests in subsection (3) is met; and
- (b) the company is not an unlisted trust that has chosen the slice rule for the share under subsection (4); and
- (c) the anti-avoidance rule in subsection (6) does not apply.
Bright line tests
(3) The bright line tests referred to in subsection (2)(a) are as follows:
- (a) the cancellation is part of a pro rata cancellation that results in a fifteen percent capital reduction for the company:
- (b) the cancellation is part of a pro rata cancellation that results in a ten percent capital reduction for the company and the Commissioner has given a notice under subsection (8):
- (c) the cancellation is not part of a pro rata cancellation and results in the shareholder suffering a fifteen percent interest reduction:
- (d) the company is an unlisted trust and the cancellation is not part of a pro rata cancellation:
- (e) the share is a non-participating redeemable share.
Unlisted trusts choosing slice rule
(4) If the company is an unlisted trust, it may issue a share on terms that the ordering rule does not apply and that instead the slice rule applies to the cancellation. If this happens, the amount paid is not a dividend to the extent to which it is less than or equal to the available subscribed capital per share calculated under the slice rule (but still subject to the anti-avoidance rule in subsection (6)).
Calculation concessions for foreign unlisted widely-held trusts
(5) If a company is an unlisted widely-held trust not resident in New Zealand and a shareholder cannot obtain sufficient information to calculate the available subscribed capital per share under the ordering rule,—
- (a) the share is treated as if it were issued under subsection (4) on terms that the slice rule applies; and
- (b) the available subscribed capital under the slice rule is—
  - (i) the amount paid for the issue of the share, if subparagraph (ii) does not apply; or
  - (ii) the value of the money or property in which a beneficial interest would have vested in the shareholder had the share not been issued, if the share is a taxable bonus issue under paragraph (d) of the definition of the term.
Overriding anti-avoidance rule
(6) Neither subsection (2) nor (4) excludes an amount paid by a company on cancellation of a share from being a dividend if any part of the payment is in lieu of the payment of a dividend.
Factors relevant in applying anti-avoidance rule
(7) For the purposes of applying subsection (6), the following factors must be considered:
- (a) the nature and amount of dividends paid by the company before or after the cancellation; and
- (b) the issue of shares in the company after the cancellation; and
- (c) the expressed purpose or purposes of the cancellation; and
- (d) any other relevant factor.
Commissioner notifying view
(8) If no part of a payment on cancellation of a share is in lieu of the payment of a dividend, the Commissioner may give notice to the company that subsection (6) does not apply to the cancellation.
Some definitions
(9) In this section,—
counted associate means—
- (a) a person associated with the shareholder other than merely by virtue of being a relative; or
- (b) a spouse, civil union partner or de facto partner, or minor child of the shareholder, or a trustee of a trust under which a spouse, civil union partner or de facto partner, or minor child of the shareholder has benefited or is eligible to benefit
fifteen percent capital reduction means the circumstance in which the total amount paid by the company on account of the cancellation (or on account of any other pro rata cancellation of participating shares in the company occurring at the same time) is at least 15% of the market value of all participating shares in the company at the time the company first gave notice to shareholders of the cancellation
fifteen percent interest reduction means the circumstance in which, immediately after and as a result of the cancellation (together with any other cancellation of participating shares in the company occurring at the same time),—
- (a) the total direct voting interests in the company of the shareholder and any counted associates is 85% or less of their total direct voting interests in the company immediately before the cancellation; and
- (b) if at the time of the cancellation a market value circumstance exists, the total direct market value interests in the company of the shareholder and any counted associates is 85% or less of their total direct market value interests immediately before the cancellation
non-participating redeemable share means a share that meets the following conditions
- (a) the share is issued, under the company’s constitution or establishing legislation, on terms that involve the share being required or allowed to be redeemed or repaid before the company is liquidated; and
- (b) the share is—
  - (i) a redeemable share under section 68 of the Companies Act 1993 or an equivalent provision of foreign law; or
  - (ii) issued under 1 of New Zealand’s Acts relating to co-operative companies; or
  - (iii) subject to section FA 2 (Recharacterisation of certain debentures) and FZ 1 (Treatment of interest payable under debentures issued before certain date) or section FA 2B(2) (Stapled debt securities); or
  - (iv) a unit in a unit trust that is not a widely-held trust; and
- (c) the share is either a fixed-rate share or a share for which the amount payable on cancellation is no more than the available subscribed capital per share calculated under the slice rule; and
- (d) the shareholder does not have shareholder decision-making rights in relation to the share except—
  - (i) a protective right; or
  - (ii) if the company is subject to 1 of New Zealand’s Acts relating to co-operative companies
participating share means a share that is not a non-participating redeemable share
protective right means a shareholder decision-making right that—
- (a) arises only if the shareholder’s position may be altered to the shareholder’s detriment or if the company defaults on its obligations under the terms of the share; and
- (b) is granted to the shareholder only to assist the shareholder to prevent the alteration or to remedy the default; and
- (c) when the share is issued is not expected to arise
ten percent capital reduction means the circumstance in which the total amount paid by the company on account of the cancellation, or paid on account of any other pro rata cancellation of participating shares in the company occurring at the same time, is at least 10% of the market value of all participating shares in the company at the time the company first gave notice to shareholders of the cancellation
unlisted trust means a unit trust or group investment fund, the units or interests in which are not quoted on the official list of a recognised exchange.
Defined in this Act: amount, associated person, available subscribed capital, cancellation, Commissioner, company, co-operative company, counted associate, direct market value interest, direct voting interest, dividend, fifteen percent capital reduction, fifteen percent interest reduction, fixed-rate share, group investment fund, liquidation, market value circumstance, New Zealand, non-participating redeemable share, notice, off-market cancellation, ordering rule, participating share, pay, pro rata cancellation, protective right, recognised exchange, relative, resident in New Zealand, share, shareholder, shareholder decision-making right, slice rule, taxable bonus issue, ten percent capital reduction, trustee, unit trust, unlisted trust, unlisted widely-held trust, widely-held trust
Compare: 2004 No 35 s CD 14
Section CD 22(9) counted associate paragraph (b): amended, on 1 April 2010 (applying for the 2010–11 and later income years), by section 15(1)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 22(9) non-participating redeemable share paragraph (b)(iii): amended (with effect on 1 April 2008), on 6 October 2009, by section 15(1)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 23 Ordering rule and slice rule

Ordering rule
(1) Under the ordering rule, the available subscribed capital per share is calculated for a share using the formula—
Definition of items in formula
(2) In the formula in subsection (1),—
- (a) available subscribed capital of class is the available subscribed capital, of all shares of the same class as the share, at the relevant time for the calculation:
- (b) shares being cancelled of class is the number of shares of the same class as the share, including the share, being cancelled at the time.
Slice rule
(3) Under the slice rule, the available subscribed capital per share is calculated for a share using the formula—
Definition of items in formula
(4) In the formula in subsection (3),—
- (a) available subscribed capital of class is the available subscribed capital, of all shares of the same class as the share, at the relevant time for the calculation:
- (b) shares of class is the number of shares of the same class as the share, including the share, on issue at the time.
Amount when foreign company information inadequate
(5) Despite subsections (2) to (4), the available subscribed capital per share calculated under the ordering rule is zero if—
- (a) the company is not resident in New Zealand; and
- (b) the relevant shareholder cannot obtain sufficient information to calculate the actual available subscribed capital per share using the relevant rule.
Defined in this Act: available subscribed capital, cancellation, foreign company, ordering rule, resident in New Zealand, share, shareholder, shares of the same class, slice rule
Compare: 2004 No 35 s CD 15

CD 24 Returns of capital: on-market share cancellations

Companies acquiring own shares
(1) An amount paid by a company in acquiring any of its shares in an on-market cancellation is not a dividend.
When excess amount relevant
(2) Despite subsection (1), any excess of the amount paid over the available subscribed capital per share calculated under the ordering rule—
- (a) is treated as a dividend and not a return of capital when applying—
  - (i) section CD 29:
  - (ii) section CD 43(2)(c):
  - (iii) section GA 1(4) (Commissioner’s power to adjust); and
- (b) gives rise to an imputation credit account debit under section OB 42 (ICA on-market cancellation).
Defined in this Act: amount, available subscribed capital, company, dividend, imputation credit account, on-market cancellation, ordering rule, pay, share
Compare: 2004 No 35 s CD 16

CD 25 Treasury stock acquisitions

Treasury stock generally
(1) An amount paid by a company in acquiring any of its shares is not a dividend if—
- (a) the acquisition is treated as not resulting in the cancellation of the share, under section 67A(1) of the Companies Act 1993 or section 24 of the Co-operative Companies Act 1996 (each of which relates to treasury stock); and
- (b) the acquisition is not part of a pro rata cancellation or something that is in substance a pro rata cancellation.
Reversion to on-market cancellation treatment
(2) Subsections (4) to (6) apply in the case of an acquisition of a share to which subsection (1) or section CD 17(1) of the Income Tax Act 2004 or section CF 3(1)(d) or (da) of the Income Tax Act 1994 applies if,—
- (a) before the first anniversary of the acquisition, the company cancels the share; or
- (b) at the first anniversary, the company has failed to transfer a share of the same class in an arm’s length transfer, except if the company is established under New Zealand co-operative company legislation; or
- (c) after the first anniversary, the company, which is established under New Zealand co-operative company legislation, cancels the share.
Requirement for arm’s length transfers
(3) When subsection (2)(b) is applied,—
- (a) a transfer is arm’s length only if it is—
  - (i) to a person not associated with the company; or
  - (ii) in a transaction that occurs on a recognised exchange, through a broker or some other agent independent of the company, and that is not preceded by any arrangement between the transferee and the company for the transfer; and
- (b) each arm’s length transfer of a share is taken into account only in relation to a single share acquisition to which subsection (1) has applied.
Reduction of available subscribed capital
(4) If subsection (2) applies, then, with effect from the cancellation or the first anniversary, depending on which first causes subsection (2) to apply, the available subscribed capital of the class of the share is reduced by the lesser of—
- (a) the amount paid to the shareholder on the acquisition; and
- (b) the available subscribed capital per share calculated under the ordering rule and, in the case of the first anniversary, calculated as if the share and any other shares to which this subsection applies on that date were cancelled on that date.
Imputation credit account debit
(5) If subsection (2) applies, then, with effect from the date of the acquisition by the company, section OB 42 (ICA on-market cancellation) applies as if the original acquisition were an on-market cancellation but item “ASC per share excess” of the formula in section OB 42 were equal to only the excess of the amount received by the shareholder over the reduction described in subsection (4).
Relief from imputation penalty tax
(6) No imputation penalty tax is imposed under section 140B of the Tax Administration Act 1994 (nor any late payment penalty imposed under that Act in relation to the imputation penalty tax) if it would not have arisen had subsection (5) applied only with effect from the date of cancellation or first anniversary, depending on which first causes subsection (2) to apply.
Defined in this Act: agent, amount, arrangement, associated person, available subscribed capital, cancellation, company, co-operative company, dividend, imputation credit account, imputation penalty tax, New Zealand, on-market cancellation, ordering rule, pay, pro rata cancellation, recognised exchange, share, shareholder
Compare: 2004 No 35 s CD 17
Section CD 25(4): substituted (with effect on 1 April 2008), on 6 October 2009, by section 16(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 26 Capital distributions on liquidation or emigration

When this section applies
(1) This section applies when a shareholder—
- (a) is paid an amount in relation to a share on the liquidation of the company:
- (b) is treated under section FL 2 (Treatment of emigrating companies and their shareholders) as being paid an amount in relation to a share in the company.
Return of subscribed capital or capital gains
(2) The amount paid is a dividend only to the extent to which it is more than—
- (a) the available subscribed capital per share calculated under the ordering rule; and
- (b) the available capital distribution amount calculated under section CD 44.
Statutory producer board capital levies
(3) If the company is a statutory producer board, the amount is not a dividend to the extent to which it is a return of a levy charged specifically for capital development.
Non-deductible capital
(4) An amount that is not a dividend as a result of subsection (3) is nevertheless treated as a return of capital for the purposes of the capital limitation.
Defined in this Act: amount, available capital distribution amount, available subscribed capital, capital limitation, company, dividend, emigrating company, levy, liquidation, ordering rule, pay, share, shareholder, statutory producer board
Compare: 2004 No 35 s CD 18

CD 27 Property made available intra-group

When this section applies
(1) This section applies when—
- (a) a transfer of value is made by a company (the first company) to another company (the associated company); and
- (b) in the absence of this section, the transfer would be a dividend under section CD 6(1)(a)(ii) because the associated company is associated with a shareholder in the first company.
Intra-group property arrangements worth $10,000 or less
(2) The transfer of value is not a dividend if—
- (a) the transfer consists of making property available for less than market value; and
- (b) the transfer is not a loan; and
- (c) in the income year of the first company in which the transfer occurs, the total amount of transfers of value by the first company to the associated company that would be dividends for the year in the absence of this section, is $10,000 or less.
Downward transfers of value
(3) The transfer of value is also not a dividend if—
- (a) either—
  - (i) the first company has a voting interest in the associated company; or
  - (ii) the first company is associated with a company (the parent company) that has a voting interest in the associated company and that could have received the transfer of value without the transfer being assessable income or non-resident passive income; and
- (b) the associated company does not have a voting interest in the first company; and
- (c) no person, other than the parent company, has both—
  - (i) a voting interest or, if there is a market value circumstance in relation to either the first company or the associated company, a market value interest in the first company; and
  - (ii) a voting interest or, if there is a market value circumstance in relation to either the first company or the associated company, a market value interest in the associated company, of more than 10%.
Relationship with section FA 3
(4) Subsection (3) does not apply to a transfer of value that is subject to section FA 3 (Recharacterisation of certain dividends: recovery of cost of shares held on revenue account).
Rules for identifying voting interests
(5) For the purposes of subsection (3)(a) and (b),—
- (a) for the purposes of determining if a company has a voting interest in another company, the look-through rule in section YC 4 (Look-through rule for corporate shareholders) does not apply to treat the initial company’s voting interest as held by its shareholders or anyone else; and
- (b) a zero voting interest is not a voting interest.
Rules for identifying voting and market value interests
(6) For the purposes of subsection (3)(c),—
- (a) for the purposes of determining the extent to which a person, other than the parent company, has a voting interest or market value interest in the first company or the associated company, the look-through rule in section YC 4 does not apply to treat the person’s voting interest or market value interest as held by the person’s shareholders or anyone else unless the person treated as holder is the parent company; and
- (b) for the purposes of determining the extent to which a person, other than the parent company, has a voting interest or market value interest of more than 10% in the associated company, the look-through rule in section YC 4 does not apply to treat a voting interest or market value interest of the first company or the parent company in the associated company as held by their respective shareholders or anyone else; and
- (c) a zero voting interest is not a voting interest and a zero market value interest is not a market value interest.
Defined in this Act: amount, assessable income, associated person, company, dividend, income year, loan, market value circumstance, market value interest, non-resident passive income, shareholder, tax year, transfer of value, trustee, voting interest
Compare: 2004 No 35 s CD 19
Section CD 27(1)(b): substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 17(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 27(3)(a)(ii): substituted (with effect on 30 June 2009), on 6 October 2009, by section 17(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 27 list of defined terms FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 17(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 28 Transfers of certain excepted financial arrangements within wholly-owned groups

When section ED 2 (Transfers of certain excepted financial arrangements within wholly-owned groups) applies to a transfer of an excepted financial arrangement within a wholly-owned group of companies, the transfer does not give rise to a dividend.
Defined in this Act: dividend, excepted financial arrangement, wholly-owned group of companies
Compare: 2004 No 35 s CD 20

CD 29 Non-taxable bonus issues

A non-taxable bonus issue is not a dividend.
Defined in this Act: dividend, non-taxable bonus issue
Compare: 2004 No 35 s CD 21

CD 30 Transfer by unit trust of legal interest after beneficial interest vests

If money or property of a unit trust is a dividend under section CD 9 for a unit holder, a transfer to the unit holder of the legal interest in the money or property is not a dividend.
Defined in this Act: dividend, unit holder, unit trust
Compare: 2004 No 35 s CD 21B

CD 31 Flat-owning companies

Occupation rights
(1) If a flat-owning company makes residential property available to a person, that is not a dividend.
Meaning of flat-owning company
(2) In this section, flat-owning company means a company—
- (a) whose constitution provides that every registered shareholder is entitled to the use of a specific residential property in New Zealand owned by the company; and
- (b) whose only significant assets are residential properties available for use by specific shareholders and funds reserved for meeting the company’s costs.
Defined in this Act: company, dividend, flat-owning company, New Zealand, shareholder
Compare: 2004 No 35 s CD 22

CD 32 Employee benefits

FBT rules
(1) A fringe benefit subject to fringe benefit tax is not a dividend.
Board
(2) An amount that is employment income under section CE 1(1)(c) (Amounts derived in connection with employment) is not a dividend.
Defined in this Act: amount, dividend, employment income, FBT rules, fringe benefit, fringe benefit tax
Compare: 2004 No 35 s CD 23
Section CD 32(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 18 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 33 Payments corresponding to notional distributions of producer boards and co-operative companies

Statutory producer board payments
(1) An amount paid by a statutory producer board to a person in relation to an income year is not a dividend if—
- (a) the person was a member of the board at some time during the income year; and
- (b) unless the Commissioner allows otherwise, the amount is calculated on the basis of the member’s share of—
  - (i) the total produce transactions of members with the board during the income year; or
  - (ii) the total levies payable by members to the board for the income year; and
- (c) the amount corresponds to a notional distribution amount treated as a dividend under section CD 13(1).
Co-operative company payments
(2) An amount paid by a co-operative company to a person in relation to an income year is not a dividend if—
- (a) the person was a shareholder of the company at some time during the income year; and
- (b) the amount is calculated on the basis of the shareholder’s share of the total produce transactions of shareholders with the company during the income year; and
- (c) the amount corresponds to a notional distribution amount treated as a dividend under section CD 13(3).
Non-deductible capital
(3) An amount that is not a dividend as a result of this section is nevertheless treated as a return of capital for the purposes of the capital limitation.
Defined in this Act: amount, capital limitation, Commissioner, co-operative company, dividend, income year, levy, member, pay, produce transactions, producer board, shareholder, statutory producer board,
Compare: 2004 No 35 s CD 24

CD 34 Distribution to member of co-operative company based on member’s transactions

Election by co-operative company that distribution not be dividend
(1) A co-operative company may choose that an amount of a distribution (the trading distribution) to a member of the co-operative company is not a dividend if—
- (a) the trading distribution is made by the co-operative company, or by a company (the subsidiary company) in which the co-operative company owns voting interests equal to 100%; and
- (b) the requirements of subsection (2) are met.
Further requirements for election
(2) A co-operative company may make an election under subsection (1) if—
- (a) the co-operative company is resident in New Zealand for the period to which the trading distribution relates; and
- (b) the company making the distribution is resident in New Zealand for the period to which the trading distribution relates; and
- (c) the co-operative company believes on reasonable grounds that the member at the time of the distribution—
  - (i) is resident in New Zealand:
  - (ii) has a fixed establishment in New Zealand; and
- (d) the value of the trading distribution is determined by the value for the period of transactions between the member and the co-operative company or subsidiary company that meet the requirements of subsection (3); and
- (e) the number of shares in the co-operative company held by the member determines the value of the transactions with the co-operative company or subsidiary company that the member has a right to enter.
Transactions must involve trading stock
(3) A transaction must—
- (a) be the sale and purchase of trading stock of the vendor that is not intangible property; and
- (b) not be subject to section CB 2 (Amounts received on disposal of business assets that include trading stock).
Amount excluded from being dividend
(4) The amount of a trading distribution that is excluded under subsection (1) from being a dividend for a member is the lesser of the following:
- (a) the amount of the trading distribution:
- (b) the amount of the trading distribution relating to shares in the co-operative company that the member acquires for the purpose of obtaining the right to enter transactions with the co-operative company or subsidiary company.
Form of election
(5) The co-operative company makes an election under subsection (1) for an income year containing the period to which a trading distribution relates by giving the Commissioner notice of the election when providing the company’s return of income for the tax year to which the income year corresponds.
Period of election
(6) The election applies for distributions in the income year referred to in subsection (5) and for distributions in later income years.
Defined in this Act: company, co-operative company, income year, resident in New Zealand, shareholder, tax year, trading stock
Compare: 2004 No 35 s CD 24B
Section CD 34 list of defined terms foreign-sourced amount: 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).

CD 35 Resident’s restricted amalgamations

An amount derived by an amalgamated company on a resident’s restricted amalgamation from an amalgamating company that ends its existence on the amalgamation is not a dividend if it arises from—
- (a) the amalgamated company acquiring property of the amalgamating company; or
- (b) the amalgamated company being relieved of an obligation owed to the amalgamating company.
Defined in this Act: amalgamated company, amalgamating company, amalgamation, amount, dividend, resident’s restricted amalgamation
Compare: 2004 No 35 s CD 25

CD 36 Foreign investment fund income

Amount not dividend
(1) An amount paid by a company to a person is not a dividend if,—
- (a) at the time the person derives the amount, the person’s interest in the company is an attributing interest, or would have been if the company had not been liquidated; and
- (b) the person calculates their foreign investment fund (FIF) income or loss in relation to the interest and the period in which the amount is paid under—
  - (i) the comparative value method:
  - (ii) the deemed rate of return method:
  - (iii) the cost method:
  - (iv) the fair dividend rate method.
- (c) [Repealed]
Exclusion for interests in grey list companies
(2) Subsection (1)(b)(iv) does not apply if—
- (a) the FIF is a grey list company; and
- (b) the person holds a direct income interest of 10% or more in the FIF at the beginning of the income year in which the period falls.
Application of rule for certain managed funds
(3) Subsection (2) does not apply if—
- (a) the person is a portfolio investment entity, an entity eligible to be a portfolio investment entity, or a life insurance company; and
- (b) the FIF is a foreign PIE equivalent.
Defined in this Act: amount, attributing interest, company, comparative value method, cost method, deemed rate of return method, direct income interest, dividend, fair dividend rate method, FIF income, foreign investment fund, foreign PIE equivalent, grey list company, income year, life insurance, liquidation, loss, pay, portfolio investment entity
Compare: 2004 No 35 s CD 26
Section CD 36(1) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 19(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 36(b): substituted, on 1 April 2008, by section 315(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CD 36(1)(b)(iv): amended (with effect on 1 April 2008), on 6 October 2009, by section 19(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 36(1)(c): repealed (with effect on 1 April 2008), on 6 October 2009, by section 19(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 36(c): added, on 1 April 2008, by section 315(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CD 36(2) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 19(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 36(2): added (with effect on 1 April 2008), on 6 October 2009, by section 19(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 36(3) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 19(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 36(3): added (with effect on 1 April 2008), on 6 October 2009, by section 19(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 36(3)(b): substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 19(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 36 list of defined terms direct income interest: inserted (with effect on 1 April 2008), on 6 October 2009, by section 19(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 36 list of defined terms foreign investment vehicle: repealed, on 1 April 2010, by section 19(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 36 list of defined terms foreign PIE equivalent: inserted, on 1 April 2010, by section 19(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 36 list of defined terms grey list company: inserted, on 1 April 2008, by section 315(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CD 36 list of defined terms income year: inserted, on 1 April 2008, by section 315(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CD 36 list of defined terms life insurance: inserted (with effect on 1 April 2008), on 6 October 2009, by section 19(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 36 list of defined terms portfolio investment entity: added (with effect on 1 April 2008), on 6 October 2009, by section 19(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 37 Maori authority distributions

A Maori authority distribution is not a dividend except for the purposes of section CW 10 (Dividend within New Zealand wholly-owned group).
Defined in this Act: dividend, Maori authority, wholly-owned group
Compare: 2004 No 35 s HI 4(2)

Calculation rules

CD 38 General calculation rule for transfers of value

Difference in value
(1) The amount of a dividend that is a transfer of value from a company to a person is calculated using the formula—
value from company − value from person.
Definition of items in formula
(2) In the formula,—
- (a) value from company is the market value of the money or money’s worth that the company provides to the person:
- (b) value from person—
  - (i) is the market value of the money or money’s worth, if any, that the person provides to the company as consideration for the transfer; and
  - (ii) excludes any amount that is attributable merely to the holding or giving up of rights as a shareholder in the company.
Relationship with sections CD 39 to CD 42
(3) This section is overridden by sections CD 39 to CD 42.
Defined in this Act: amount, company, dividend, shareholder, transfer of value
Compare: 2004 No 35 s CD 27

CD 39 Calculation of amount of dividend when property made available

How this section applies
(1) This section applies to determine the amount of a dividend that arises under section CD 3 because a company makes property available to a person.
Amounts calculated quarterly
(2) The amount of the dividend is calculated for each quarter during which the property is made available.
Date when amounts treated as paid
(3) The amount of the dividend calculated for a quarter is treated as being paid by the company to the person and as being derived by the person 6 months after the end of the company’s income year. However, if the company gives notice to the shareholder on an earlier date of the amount of the dividend for that quarter, the amount is treated as being paid and derived on that earlier date instead.
Using FBT rules
(4) Unless the property made available is a loan, the amount of the dividend for each quarter is the value of the fringe benefit for that quarter calculated under the fringe benefit tax (FBT) rules as if—
- (a) making the property available were the provision of a fringe benefit by the company to an employee in relation to employment, despite anything in sections CX 6 to CX 38 (which relate to fringe benefits); and
- (b) the company were not to choose to pay fringe benefit tax on an income year basis under section RD 60 (Close company option).
Using difference from benchmark rate
(5) If the property made available is a loan, the amount of the dividend for each quarter is the excess, if any, of interest, calculated for the quarter on the basis of the daily balance of the loan and the benchmark rate specified in subsections (6) to (8), over the actual amount of interest accruing on the loan in the quarter. However, the company may choose instead to calculate the dividend as the excess of the benchmark interest rate amount over the amount of income accruing to the company in the quarter calculated under the yield to maturity method.
Benchmark rate: fringe benefit tax rate for certain loans
(6) For the purposes of subsection (5), the benchmark rate of interest is the prescribed rate of interest if—
- (a) all amounts payable to the company for the loan are expressed in New Zealand dollars; and
- (b) either the borrower is not a company or, if the borrower is another company, the company making the loan notifies the Commissioner that this subsection is to apply to the loan and the quarter.
Setting benchmark rate
(7) For the purposes of subsection (5), the benchmark rate is the rate set by the Commissioner if—
- (a) all amounts payable to the company in relation to the loan are payable in a single currency other than New Zealand dollars; and
- (b) the Commissioner has set a benchmark rate for that currency and the quarter; and
- (c) either the borrower is not a company or, if the borrower is another company, the company making the loan notifies the Commissioner that this subsection is to apply to the loan and the quarter.
Default benchmark rate
(8) For the purposes of subsection (5), if neither subsection (6) nor (7) applies, the benchmark rate of interest is a market rate determined at the end of the quarter for a loan made on the same terms between persons at arm’s length.
Daily loan balance: certain repayments backdated
(9) For the purposes of subsection (5), in determining the daily balance of a loan during a tax year, an amount repaid during the tax year is treated as having been applied in repayment of the loan at the start of the company’s tax year or, if later, the day the loan was made, if—
- (a) the amount is repaid by applying any salary, wages, extra pay, dividends, or interest payable by the company to the borrower; and
- (b) the amount payable by the company is income of the borrower in the tax year or an earlier tax year; and
- (c) the amount payable by the company is payable without any amount of tax being withheld and paid under the PAYE rules, the RWT rules, or the NRWT rules.
Daily loan balance: company nominating amount
(10) Subject to subsection (9), for the purposes of subsection (5), the daily balance of the loan for a tax year is treated as being equal to the notional balance chosen under subsection (11) by the company making the loan if—
- (a) the borrower is a company; and
- (b) the loan is a variable principal debt instrument; and
- (c) the company making the loan notifies the Commissioner that this subsection applies for the loan and the tax year; and
- (d) the amount of the dividend calculated as a result for the loan, the borrower, and the tax year is no more than 30% greater or less than the amount that would be calculated if this section did not apply.
Notional balance options
(11) The notional balance referred to in subsection (10) is whichever of the following is chosen by the company making the loan and notified to the Commissioner:
- (a) the average of the outstanding balances of the loan at the end of each month in the company’s tax year:
- (b) the average of—
  - (i) the outstanding balance of the loan at the start of the tax year or the first time during the tax year at which the loan exists, whichever is later; and
  - (ii) the outstanding balance of the loan at the end of the tax year or the last time during the tax year at which the loan exists, whichever is earlier.
Notice generally by tax returns
(12) Reference in this section to a company notifying the Commissioner is a reference to—
- (a) a notice given to the Commissioner with the company’s return of income for the relevant tax year; or
- (b) if no return is required, a notice given by the date on which a return would be required to be filed for the tax year if a return had been required.
Attributed repatriation dividends
(13) No amount of dividend arises under section CD 4 as a result of any difference between the interest, if any, payable by a person to a CFC in an accounting period of the CFC under a loan and the benchmark rate of interest specified in any of subsections (6) to (8) if—
- (a) the outstanding balance of the loan at the end of the accounting period is taken into account under sections CD 46 to CD 52 in calculating the New Zealand repatriation amount of the CFC for the accounting period; and
- (b) as a result, the person derives a dividend under section CD 21.
When loan disregarded
(14) Subsection (13) does not apply to the extent to which the loan is a loan to which—
- (a) section CD 50(11) applies, meaning that the loan is disregarded for the accounting period; or
- (b) section CZ 10(4) (Transitional relief for calculation of attributed repatriation dividends: 2 July 1992) applies, meaning that the loan is effectively disregarded for the accounting period.
Defined in this Act: accounting period, amount, amount of tax, attributed repatriation, CFC, Commissioner, company, dividend, employee, extra pay, FBT rules, fringe benefit, fringe benefit tax, income, income year, interest, loan, New Zealand, New Zealand repatriation amount, notice, notify, NRWT rules, pay, PAYE rules, prescribed rate of interest, quarter, return of income, RWT rules, shareholder, tax year, variable principal debt instrument
Compare: 2004 No 35 s CD 28

CD 40 Adjustment if dividend recovered by company

When dividends recovered
(1) If a company recovers a dividend from a shareholder under section 56 of the Companies Act 1993 or an equivalent provision of foreign law, this section applies to the extent necessary to ensure that—
- (a) the recovered dividend and any attached imputation credit or FDP credit are disregarded for the purposes of this Act; and
- (b) the resulting refunds are made.
Amendment of assessments
(2) Section 113B of the Tax Administration Act 1994 requires the Commissioner to amend assessments if given notice of the recovery.
Refunds
(3) If the Commissioner is given notice of the recovery, the Commissioner must refund any relevant—
- (a) income tax, FDP, or FDP penalty tax of the shareholder; and
- (b) non-resident withholding tax (NRWT) or resident withholding tax (RWT) of the company.
Relationship with subpart RM
(4) The refund is made despite sections RM 2 to RM 6 (which relate to refunds of excess tax) and RM 18 to RM 21 (which relate to limits on refunds), but subject to the other provisions of this Act.
Adjustments to accounts
(5) A credit or debit (as applicable) arises as at the date of recovery, and must be recorded in—
- (a) the imputation credit account of the company; or
- (b) if the shareholder is an imputation credit account (ICA) company or foreign dividend payment account (FDPA) company, the imputation credit account or FDP account of the shareholder.
Defined in this Act: assessment, Commissioner, company, dividend, FDP, FDP account, FDP credit, FDP penalty tax, FDPA company, ICA company, imputation credit, imputation credit account, income tax, notice, NRWT, RWT, shareholder
Compare: 2004 No 35 s CD 29

CD 41 Adjustment if amount repaid later

When released debt repaid
(1) If the release by a company of a shareholder’s obligation to pay money to the company has been treated as a dividend and the released amount is later repaid to the company, this section applies to the extent necessary to ensure that—
- (a) the dividend is disregarded for the purposes of this Act; and
- (b) the resulting refunds are made.
When close company expenditure repaid
(2) If any expenditure of a close company that shareholders in the company believed on reasonable grounds was only for the benefit of the company is nevertheless a dividend and the expenditure is later repaid to the company, this section applies to the extent necessary to ensure that—
- (a) the dividend is disregarded for the purposes of this Act; and
- (b) the resulting refunds are made.
Amendment of assessments
(3) Section 113B of the Tax Administration Act 1994 requires the Commissioner to amend assessments if given notice of the repayment.
Refunds
(4) If the Commissioner is given notice of the repayment, the Commissioner must refund any relevant tax of the shareholder.
Relationship with sections RM 2 to RM 6
(5) The refund is made despite sections RM 2 to RM 6 (which relate to refunds of excess tax), but subject to the other provisions of this Act.
Repayment of pre-1992 loans
(6) Subsection (1) also applies to the repayment of an amount treated as a dividend under section 4(1)(b) of the Income Tax Act 1976 (as it applied before 1 April 1992 to give the Commissioner a discretion to treat loans as dividends), as if the amount repaid were a released amount that is repaid.
Defined in this Act: amount, assessment, close company, Commissioner, company, dividend, notice, pay, shareholder, tax
Compare: 2004 No 35 s CD 30

CD 42 Adjustment if additional consideration paid

Differences from market value
(1) If a dividend from a company arises because of a difference between the market value of property provided by or to the company and the consideration paid for it, the dividend is disregarded for the purposes of this Act if the conditions in subsections (2) to (4) are met.
Market value
(2) The consideration paid must have been an amount that the company considered was the market value, having taken reasonable steps at the time of the transaction to ascertain a market value.
Difference paid
(3) The recipient of the dividend must have later paid to the company—
- (a) sufficient additional consideration to reflect the actual market value of the property at the time of the transaction; or
- (b) a refund of any excess consideration paid by the company.
Accounts adjusted
(4) Any necessary adjustments must have been made to the accounts of the company and the recipient for the additional consideration or refund.
Defined in this Act: amount, company, dividend, pay
Compare: 2004 No 35 s CD 31

CD 43 Available subscribed capital (ASC) amount

Formula for calculating amount of available subscribed capital
(1) For a share (the share) in a company at any relevant time (the calculation time), the amount of available subscribed capital is calculated using the formula—
1 July 1994 balance + subscriptions – returns.
Definition of items in formula
(2) In the formula in subsection (1),—
- (a) 1 July 1994 balance is,—
  - (i) if the company existed before 1 July 1994, the amount calculated under subsection (3); and
  - (ii) in any other case, zero:
- (b) subscriptions, subject to subsections (6) to (21), is the total amount of consideration that the company received, after 30 June 1994 and before the calculation time, for the issue of shares of the same class (the class) as the share:
- (c) returns, subject to subsections (22) and (23), is the total amount of consideration that the company paid, after 30 June 1994 and before the calculation time, on the cancellation of shares in the relevant class and that was not a dividend because of section CD 22 or CD 24 or a corresponding provision of an earlier Act.
1 July 1994 balance
(3) The 1 July 1994 balance is calculated using the formula—
Definition of items in formula
(4) In the formula in subsection (3),—
- (a) paid-up capital, subject to subsection (5) relating to bonus issues, is the total amount of capital paid up before 1 July 1994 for shares in the class:
- (b) premiums is the total amount of qualifying share premium paid to the company before 1 July 1994 for shares in the class, but not including amounts applied before 1 July 1994 in paying up capital:
- (c) all shares issued is the number of shares in the class ever issued at the end of 30 June 1994:
- (d) 30 June 1994 shares is the number of shares in the class on issue at the end of 30 June 1994.
1 July 1994 balance: bonus issues after 30 September 1988
(5) The capital amount included in calculating the 1 July 1994 amount does not include an amount paid up by way of a bonus issue made after 30 September 1988, unless—
- (a) the bonus issue was a taxable bonus issue; or
- (b) the amount was paid up by application of an amount of qualifying share premium.
Subscriptions amount: taxable bonus issues and debt capitalisations
(6) The subscriptions amount includes,—
- (a) in the case of a bonus issue in lieu, the amount offered as an alternative to the bonus issue; and
- (b) in the case of a taxable bonus issue that is not a bonus issue in lieu, the amount of the dividend arising from the taxable bonus issue; and
- (c) in the case of shares issued on conversion of, or as consideration for the release of, a debt claim against the company, the amount of debt converted or released.
Subscriptions amount: non-taxable and exempt bonus issues
(7) The subscriptions amount does not include—
- (a) an amount for a bonus issue if neither subsection (6)(a) nor (b) applies; or
- (b) an amount for a taxable bonus issue made to a shareholder to whom the bonus issue was exempt income under section CW 9 (Dividend derived by company from overseas) or CW 10 (Dividend within New Zealand wholly-owned group), or under a corresponding repealed provision, except to the extent to which the taxable bonus issue is fully credited.
Subscriptions amount: reinvested exempt dividends
(8) The subscriptions amount does not include—
- (a) an amount received by the company that is mainly attributable, directly or indirectly, to the company paying a dividend to a shareholder,—
  - (i) if the dividend was exempt income of the shareholder under section CW 9 or CW 10, or a corresponding provision of an earlier Act; and
  - (ii) if the shareholder was not required to withhold and pay an amount of FDP from the dividend by section RG 3 (Obligation to pay FDP); and
  - (iii) to the extent to which the dividend is not fully credited; or
- (b) an amount received by the company if the amount is mainly attributable, directly or indirectly, to the payment by the company of a dividend to a controlled foreign company at a time when the company is also a controlled foreign company, regardless of whether either company is a grey list company or non-attributing Australian CFC.
Subscriptions amount: share-for-share exchanges
(9) Subsection (10) applies if—
- (a) the company receives an amount, directly or indirectly, for the issue of shares in the class that is in the form of shares in another company; and
- (b) immediately after the issue there are 1 or more persons whose common voting interests (or common market value interests), as measured in section IC 3(3) and (4) (Common ownership: group of companies), in the company and the other company total 10% or greater; and
- (c) the receipt is not on an amalgamation.
Subscriptions amount: no uplift for share-for-share exchanges
(10) If subsection (9) applies, the subscriptions amount does not include the amount received to the extent to which it is more than the total available subscribed capital per share, calculated under the slice rule and calculated after deducting any ineligible capital amount described in subsections (13) and (14) of the shares in the other company at the date on which the amount is received.
Subscriptions amount: company share capital reorganisation
(11) Subsection (12) applies if a company receives an amount for the issue of shares in the class in the form of—
- (a) a shareholder giving up rights of membership in the company; or
- (b) a shareholder giving up rights of membership in a company associated with the company or that is in substance the same company.
Subscriptions amount: no uplift for share capital reorganisation
(12) If subsection (11) applies, the subscriptions amount does not include the amount received to the extent to which it is more than the total available subscribed capital per share of the rights given up at the date they are given up, calculated—
- (a) under the slice rule; and
- (b) after deducting any ineligible capital amount described in subsections (13) and (14); and
- (c) as if the rights given up were shares, if they are not shares.
Subscriptions amount: when ineligible capital arises
(13) For the purposes of subsections (10) and (12), an ineligible capital amount arises if—
- (a) a company (the acquiring company) issues shares in consideration for acquiring, directly or indirectly, shares in another company (the acquired company); and
- (b) the acquired company has issued shares in anticipation of the shares being acquired by the acquiring company; and
- (c) those shares issued in anticipation are not a fully credited taxable bonus issue; and
- (d) the acquiring company pays an amount in consideration for acquiring the shares in the acquired company in addition to issuing shares in the acquiring company.
Subscriptions amount: amount of ineligible capital
(14) The ineligible capital amount is the lesser of—
- (a) the total of the available subscribed capital per share calculated under the slice rule of the shares in the acquired company that is attributable to the shares issued in anticipation, except to the extent to which the shares issued in anticipation are a fully credited taxable bonus issue; and
- (b) the total additional amount paid by the acquiring company referred to in subsection (13)(d).
Subscriptions amount: amalgamated company
(15) The subscriptions amount for a company that is an amalgamated company resulting from an amalgamation—
- (a) includes an amount, as if it were consideration received at the time of the amalgamation for the issue of the amalgamated company’s shares, equal to the available subscribed capital, at the time of the amalgamation, of all shares in the amalgamating companies that are—
  - (i) of an equivalent class to the class; and
  - (ii) not held directly or indirectly by an amalgamating company; and
  - (iii) not shares in the amalgamated company:
- (b) does not include any other amount for the agreement of shareholders of an amalgamating company to the amalgamation and the resulting property acquisitions by the amalgamated company.
Subscriptions amount: emigrating company
(16) If a company has been treated under section FL 2 (Treatment of emigrating companies and their shareholders) as paying a distribution to shareholders, the subscriptions amount includes the amount of the distribution that is a dividend.
Subscriptions amount: Maori authority
(17) If the company is a Maori authority, the subscriptions amount includes the taxable income derived by the Maori authority in the 2003–04 tax year or an earlier tax year.
Subscriptions amount: no double counting
(18) The subscriptions amount does not include amounts included in calculating the 1 July 1994 balance.
Subscriptions amount: treasury stock sales excluded
(19) The subscriptions amount does not include the amount of consideration received by a company for disposing of a share if the disposal is taken into account under section CD 25 to determine that the amount paid by the company on a previous share acquisition is not subject to section CD 25(4) to (6).
Subscriptions amount: superannuation fund’s interest in GIF
(20) The subscriptions amount of a company that is a group investment fund includes the value of the interest of a superannuation fund in the group investment fund at the end of 31 March 1999.
1 July 1994 and subscriptions amount: foreign currency conversions
(21) If an amount of consideration that a company receives for the issue of shares is payable in a foreign currency, the amount paid is treated, for the purposes of this section, as if it were converted into New Zealand currency at the calculation time.
Returns amount: on-market cancellations by associate
(22) If the acquisition of a share by an associate of the company is within the meaning of an acquisition under paragraph (d) of the definition of on-market cancellation, it is treated in the same way for the purposes of calculating the returns amount.
Returns amount: recovered amounts
(23) The returns amount does not include any amount recovered by the company before the calculation time under section 56 of the Companies Act 1993 or an equivalent provision of foreign law.
Returns amount: shares cancelled on amalgamation
(24) If shares in an amalgamated company held by an amalgamating company are cancelled on the amalgamation, the returns amount included in calculating the available subscribed capital amount of a share in the amalgamated company that is of the same class as the cancelled shares is increased by the amount calculated using the formula—
cancelled shares × asc per share.
Definition of items in formula
(25) In the formula in subsection (24),—
- (a) cancelled shares is the number of cancelled shares:
- (b) asc per share is the available subscribed capital per share calculated under the slice rule of each cancelled share immediately before the amalgamation.
Meaning of fully credited
(26) In this section, the part of a dividend that is fully credited is the part that is calculated using the formula—
Definition of items in formula
(27) In the formula in subsection (26),—
- (a) dividend excluding credits is the dividend excluding any attached imputation credit or FDP credit:
- (b) actual ratio is the total of the imputation ratio and FDP ratio of the dividend (section OZ 13 (Fully credited dividends: modifying actual ratio) may apply to modify this paragraph):
- (c) maximum ratio is the maximum imputation ratio specified in section OA 18 (Calculation of maximum permitted ratios).
Meaning of qualifying share premium
(28) In this section, qualifying share premium means an amount of premium paid to a company for the issue of a share by the company if—
- (a) the amount was credited to a share premium account in the company’s books; and
- (b) the issue of shares was not in consideration for the acquisition, directly or indirectly, of shares in another company.
Defined in this Act: amalgamated company, amalgamating company, amalgamation, amount, associated person, available subscribed capital, bonus issue, bonus issue in lieu, cancellation, common market value interest, common voting interest, company, consideration, controlled foreign company, dividend, exempt income, FDP, FDP credit, FDP ratio, fully credited, grey list company, group investment fund, imputation credit, imputation ratio, Maori authority, New Zealand, non-attributing Australian CFC, on-market cancellation, pay, qualifying share premium, share, shareholder, shares of the same class, slice rule, superannuation fund, tax year, taxable bonus issue, taxable income
Compare: 2004 No 35 s CD 32
Section CD 43(8)(b): substituted (with effect on 30 June 2009), on 6 October 2009, by section 20(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 43(27)(b): amended, on 1 April 2008, by section 316 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CD 43 list of defined terms consideration: inserted (with effect on 1 April 2008), on 6 October 2009, by section 20(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 43 list of defined terms non-attributing Australian CFC: inserted (with effect on 30 June 2009), on 6 October 2009, by section 20(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 44 Available capital distribution amount

Formula for calculating amount of available capital distribution
(1) For a share (the share) on the liquidation of the company, the available capital distribution amount is calculated using the formula—
Definition of items in formula
(2) In the formula,—
- (a) receipt is the amount received by the shareholder on the liquidation for the share:
- (b) asc per share is the available subscribed capital per share calculated under the ordering rule for the share at the time of the liquidation:
- (c) capital gains is the total of the capital gain amounts available for distribution to shareholders in the company on the liquidation, but excluding any gain occurring when the company distributes property to a shareholder on the liquidation:
- (d) capital property distributed is the total market value of capital property of the company distributed to shareholders on the liquidation:
- (e) cost is the total cost to the company of the capital property included in the capital property distributed item:
- (f) capital losses is the total of capital loss amounts of the company arising in the 1992–93 tax year or a later tax year, but excluding any loss occurring when the company distributes property to shareholders on the liquidation:
- (g) total receipts is the total of all amounts received by shareholders on the liquidation:
- (h) total asc is the total of the available subscribed capital of all shares in the company at the time of the liquidation.
Positive amounts
(3) Despite subsection (1), the available capital distribution amount per share is zero if either multiplier in the formula is negative.
When foreign company information inadequate
(4) Despite subsection (1), the available capital distribution amount is zero if—
- (a) the company is not resident in New Zealand; and
- (b) the shareholder cannot obtain sufficient information to calculate the actual available capital distribution amount.
Capital gain amount: bonus issued capital gains
(5) A capital gain amount is treated as still being available for distribution to the extent to which—
- (a) it has been applied to pay up a bonus issue made after 30 September 1988; and
- (b) the bonus issue is a non-taxable bonus issue; and
- (c) the bonus issued share is still on issue at the time of the company’s liquidation.
This subsection is overridden by subsection (6).
Capital gain amount: capital gains after 31 March 1988 and before 1992–93
(6) A capital gain amount, derived after 31 March 1988 and before the 1992–93 tax year, is not available for distribution to the extent to which a capital loss amount has arisen for the company in the tax year in which the capital gain amount was derived or in a later tax year before the 1992–93 tax year. Capital loss amounts are offset against capital gain amounts in the chronological order in which each arose and, to the extent offset, are then disregarded for the purposes of this subsection.
Capital gain amount: when capital gain amounts arise
(7) For the purposes of this section, a company derives a capital gain amount if,—
- (a) after 31 March 1988, it disposes of capital property for an amount of consideration that is more than the cost of the property to the company, including a disposal that the company is treated as making under section DB 26 (Amount from profit-making undertaking or scheme and not already in income) or DB 27 (Amount from major development or division and not already in income); the capital gain amount is the excess; or
- (b) after 31 March 1988, it receives a capital gain, including a gift, and no part is income of the company; the capital gain amount is the amount of the capital gain; or
- (c) an amount is derived by the company from another company on liquidation of the other company that is excluded from being a dividend as a result of section CD 26(2)(b) and this section; or
- (d) an amount is derived by the company that is attributable to a revaluation of livestock in the 1992–93 tax year or a later tax year under section 86D of the Income Tax Act 1976 or section EC 16 (Valuation under herd scheme) or EC 20 (Herd livestock disposed of before values determined); or
- (e) the amount is described in section CZ 9(1) (Available capital distribution amount: 1965 and 1985–1992).
Capital gain amount: amalgamated company inheriting gain
(8) An amalgamated company is treated as deriving a capital gain amount at the time of the amalgamation equal to a capital gain amount of an amalgamating company to the extent to which—
- (a) the amalgamating company ends its existence on the amalgamation; and
- (b) the amalgamating company’s capital gain amount was available for distribution at the time and was not distributed to anyone other than the amalgamated company.
Capital losses amount: when capital losses arise
(9) For the purposes of this section, a company incurs a capital loss if it disposes of capital property for an amount of consideration less than the cost of the property to the company. The capital loss amount is the deficit.
Capital losses amount: company existing before 1 April 1988
(10) In the case of a company that existed before 1 April 1988, the capital losses amount cannot be more than the total of —
- (a) the amount of the capital gains item in the formula in subsection (1) to the extent derived after 31 March 1988; and
- (b) the amount of the capital property distributed item, minus the amount of the cost item, in the formula.
Associated persons transactions
(10B) No capital gain amount is derived or capital loss amount incurred by a company after 31 March 2010 on disposing of property under an arrangement with an associated person. This subsection is overridden by subsection (10C).
Close company liquidations
(10C) Subsection (10B) does not apply if—
- (a) the company is a close company; and
- (b) the associated person is not a company; and
- (c) the disposal is on the liquidation of the company.
Related person transactions
[Repealed]
(11) [Repealed]
Close companies liquidations
[Repealed]
(12) [Repealed]
Reinvested exempt dividends
(13) When a capital gain amount, a capital loss amount, or the cost of capital property is determined, the cost of any shares subscribed for by the company in another company does not include any consideration for the subscribed shares that is excluded from the available subscribed capital of the other company under section CD 43(7)(b) or (8).
Amounts written up
(14) When a capital gain amount, a capital loss amount, or the cost of capital property is determined, the cost of the relevant capital property is increased to the extent to which—
- (a) the value of the property is written up in the company’s books; and
- (b) because it was attributed to the write-up,—
  - (i) an amount paid before 11 June 1965 is treated as described in section CZ 9(2)(a); or
  - (ii) an issue of a share before 1 April 1988 is treated as described in section CZ 9(2)(b).
Relationship with section CZ 9B
(14B) For capital gain amounts derived or capital loss amounts incurred between 1 April 1988 and 31 March 2010, see section CZ 9B (Available capital distribution amount: 1988 to 2010).
Meaning of related person
[Repealed]
(15) [Repealed]
Look-through relatives and nominees
[Repealed]
(16) [Repealed]
Look-through interposed companies
[Repealed]
(17) [Repealed]
Meaning of capital property
(18) In this section, capital property means property of the company that is not revenue account property.
Defined in this Act: amalgamated company, amalgamating company, amalgamation, amount, available capital distribution amount, available subscribed capital, bonus issue, capital property, close company, company, dividend, income, liquidation, non-taxable bonus issue, ordering rule, pay, relative, resident in New Zealand, revenue account property, share, shareholder, tax year, trustee
Compare: 2004 No 35 s CD 33
Section CD 44(10B) heading: inserted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(10B): inserted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(10C) heading: inserted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(10C): inserted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(11) heading: repealed, on 1 April 2010 (applying for the 2010–11 and later income years), pursuant to section 21(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(11): repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(12) heading: repealed, on 1 April 2010 (applying for the 2010–11 and later income years), pursuant to section 21(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(12): repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(14B) heading: inserted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(14B): inserted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(15) heading: repealed, on 1 April 2010 (applying for the 2010–11 and later income years), pursuant to section 21(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(15): repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(16) heading: repealed, on 1 April 2010 (applying for the 2010–11 and later income years), pursuant to section 21(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(16): repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(17) heading: repealed, on 1 April 2010 (applying for the 2010–11 and later income years), pursuant to section 21(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44(17): repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 44 list of defined terms related person: repealed, on 1 April 2010, by section 594 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Attributed repatriation calculation rules

[Repealed]

Heading: repealed (with effect on 30 June 2009), on 6 October 2009, by section 22(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 45 When does a person have attributed repatriation from a controlled foreign company?

[Repealed]
Section CD 45: repealed (with effect on 30 June 2009), on 6 October 2009, by section 22(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 45(1)(b): amended, on 1 April 2008, by section 317 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

CD 46 New Zealand repatriation amount

[Repealed]
Section CD 46: repealed (with effect on 30 June 2009), on 6 October 2009, by section 22(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 47 New Zealand property amount

[Repealed]
Section CD 47: repealed (with effect on 30 June 2009), on 6 October 2009, by section 22(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 48 Cost of tangible property

[Repealed]
Section CD 48: repealed (with effect on 30 June 2009), on 6 October 2009, by section 22(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 49 Cost of associated party equity

[Repealed]
Section CD 49: repealed (with effect on 30 June 2009), on 6 October 2009, by section 22(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 50 Outstanding balances of financial arrangements

[Repealed]
Section CD 50: repealed (with effect on 30 June 2009), on 6 October 2009, by section 22(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 51 Property transfers between associated persons

[Repealed]
Section CD 51: repealed (with effect on 30 June 2009), on 6 October 2009, by section 22(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CD 52 Unrepatriated income balance

[Repealed]
Section CD 52: repealed (with effect on 30 June 2009), on 6 October 2009, by section 22(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Prevention of double taxation

CD 53 Prevention of double taxation of share cancellation dividends

When this section applies
(1) This section applies when—
- (a) a person derives an amount from the cancellation of a share in a company; and
- (b) the amount is income of the person under 1 of the following provisions (the other rules):
  - (i) section CB 1 (Amounts derived from business); or
  - (ii) section CB 3 (Profit-making undertaking or scheme); or
  - (iii) section CB 4 (Personal property acquired for purpose of disposal); or
  - (iv) section CB 5 (Business of dealing in personal property); or
  - (v) any other provision of this Act outside this subpart.
Treatment of amount
(2) For the purposes of the other rules, the amount derived by the person from the company is treated as if it were reduced, but not below zero, by the amount of any dividend derived by the person in relation to the cancellation, excluding any attached imputation credit or FDP credit.
Non-taxable dividends
(3) Subsection (2) does not apply to the extent to which the dividend is exempt income of the person under sections CW 9 to CW 11 (which relate to income from equity).
Subsection (3)(b): formula
[Repealed]
(4) [Repealed]
Definition of items in formula
[Repealed]
(5) [Repealed]
Relationship of dividend exclusions to other provisions
(6) Subject to subsection (2), the amount derived by the person from the company may be income of the person despite the fact that the amount is excluded from being a dividend by any of sections CD 22 to CD 27.
Relationship with section FA 3
(7) This section is overridden by section FA 3 (Recharacterisation of certain dividends: recovery of cost of shares held on revenue account).
Defined in this Act: amount, cancellation, company, dividend, exempt income, imputation credit, income, income tax, share, tax year
Compare: 2004 No 35 s CD 42
Section CD 53(3) heading: substituted (with effect on 30 June 2009), on 6 October 2009, by section 23(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 53(3): substituted (with effect on 30 June 2009), on 6 October 2009, by section 23(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 53(4) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 23(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 53(4): repealed (with effect on 30 June 2009), on 6 October 2009, by section 23(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 53(5) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 23(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 53(5): repealed (with effect on 30 June 2009), on 6 October 2009, by section 23(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 53(5)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CD 53(5)(b): amended, on 1 April 2008, by section 318 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CD 53 list of defined terms FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 23(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CD 53 list of defined terms FDP credit: repealed (with effect on 30 June 2009), on 6 October 2009, by section 23(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Returning share transfers

CD 54 Replacement payments

The amount of a replacement payment derived by a person under a returning share transfer is income of the person when it is paid to the person.
Defined in this Act: income, pay, replacement payment, returning share transfer
Compare: 2004 No 35 s CD 43

Subpart CE—Employee or contractor income

Employment income

CE 1 Amounts derived in connection with employment

Income
(1) The following amounts derived by a person in connection with their employment or service are income of the person:
- (a) salary or wages or an allowance, bonus, extra pay, or gratuity:
- (b) expenditure on account of an employee that is expenditure on account of the person:
- (c) the market value of accommodation that the person receives in connection with their employment or service other than an amount paid under section CW 17B (Relocation payments):
- (d) a benefit received under a share purchase agreement:
- (e) directors’ fees:
- (f) compensation for loss of employment or service:
- (g) any other benefit in money.
Meaning of accommodation
(2) For the purposes of this section and section CX 28 (Accommodation), accommodation means board or lodging, or the use of a house or living premises, or the use of part of a house or living premises.
Defined in this Act: accommodation, amount, expenditure on account of an employee, extra pay, income, salary or wages, share purchase agreement
Compare: 2004 No 35 s CE 1
Section CE 1(1) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 24(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CE 1(1)(c): substituted (with effect on 1 April 2008), on 6 October 2009, by section 24(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CE 1(2) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 24(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CE 1(2): added (with effect on 1 April 2008), on 6 October 2009, by section 24(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CE 1 list of defined terms accommodation: inserted (with effect on 1 April 2008), on 6 October 2009, by section 24(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CE 2 Value and timing of benefits under share purchase agreements

What this section does
(1) This section determines the value of a benefit that an employee receives under a share purchase agreement and the allocation of the benefit to a particular income year. If restrictions apply to the disposal of shares received under a share purchase agreement, CE 3 applies.
If employees acquire shares
(2) If an employee acquires shares under a share purchase agreement, the value of the benefit to the employee is the amount by which the value of the shares when they were acquired is more than the amount paid or payable for them. The employee receives the benefit in the income year in which they acquire the shares.
If employees dispose of rights to non-associates
(3) If an employee disposes of their rights under a share purchase agreement to a person who is not associated with them, the value of the benefit is the consideration for the disposal of the rights. The employee receives the benefit in the income year in which they dispose of the rights.
If associates acquire shares
(4) If, following 1 or more transactions between associated persons, an associated person acquires the shares under a share purchase agreement, the value of the benefit is the difference between the value of the shares on the date of acquisition by the associated person and the amount paid or payable for them. If the difference is negative, the value is zero. The employee receives the benefit in the income year in which the associated person acquires the shares.
If associates dispose of rights to non-associates
(5) If, following 1 or more transactions between associated persons, a person who is not an associated person acquires the rights under a share purchase agreement, the value of the benefit is the consideration paid for that disposal. The employee receives the benefit in the income year in which the last associated person disposes of the rights.
If shares transferred when employees end employment or die
(6) The value of the benefit is zero if a share purchase agreement provides unconditionally that, when the employee ends their employment or service or dies, the shares must be transferred to the employer or to the person from whom they were acquired, either without consideration or for a consideration no more than that paid by the employee.
If benefits arise under approved schemes
(7) The value of the benefit is zero if the benefit arises under a share purchase scheme.
Disposal of rights under share purchase option
(8) For the purposes of subsection (3), a disposal of rights under a share purchase agreement includes the cancellation of a share option in return for a cash payment.
Reduction of value of benefit in circumstances relating to non-resident
(9) The value of a benefit arising from a period of employment is reduced, from the value that the benefit would have in the absence of this subsection,—
- (a) if, when the employee acquires the shares under the share purchase agreement or disposes of the rights under the share purchase agreement, the employee is a transitional resident; and
- (b) by an amount calculated using the formula—
Defined in this Act: amount, associated person, employee, employer, income year, non-resident, pay, share, share purchase agreement, share purchase scheme, transitional resident
Compare: 2004 No 35 s CE 2

CE 3 Restrictions on disposal of shares under share purchase agreements

Effect of restrictions
(1) When the benefit to an employee under a share purchase agreement is being valued, a restriction in the agreement on the disposal of the shares is taken into account only if the restriction is of a kind described in subsection (2) or (3).
First restriction
(2) The first restriction is one that applies for a period that ends—
- (a) at least 8 years after the end of the tax year in which the employee receives the benefit; or
- (b) with the date of the employee’s death.
Second restriction
(3) The second restriction is one that—
- (a) applies for a period that ends—
  - (i) at least 8 years after the end of the tax year in which the employee receives the benefit; or
  - (ii) with the date of the employee’s death; and
- (b) provides that an employee who ends their employment or service before the end of the period must unconditionally transfer some or all of the shares to the employer or to the person from whom the employee acquired them, either without consideration or for a consideration that is no more than that paid by the employee.
Transfers of shares under relationship agreements
(4) If a share purchase agreement does not restrict an employee from transferring the shares under a relationship agreement, but the disposal of the shares by the person to whom the shares are transferred is restricted for a period that ends at least 8 years after the end of the tax year in which the employee would otherwise have received the benefit or after the death of the employee, then the restriction is treated as applying to the employee.
Defined in this Act: employee, employer, pay, relationship agreement, share, share purchase agreement, tax year, year
Compare: 2004 No 35 s CE 3

CE 4 Adjustments to value of benefits under share purchase agreements

The Commissioner may at any time adjust the previously determined value of a benefit under a share purchase agreement if the value is reduced because—
- (a) a restriction on disposal exists when the employee disposes of the shares that was not taken into account in valuing the benefit; or
- (b) further consideration is required for the shares; or
- (c) the shares are reacquired either without consideration or for a consideration no more than that paid by the employee.
Defined in this Act: Commissioner, employee, pay, share, share purchase agreement
Compare: 2004 No 35 s CE 4

Definitions

CE 5 Meaning of expenditure on account of an employee

Meaning
(1) Expenditure on account of an employee means a payment made by an employer relating to expenditure incurred by an employee.
Inclusion
(2) Expenditure on account of an employee includes a premium that an employer pays on a life insurance policy taken out for the benefit of the employee, or their spouse, civil union partner, de facto partner, or their child. This subsection is overridden by subsection (3)(f) to (i).
Exclusions
(3) Expenditure on account of an employee does not include—
- (a) expenditure for the benefit of an employee, or a payment made to reimburse an employee, under section CW 17 (Expenditure on account, and reimbursement, of employees):
- (b) an allowance for additional transport costs under section CW 18 (Allowance for additional transport costs):
- (bb) an amount paid under section CW 17B (Relocation payments) or section CW 17C (Payments for overtime meals and certain other allowances):
- (c) expenses that an employee pays in connection with their employment or service to the extent to which the expenditure is their employer’s liability, if the employee undertakes to discharge the liability in consideration of the making of the payment by the employer:
- (d) expenditure on an employment-related loan to which the fringe benefit tax (FBT) rules apply:
- (e) an employer’s superannuation contribution:
- (f) a premium that an employer pays on a life insurance policy taken out for the benefit of the employee, or their spouse, civil union partner, de facto partner, or their child, if—
  - (i) the premium cannot be refunded to, or converted to cash by, the employee or an associated person; and
  - (ii) the only benefits that are payable under the policy are those payable on the death of the employee, or their spouse, civil union partner, de facto partner, or their child, or those payable because of accident, disease, or sickness of the employee, or their spouse, civil union partner, de facto partner, or their child:
- (g) a premium that an employer that is a close company pays on a life insurance policy taken out for the benefit of the employee, or their spouse, civil union partner, de facto partner, or their child, to the extent to which the expenditure is treated as a dividend under subpart CD (Income from equity):
- (h) a premium that an employer pays on a life insurance policy taken out for the benefit of the employee, or their spouse, civil union partner, de facto partner, or their child, if the policy is, or is included in, a superannuation category 1 scheme, a superannuation category 2 scheme, or a superannuation category 3 scheme:
- (i) a premium that an employer pays on a life insurance policy taken out for the benefit of the employee, or their spouse, civil union partner, de facto partner, or their child, if the policy is held by or for the trustees of a superannuation category 3 scheme:
- (j) a premium for income protection insurance that an employer is liable to pay or make a contribution towards for the benefit of an employee.
Defined in this Act: additional transport costs, associated person, close company, contribution, dividend, employee, employer, employer’s superannuation contribution, employment-related loan, expenditure on account of an employee, FBT rules, life insurance policy, pay, premium, superannuation category 1 scheme, superannuation category 2 scheme, superannuation category 3 scheme, trustee
Compare: 2004 No 35 s CE 5
Section CE 5(3)(bb): inserted (with effect on 1 April 2008), on 6 October 2009, by section 25 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CE 6 Meaning of share: when share acquired

Meaning
(1) In sections CE 2 to CE 4 and CE 7, share includes a convertible note.
Use in sections CE 2 to CE 4 and CE 7
(2) For the purposes of sections CE 2 to CE 4 and CE 7,—
- (a) shares are treated as having been acquired on the date on which the right or option to buy them is exercised; and
- (b) if shares or rights are acquired or transferred under an agreement by a trustee for the benefit of an employee to whom section CE 2 applies, the employee is treated as having acquired or transferred the shares or rights.
Defined in this Act: convertible note, employee, share, trustee
Compare: 2004 No 35 s CE 6

CE 7 Meaning of share purchase agreement

In sections CE 1 to CE 4, share purchase agreement means an agreement to sell or issue shares in a company to an employee that is entered into in connection with the employee’s employment or service, whether or not an employment relationship exists when the employee receives a benefit under the agreement.
Defined in this Act: company, employee, share, share purchase agreement
Compare: 2004 No 35 s CE 7

Attributed income

CE 8 Attributed income from personal services

When this section applies
(1) This section applies when, under sections GB 27 to GB 29 (which relate to the attribution rule), a person is required to attribute an amount to another person.
Income
(2) The amount attributed is income of the person to whom it is attributed.
Timing of income
(3) The amount is allocated to the income year in which it is attributed.
Defined in this Act: amount, income, income year
Compare: 2004 No 35 s CE 8

Restrictive covenants and exit inducement payments

CE 9 Restrictive covenants

When this section applies
(1) This section applies when—
- (a) a person (person A) gives an undertaking that restricts, or is intended to restrict, their ability to perform services as an employee, office holder, or independent contractor, whether or not the undertaking is legally enforceable; and
- (b) a person, whether or not person A, derives an amount for the undertaking.
Income
(2) The amount is income of person A.
Exclusion
(3) Subsection (2) does not apply if—
- (a) person A derives the amount because person A or an associated person sells a business to another person (person B); and
- (b) person A or the associated person and person B agree in writing that the transaction is the sale of a business; and
- (c) person A derives the amount as consideration for an undertaking by person A not to provide goods or services in competition with the goods or services that person B provides from the business; and
- (d) person A does not provide services to person B after the sale of the business, other than temporarily providing services incidental to the sale.
Sale of all shares in company
(4) For the purposes of subsection (3),—
- (a) the sale of a business includes the sale of shares in a company, but only if the sale is of all the shares in the company and the company—
  - (i) carries on a business; or
  - (ii) directly or indirectly wholly owns another company that carries on a business; and
- (b) in that case, the words “person B” in subsection (3)(c) and (d) mean the company that carries on the business, whether the company referred to in paragraph (a)(i) or the company referred to in paragraph (a)(ii).
Sale of part of business
(5) For the purposes of subsection (3), the sale of a business includes the sale of part of a business, if the part can be operated separately.
Avoidance arrangements
(6) Section GB 30 (Arrangements to avoid taxation of restrictive covenant payments) may apply to treat an amount as income under this section.
Defined in this Act: amount, arrangement, associated person, business, company, employee, income, share
Compare: 2004 No 35 s CE 9

CE 10 Exit inducements

An amount is income of a person if they derive it for—
- (a) the loss of a vocation; or
- (b) the loss of a position; or
- (c) leaving a position; or
- (d) loss of status.
Defined in this Act: amount, income
Compare: 2004 No 35 s CE 10

Income protection insurance

CE 11 Proceeds from claims under policies of income protection insurance

When this section applies
(1) This section applies when an employer is liable to pay, or contribute to the payment of, a premium under a policy of income protection insurance for the benefit of a person who is their employee.
Income
(2) An amount that is or would be derived under the policy is income of the person.
Defined in this Act: amount, employee, employer, income, pay
Compare: 2004 No 35 s CE 11

Tax credits

CE 12 Tax credits for personal service rehabilitation payments

When this section applies
(1) This section applies when a person has a tax credit in a tax year under section LB 7 (Tax credits related to personal service rehabilitation payments: providers).
Income
(2) An amount equal to the credit is income of the person in the corresponding income year.
Defined in this Act: amount, corresponding income year, income, income year, personal service rehabilitation payment, tax credit, tax year
Compare: 2004 No 35 s CE 12
Section CE 12: substituted, on 1 July 2008, by section 319 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subpart CF—Income from living allowances, compensation, and government grants

CF 1 Benefits, pensions, compensation, and government grants

Income
(1) The following amounts are income:
- (a) an accident compensation payment:
- (b) an education grant:
- (c) an income-tested benefit:
- (d) a living alone payment:
- (e) a New Zealand superannuation payment:
- (f) a parental leave payment paid under Part 7A of the Parental Leave and Employment Protection Act 1987:
- (g) a pension:
- (h) a veteran’s pension.
Some definitions
(2) In this section,—
accident compensation payment means—
- (a) a payment under the Accident Compensation Act 1982 of earnings-related compensation that is not recovered or recoverable by, or refunded to, the chief executive of the administering department:
- (b) a payment under section 80(4) of the Accident Compensation Act 1982 that is not recovered or recoverable by, or refunded to, the chief executive of the administering department:
- (c) a payment of any of the following kinds under the Accident Rehabilitation and Compensation Insurance Act 1992, none of which is recovered or recoverable:
  - (i) a vocational rehabilitation allowance under section 25; or
  - (ii) compensation for loss of earnings under any of sections 38, 39, and 43; or
  - (iii) compensation for loss of potential earning capacity under section 45 or 46; or
  - (iv) weekly compensation under any of sections 58, 59, and 60; or
  - (v) continued compensation under section 138:
- (d) a payment under the Accident Insurance Act 1998 of weekly compensation that is not recovered or recoverable:
- (e) a payment under a policy of personal accident or sickness insurance under section 188(1)(a) of the Accident Insurance Act 1998, as it was immediately before its repeal by section 7 of the Accident Insurance Amendment Act 2000, of compensation for loss of earnings or loss of potential earning capacity as it relates to work-related personal injury:
- (f) a payment under the Injury Prevention, Rehabilitation, and Compensation Act 2001 paid by the Corporation as defined in that Act, of weekly compensation that is not recovered or recoverable under section 248 of that Act:
- (g) a payment under section 81(1)(b) of the Injury Prevention, Rehabilitation, and Compensation Act 2001 paid by the Corporation as defined in that Act, for attendant care as defined in schedule 1, clause 12 of that Act:
- (h) a personal service rehabilitation payment for a person under the Injury Prevention, Rehabilitation, and Compensation Act 2001
education grant means a basic grant or an independent circumstances grant under regulations made under section 303 of the Education Act 1989
pension—
- (a) includes a gratuitous payment made to a person in return for services that the person, or their parent, child, spouse, civil union partner or de facto partner, former spouse, civil union partner or de facto partner, or dependant, provided to the payer when the payment would not have been made if the services had not been provided; and
- (b) does not include a payment made to the person because of, and within 1 year after, the death of that parent, child, spouse, civil union partner or de facto partner, former spouse, civil union partner or de facto partner, or dependant.
Defined in this Act: accident compensation payment, amount, chief executive of the administering department, education grant, income, income-tested benefit, living alone payment, New Zealand superannuation, pay, pension, personal service rehabilitation payment, veteran’s pension, year
Compare: 2004 No 35 s CF 1
Section CF 1(2)(a) accident compensation payment: amended (with effect on 1 April 2008), on 7 December 2009, by section 7 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section CF 1(2)(b) accident compensation payment: amended (with effect on 1 April 2008), on 7 December 2009, by section 7 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section CF 1(2)(f) accident compensation payment: substituted (with effect on 1 April 2008), on 6 October 2009, by section 26 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CF 1(2)(g) accident compensation payment: substituted (with effect on 1 April 2008), on 6 October 2009, by section 26 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CF 1(2)(g) accident compensation payment: substituted, on 1 July 2008, by section 320(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CF 1(2)(h) accident compensation payment: added (with effect on 1 April 2008), on 6 October 2009, by section 26 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CF 1 list of defined terms personal service rehabilitation payment: inserted, on 1 July 2008, by section 320(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

CF 2 Remission of specified suspensory loans

When this section applies
(1) This section applies when a public authority—
- (a) grants a loan to a person for a business that the person carries on; and
- (b) designates the loan as a specified suspensory loan.
Income
(2) An amount remitted on the specified suspensory loan is income of the person.
Timing of income
(3) The amount is allocated in equal parts to the income year of remission and the following 2 income years. However, the person may choose to allocate some or all of the amount in the following 2 income years to an earlier income year that is 1 of the 3 income years.
Business ceasing
(4) If the person stops carrying on the business for which the specified suspensory loan was granted, an amount remitted that is allocated to a later income year is allocated to the income year in which the person stops carrying on the business.
Defined in this Act: amount, business, income, income year, public authority
Compare: 2004 No 35 s CF 2

Subpart CG—Recoveries

CG 1 Amount of depreciation recovery income

An amount of depreciation recovery income that a person has is income of the person.
Defined in this Act: amount, depreciation recovery income, income
Compare: 2004 No 35 s CG 1

CG 2 Remitted amounts

When this section applies
(1) This section applies when—
- (a) a person is allowed a deduction in an income year of an amount that the person is liable to pay; and
- (b) the person’s liability for the amount is later remitted or cancelled, wholly or partly; and
- (c) the remission or cancellation is not a dividend; and
- (d) the person is not required to calculate a base price adjustment by section EW 29 (When calculation of base price adjustment required).
Income
(2) The amount to which the remission or cancellation applies is income of the person.
Timing of income
(3) The income is allocated to the income year in which the remission or cancellation occurs.
How remission or cancellation occurs
(4) Remission or cancellation occurs, for the purposes of this section, in 1 of the following ways:
- (a) a liability is remitted to the extent to which the person is discharged from it without fully adequate consideration in money or money’s worth:
- (b) a liability is cancelled to the extent to which the person is released from it under the Insolvency Act 2006 or the Companies Act 1993 or the laws of a country or territory other than New Zealand:
- (c) a liability is cancelled to the extent to which the person is released from it by a deed or agreement of composition with the person’s creditors:
- (d) a liability is cancelled to the extent to which it is irrecoverable or unenforceable through lapse of time.
Defined in this Act: amount, deduction, dividend, income, income year, New Zealand, pay
Compare: 2004 No 35 s CG 2

CG 3 Bad debt repayment

An amount received by a person for a bad debt for which the person has been allowed a deduction is income of the person.
Defined in this Act: amount, deduction, income
Compare: 2004 No 35 s CG 3

CG 4 Recovered expenditure or loss

When this section applies
(1) This section applies when—
- (a) a person is allowed a deduction for expenditure or loss; and
- (b) the person recovers some or all of the expenditure or loss, whether through insurance, indemnity, or otherwise; and
- (c) the amount recovered, to the extent of the deduction, is not income of the person under any other provision of this Act.
Income
(2) The amount recovered is, to the extent of the deduction, income of the person.
Timing of income
(3) The income is allocated to the income year in which the amount is recovered.
Defined in this Act: amount, deduction, income year, loss
Compare: 2004 No 35 s CG 4

CG 5 Recoveries or receipts by employers from superannuation schemes

When this section applies
(1) This section applies when—
- (a) an employer makes an employer’s superannuation contribution to a superannuation scheme for their employee’s benefit; and
- (b) the employer is allowed a deduction for the contribution; and
- (c) the employer—
  - (i) recovers the contribution from the superannuation scheme; or
  - (ii) receives a benefit in money or money’s worth from the superannuation scheme, other than an amount paid to the employer under the scheme in return for contributions made by or for the employer in a personal capacity.
Income
(2) The amount recovered or received is, to the extent of the deduction, income of the employer.
Timing of income
(3) The income is allocated to the income year in which the amount is recovered or received.
Defined in this Act: amount, deduction, employee, employer, employer’s superannuation contribution, income, income year, pay, superannuation scheme
Compare: 2004 No 35 s CG 5

CG 6 Receipts from insurance, indemnity, or compensation for trading stock

When this section applies
(1) This section applies when a person receives an amount of insurance, indemnity, or compensation for the loss or destruction of, or damage to,—
- (a) trading stock:
- (b) anything acquired, manufactured, or produced for a purpose ancillary to a business of manufacturing or producing goods for sale or exchange.
Income
(2) The part of the insurance, indemnity, or compensation that is attributable to the asset is income if—
- (a) the person is allowed a deduction in an income year for the cost of the asset; and
- (b) the deduction is not for an amount of depreciation loss.
Timing of income
(3) The income is allocated to the income year in which the amount is received.
Defined in this Act: amount, business, deduction, depreciation loss, income, income year, trading stock
Compare: 2004 No 35 s CG 6

CG 7 Recoveries after deduction of payments under lease

When this section applies
(1) This section applies, for the purposes of section FA 5 (Assets acquired and disposed of after deduction of payments under lease) when—
- (a) a person leases, rents, or hires an asset that is—
  - (i) plant, machinery, or other equipment; or
  - (ii) a motor vehicle; or
  - (iii) a temporary building; and
- (b) they are allowed a deduction for the rental payments; and
- (c) they acquire the asset and later dispose of it for an amount that is more than the amount paid to acquire the asset.
Income
(2) The amount described in subsection (3) is income of the person.
Consideration less payments or total deductions
(3) The amount is the lesser of the amount by which the consideration on disposal is more than—
- (a) the sum of the payments made; or
- (b) the total amount of the deductions referred to in subsection (1)(b).
Timing of income
(4) The income is allocated to the income year of the disposal of the asset.
Defined in this Act: amount, deduction, dispose, income, income year, motor vehicle, pay, temporary building
Compare: 2004 No 35 s FC 5(1)

CG 8 Capital contributions

When this section applies
(1) This section applies for the income year (the first year) in which a person derives a capital contribution and for the 9 income years after that first year.
Income
(2) For an income year, the amount given by the following formula is income of the person derived in that income year:
capital contribution
10.
Definition of item in formula
(3) In the formula, capital contribution is the capital contribution that the person derives in the first year.
Exception
(4) This section does not apply for the capital contribution if the person has chosen, in accordance with section DB 64(1)(c) (Capital contributions), to apply section DB 64 instead.
Defined in this Act: amount, capital contribution, income, income year, return of income
Section CG 8: added (with effect on 20 May 2010), on 28 May 2010 (applying for capital contributions derived after 20 May 2010), by section 75(1) of the Taxation (Budget Measures) Act 2010 (2010 No 27).

Subpart CH—Adjustments

Matching rules: revenue account property, prepayments, and deferred payments

CH 1 Adjustment for closing values of trading stock, livestock, and excepted financial arrangements

When this section applies
(1) This section applies when a person has some or all of the following at the end of an income year:
- (a) trading stock valued under subpart EB (Valuation of trading stock (including dealer’s livestock)):
- (b) livestock valued under subpart EC (Valuation of livestock):
- (c) excepted financial arrangements that are revenue account property valued under subpart ED (Valuation of excepted financial arrangements):
- (d) a share supplier’s share-lending right, if the original shares that relate to the right are excepted financial arrangements described in paragraph (c).
Income: closing value of trading stock
(2) The value of the trading stock, calculated under section EB 3 (Valuation of trading stock), is income of the person in the income year.
Income: closing value of livestock
(3) The value of the livestock, calculated under section EC 2 (Valuation of livestock), is income of the person in the income year.
Income: closing value of excepted financial arrangements
(4) The value of the excepted financial arrangements or share-lending right, calculated under section ED 1 (Valuation of excepted financial arrangements), is income of the person in the income year.
Defined in this Act: excepted financial arrangement, income, income year, original share, revenue account property, share-lending right, share supplier, trading stock
Compare: 2004 No 35 s CH 1

CH 2 Adjustment for prepayments

When this section applies
(1) This section applies when a person has, under section EA 3 (Prepayments), an unexpired amount of expenditure at the end of an income year.
Income
(2) The unexpired amount is income of the person in the income year.
Defined in this Act: amount, income, income year
Compare: 2004 No 35 s CH 2

CH 3 Adjustment for deferred payment of employment income

When this section applies
(1) This section applies when a person has, under section EA 4 (Deferred payment of employment income), an unpaid amount of expenditure on employment income that is to be treated as income in an income year.
Income
(2) The unpaid amount is income of the person in the income year.
Defined in this Act: amount, employment income, income, income year, pay
Compare: 2004 No 35 s CH 3

Change to accounting practice

CH 4 Adjustment for change to accounting practice

When this section applies
(1) This section applies when a person has, under section EG 2(2)(a) or (3)(a) (Adjustment for changes to accounting practice), an amount owing to them or an amount owed by them as quantified in those paragraphs.
Income
(2) An amount quantified and allocated under section EG 2(2)(a) or (3)(a) is income of the person.
Defined in this Act: amount, income
Compare: 2004 No 35 s CH 4

Goods and services tax (GST)

CH 5 Adjustment for GST

Income
(1) An amount calculated under sections 21F and 21G of the Goods and Services Tax Act 1985 relating to the application of goods and services is income of a person.
Exclusion
(2) This section does not apply to an amount that relates to the application of a capital asset—
- (a) for the principal purpose of making taxable supplies, when the asset was acquired or produced other than for the principal purpose of making taxable supplies:
- (b) other than for the principal purpose of making taxable supplies, when the asset was acquired or produced for the principal purpose of making taxable supplies:
- (c) other than for the purpose of deriving income.
Timing of income
(3) The income is allocated to the income year in which the amount is calculated.
Defined in this Act: amount, income, income year, taxable supply
Compare: 2004 No 35 s CH 5

Finance leases

CH 6 Adjustments for certain finance and operating leases

When this section applies
(1) This section applies when an adjustment is made under section FA 11 or FA 11B (which relate to adjustments for leases that become finance leases and certain operating leases).
Income: leases that become finance leases
(2) The amount of a positive adjustment under section FA 11 is income of the lessor or the lessee, as applicable, in the income year in which the lease becomes a finance lease.
Income: operating leases entered into before 20 June 2007
(3) The amount of the adjustment under section FA 11B is income of the lessor in the income year after the income year in which 20 June 2007 falls.
Defined in this Act: amount, finance lease, income, income year, lease, operating lease
Compare: 2004 No 35 ss FC 8H(6), FC 8I(6)
Section CH 6: substituted, on 1 April 2008, by section 321 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Avoidance and non-market transactions

CH 7 Adjustment for avoidance arrangements

An amount treated as income of a person under any of the following sections is income of the person:
- (a) section GA 1 (Commissioner’s power to adjust):
- (b) section GB 23 (Excessive remuneration to relatives):
- (c) section GB 26 (Arrangements involving repatriation of commercial bills):
- (d) section GB 29 (Attribution rule: calculation):
- (e) section GB 46 (Deferral of surplus deductions from arrangements).
Defined in this Act: amount, arrangement, Commissioner, income, relative

CH 8 Market value substituted

Transfer pricing arrangements
(1) An amount treated as income of a person under section GB 7 (Arrangements involving CFC control interests) is income of the person.
Disposal at below market value
(2) A person may be treated as deriving an amount—
- (a) on disposal of trading stock under section GC 1 (Disposals of trading stock at below market value):
- (b) on the lease of a property under section GC 5 (Leases for inadequate rent).
Defined in this Act: amount, income, lease, trading stock

Interest apportionment on thin capitalisation

CH 9 Interest apportionment: excess debt entity

When this section applies
(1) This section applies when an excess debt entity is required under section FE 6 (Apportionment of interest by excess debt entity) to apportion its interest expenditure.
Income
(2) The amount calculated under section FE 6(2) is treated as income of the excess debt entity for the income year.
Defined in this Act: amount, excess debt entity, income, income year, interest
Compare: 2004 No 35 s FG 8(1)

CH 10 Interest apportionment: reporting bank

When this section applies
(1) This section applies when a reporting bank is required under section FE 7 (Apportionment of interest by reporting bank) to apportion its interest expenditure.
Income
(2) The amount calculated under section FE 7(2) is treated as income of the reporting bank for the income year in which the measurement period falls.
Defined in this Act: amount, income, income year, interest, measurement period, reporting bank
Compare: 2004 No 35 s FG 8B(1)

Subpart CO—Income from voluntary activities

Subpart CO: inserted (with effect on 1 April 2009), on 6 October 2009, by section 27(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CO 1 Income from voluntary activities

Income
(1) An amount derived by a person in undertaking a voluntary activity is income of the person.
Relationship with section CW 62B
(2) This section is overridden by section CW 62B (Voluntary activities).
Defined in this Act: amount, income
Section CO 1: inserted (with effect on 1 April 2009), on 6 October 2009, by section 27(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Subpart CP—Income from portfolio investment entities

CP 1 Attributed income of investors in multi-rate PIEs

When this section applies
(1) This section applies when a multi-rate PIE attributes an amount of income for an income year calculated under section HM 36 (Calculating amounts attributed to investors) to a person who is an investor in the PIE.
Income
(2) The amount is income of the person in the income year of the person in which the PIE’s income year ends.
Defined in this Act: amount, income, income year, investor, multi-rate PIE, PIE
Compare: 2007 No 97 s CP 1
Section CP 1: substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 28(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Subpart CQ—Attributed income from foreign equity

Attributed controlled foreign company income

CQ 1 Attributed controlled foreign company income

Attributed controlled foreign company (CFC) income of a person is income.
Defined in this Act: attributed CFC income, controlled foreign company, income
Compare: 2004 No 35 s CQ 1

CQ 2 When attributed CFC income arises

General rule
(1) A person has attributed CFC income from a foreign company in an income year if—
- (a) the foreign company is a CFC at any time during 1 of its accounting periods, under sections EX 1 to EX 7 (which relate to the definition of a controlled foreign company); and
- (b) the accounting period ends during the income year; and
- (c) the person has an income interest in the foreign company for the accounting period, under sections EX 8 to EX 13 (which relate to calculating a person’s income interest); and
- (d) at any time in the accounting period, the person is a New Zealand resident who is not a transitional resident; and
- (e) the person’s income interest is 10% or more for the part of the accounting period during which the person is a New Zealand resident who is not a transitional resident, under sections EX 14 to EX 17 (which relate to the 10% threshold); and
- (f) either—
  - (i) the CFC has net attributable CFC income for the accounting period under section EX 20C (Net attributable CFC income or loss); or
  - (ii) the special rule in section EX 19 (Taxable distribution from non-complying trust) applies because the CFC gets a distribution from a non-complying trust; and
- (g) [Repealed]
- (h) the CFC is not a non-attributing active CFC for the accounting period, under section EX 21B (Non-attributing active CFCs); and
- (i) the CFC is not a non-attributing Australian CFC for the accounting period, under section EX 22 (Non-attributing Australian CFCs).
Special rule: branch equivalent FIF with taxable distribution
(2) A person also has attributed CFC income if section EX 50(5) (Branch equivalent method) applies because—
- (a) the person has an attributing interest in a foreign investment fund (FIF); and
- (b) the person is using the branch equivalent method to calculate FIF income; and
- (c) the FIF receives a taxable distribution from a non-complying trust.
Special rule: attributed CFC amount from personal services
(2B) If a person and a non-attributing active CFC or non-attributing Australian CFC meet the requirements of subsection (1)(a) to (e) and the CFC derives income from personal services that is an attributable CFC amount under section EX 20B(3)(h) (Attributable CFC amount), the person has attributed CFC income from the CFC equal to the product of—
- (a) the person's income interest in the CFC:
- (b) the amount by which the CFC's income from personal services exceeds the expenditure incurred by the CFC in deriving the income from personal services.
Treated as derived while person New Zealand resident
(3) Attributed CFC income of a person who has stopped being a New Zealand resident is treated as being derived while the person was a New Zealand resident.
Dividend income can arise
[Repealed]
(4) [Repealed]
Defined in this Act: accounting period, attributable CFC amount, attributed CFC income, attributed repatriation, attributing interest, branch equivalent method, CFC, distribution, dividend, FIF, FIF income, foreign company, grey list, income, income interest, income year, net attributable CFC income, New Zealand resident, non-attributing active CFC, non-attributing Australian CFC, non-complying trust, taxable distribution, transitional resident
Compare: 2004 No 35 s CQ 2
Section CQ 2(1)(f)(i): substituted (with effect on 30 June 2009), on 6 October 2009, by section 29(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 2(1)(g): repealed (with effect on 30 June 2009), on 6 October 2009, by section 29(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 2(1)(h): added (with effect on 30 June 2009), on 6 October 2009, by section 29(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 2(1)(i): added (with effect on 30 June 2009), on 6 October 2009, by section 29(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 2(2B) heading: inserted (with effect on 30 June 2009), on 6 October 2009, by section 29(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 2(2B): inserted (with effect on 30 June 2009), on 6 October 2009, by section 29(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 2(4) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 29(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 2(4): repealed (with effect on 30 June 2009), on 6 October 2009, by section 29(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 2 list of defined terms attributable CFC amount: inserted (with effect on 30 June 2009), on 6 October 2009, by section 29(5)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 2 list of defined terms branch equivalent income: repealed (with effect on 30 June 2009), on 6 October 2009, by section 29(5)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 2 list of defined terms net attributable CFC income: inserted (with effect on 30 June 2009), on 6 October 2009, by section 29(5)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 2 list of defined terms non-attributing active CFC: inserted (with effect on 30 June 2009), on 6 October 2009, by section 29(5)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 2 list of defined terms non-attributing Australian CFC: inserted (with effect on 30 June 2009), on 6 October 2009, by section 29(5)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CQ 3 Calculation of attributed CFC income

The amount of attributed CFC income is calculated under the rules in sections EX 18 to EX 20 (which relate to the calculation of attributed CFC income or loss).
Defined in this Act: amount, attributed CFC income
Compare: 2004 No 35 s CQ 3

Foreign investment fund income

CQ 4 Foreign investment fund income

FIF income of a person is income.
Defined in this Act: FIF income, income
Compare: 2004 No 35 s CQ 4

CQ 5 When FIF income arises

General rule
(1) A person has FIF income in an income year if—
- (a) at any time in the year, the person has—
  - (i) rights in a foreign company, or a foreign superannuation scheme, or an entity listed in schedule 25, part A (Foreign investment funds); or
  - (ii) rights under a life insurance policy issued by a non-resident; and
- (b) at that time, the rights are an attributing interest in a FIF under section EX 29 (Attributing interests in FIFs); and
- (c) at that time, the rights are not exempt from being an attributing interest in a FIF under any of—
  - (i) the exemption for ASX-listed Australian companies in section EX 31 (Exemption for ASX-listed Australian companies):
  - (ii) the exemption for Australian unit trusts with 25% turnover in section EX 32 (Exemption for Australian unit trusts with 25% turnover):
  - (iii) the exemption for Australian regulated superannuation savings in section EX 33 (Exemption for Australian regulated superannuation savings):
  - (iv) the CFC rules exemption in section EX 34 (CFC rules exemption):
  - (v) the exemption for a 10% or greater interest in a grey list company in section EX 35 (Exemption for 10% or greater interest in grey list company):
  - (vi) the 10-year exemption for a venture capital company emigrating to a grey list country in section EX 36 (Venture capital company emigrating to grey list country: 10-year exemption):
  - (vii) the 10-year exemption for a grey list company owning a New Zealand venture capital company in section EX 37 (Grey list company owning New Zealand venture capital company: 10-year exemption):
  - (viii) the exemption for an employee share purchase scheme of a grey list company in section EX 38 (Exemption for employee share purchase scheme of grey list company):
  - (ix) the terminating exemption for a grey list company with numerous New Zealand shareholders in section EX 39 (Terminating exemption for grey list company with numerous New Zealand shareholders):
  - (x) the terminating exemption for a grey list company investing in Australasian equities in section EZ 32 (Terminating exemption for grey list FIF investing in Australasian listed equities):
  - (xi) the foreign exchange control exemption in section EX 40 (Foreign exchange control exemption):
  - (xii) the exemption for a non-resident or transitional resident in section EX 41 (Income interest of non-resident or transitional resident):
  - (xiii) the immigrant’s accrued superannuation entitlement exemption in section EX 42 (New resident’s accrued superannuation entitlement exemption):
  - (xiv) the non-resident’s annuity or pension exemption in section EX 43 (Non-resident’s pension or annuity exemption); and
- (d) if the person is a natural person and not acting as a trustee, the total cost, calculated under section EX 68 (Measurement of cost), of attributing interests in FIFs that the person holds at any time in the year when the person is a New Zealand resident is more than $50,000; and
- (e) if the person is acting as trustee of a trust that meets the requirements of subsection (5), the total cost, calculated under section EX 68, of attributing interests in FIFs that the person holds at any time in the year is more than $50,000; and
- (f) at any time in the year, the person is a New Zealand resident who is not a transitional resident and holds the attributing interest; and
- (g) under the relevant calculation method chosen by the person, an income amount is calculated for the year under sections EX 44 to EX 56 (which relate to the calculation of FIF income or loss), EX 60 or EX 61 (which relate to top-up FIF income).
Treatment of transaction under section EX 63, EX 65, or EX 67
(1B) If a person is treated under section EX 63(5), EX 65, or EX 67 (which relate to changes in method or application of FIF rules) as disposing of or acquiring rights in an income year, the disposal or acquisition is ignored for the purposes of subsection (1)(d) and (e).
Look-through calculation methods
(2) Despite subsection (1), if the calculation method is the accounting profits method or branch equivalent method,—
- (a) FIF income arises in the income year only if the relevant accounting period of the FIF ends during the year; and
- (b) the tests in subsection (1)(a), (b), (c), and (f) are applied on the basis that references in subsection (1)(a), (b), (c), and (f) to any time in the year are read as references to any time in the relevant accounting period.
FIF income from CFC with FIF interest
(3) FIF income also includes an additional amount that a person with an income interest of 10% or more in a CFC has in an income year under section EX 58 (Additional FIF income or loss if CFC owns FIF), whether or not the CFC is a non-attributing Australian CFC under section EX 22 (Non-attributing Australian CFCs).
Treated as derived while person New Zealand resident
(4) FIF income of a person who has stopped being a New Zealand resident is treated as being derived while the person was a New Zealand resident.
Requirements for trustees
(5) Subsection (1)(e) applies to the trustee of a trust for an income year if—
- (a) the trust is of the estate of a deceased person and the income year begins on or before the day that is 5 years after the person’s death:
- (b) the settlor of the trust—
  - (i) is a relative or legal guardian of a beneficiary of the trust, or a person associated with a relative or legal guardian of a beneficiary of the trust; and
  - (ii) is required by a court order to pay damages or compensation to the beneficiary:
- (c) the settlor of the trust—
  - (i) is the estate of a deceased person; and
  - (ii) is required by a court order to settle on the trust the proceeds of damages or compensation for the beneficiaries of the trust:
- (d) the settlor of the trust is the Accident Compensation Corporation.
Defined in this Act: accounting period, accounting profits method, amount, associated person, attributing interest, branch equivalent method, calculation method, CFC, FIF, FIF income, foreign company, foreign superannuation scheme, grey list, grey list company, income, income interest, income year, life insurance policy, New Zealand resident, non-attributing Australian CFC, non-resident, relative, shareholder, transitional resident, trustee, unit trust
Compare: 2004 No 35 s CQ 5
Section CQ 5(1)(d): amended, on 1 April 2008, by section 322(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CQ 5(1)(e): amended, on 1 April 2008, by section 322(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CQ 5(1B) heading: inserted, on 1 April 2008, by section 322(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CQ 5(1B): inserted, on 1 April 2008, by section 322(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CQ 5(3) heading: substituted (with effect on 30 June 2009), on 6 October 2009, by section 30(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 5(3): substituted (with effect on 30 June 2009), on 6 October 2009, by section 30(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 5 list of defined terms non-attributing Australian CFC: inserted (with effect on 30 June 2009), on 6 October 2009, by section 30(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CQ 6 Calculation of FIF income

The amount of any FIF income is calculated, using the relevant calculation method, under sections EX 44 to EX 61 (which relate to the calculation of FIF income or loss).
Defined in this Act: amount, calculation method, FIF income
Compare: 2004 No 35 s CQ 6

CQ 7 Treatment of attributing interests subject to returning share transfer

[Repealed]
Section CQ 7: repealed on 6 October 2009, by section 31 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CQ 7: added, on 1 April 2008, by section 323 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subpart CR—Income from insurance

Subpart CR heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 32 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CR 1 Income of life insurer

Income: premium loading
(1) The premium loading that a life insurer has in an income year is income of the life insurer in the income year.
Income: mortality profit
(2) The mortality profit that a life insurer has in an income year is income of the life insurer in the income year.
Income: discontinuance profit
(3) The discontinuance profit that a life insurer has in an income year is income of the life insurer in the income year.
Income: policyholder income
(4) The policyholder income that a life insurer has in an income year is income of the life insurer in the income year.
Income: disposal amount
(5) An amount that a life insurer derives from disposing of any property of their life insurance business is income of the life insurer.
Disposals at below market value
(6) Section GC 3 (Disposals by life insurers) may apply to treat a life insurer as receiving an amount on disposal of property.
Defined in this Act: amount, business, discontinuance profit, income, income year, life insurance, life insurer, mortality profit, policyholder income, premium loading, property
Compare: 2004 No 35 s CR 1

CR 2 Amount of income of life insurer

Premium loading
(1) The premium loading that a life insurer has in an income year is quantified under sections EY 15 to EY 24 (which relate to premium loading).
Mortality profit
(2) The mortality profit that a life insurer has in an income year is quantified under sections EY 25 to EY 34 (which relate to mortality profit).
Discontinuance profit
(3) The discontinuance profit that a life insurer has in an income year is quantified under sections EY 35 to EY 41 (which relate to discontinuance profit).
Policyholder income
(4) The policyholder income that a life insurer has in an income year is quantified under sections EY 42 to EY 45 (which relate to policyholder income).
Disposal of property
(5) The amount of income that a life insurer derives from disposing of any property of their life insurance business is quantified under section EY 46 (Income from disposal of property).
Defined in this Act: amount, business, discontinuance profit, income, income year, life insurance, life insurer, mortality profit, policyholder income, premium loading, property
Compare: 2004 No 35 s CR 2

CR 3 Income of non-resident general insurer

What this section applies to
(1) This section applies to a premium that is treated as derived from New Zealand under section YD 8 (Apportionment of premiums derived by non-resident general insurers) if—
- (a) an insured person pays the premium to an insurer for insurance of any of the kinds described in subsection (3); and
- (b) the premium meets all 3 conditions in subsection (4); and
- (c) the premium is not excluded from the application of this section by section YD 8(6).
Amount of income
(2) Ten percent of the gross premium derived by the insurer is income of the insurer.
Kinds of insurance
(3) The kinds of insurance referred to in subsection (1)(a) are—
- (a) general insurance:
- (b) a guarantee against risk given by an insurer to an insured person if—
  - (i) the insured person is liable to pay a premium to the insurer for the guarantee; and
  - (ii) the insured person is associated with the insurer:
- (c) a guarantee against risk given by an insurer to an insured person if—
  - (i) the insured person is liable to pay a premium to the insurer for the guarantee; and
  - (ii) the risk arises from money lent to the insured person; and
  - (iii) the amounts the insured person is liable to pay for the money are significantly less than they would otherwise have been because of the guarantee; and
  - (iv) the effect of the guarantee on the amounts payable is more than an incidental effect, or comes about as more than an incidental purpose, of the insurer’s giving the guarantee.
Conditions for premium
(4) The premium referred to in subsection (1)(b) is—
- (a) a premium derived by an insurer who is not resident in New Zealand when they derive it:
- (b) a premium that is not attributable to a fixed establishment of the insurer in New Zealand through which they carry on business in New Zealand:
- (c) a premium to which at least 1 of the following applies:
  - (i) the insured person from whom the premium is derived is resident in New Zealand; or
  - (ii) the insurance contract from which the premium is derived is offered or entered into in New Zealand; or
  - (iii) the insurance contract from which the premium is derived is entered into for the purposes of a business carried on by the insured person in New Zealand through a fixed establishment in New Zealand.
Defined in this Act: amount, business, derived from New Zealand, fixed establishment, general insurance, gross, income, insurance, insurance contract, insured person, insurer, money lent, New Zealand, non-resident, offered or entered into in New Zealand, pay, premium, resident in New Zealand
Compare: 2004 No 35 ss FC 13, FC 14(2)

CR 4 Income for general insurance outstanding claims reserve

What this section applies to
(1) This section applies for—
- (a) an insurer who––
  - (i) uses IFRS 4, Appendix D for general insurance contracts:
  - (ii) is a life insurer who has general insurance contracts; and
- (b) general insurance contracts, excluding contracts having premiums to which section CR 3 (Income of non-resident general insurer) applies.
Formula for insurer's OCR income
(2) For an income year (the current year), an insurer has income of the amount by which zero is less than the amount calculated using the formula—
opening outstanding claims reserve
− closing outstanding claims reserve.

Definition of items in formula
(3) In the formula,—
- (a) opening outstanding claims reserve is—
  - (i) the amount of the insurer’s closing outstanding claims reserve for the income year before the current year (the prior year); or
  - (ii) the amount of the insurer's reserve for outstanding claims liability, calculated at the end of the prior year, using the basis the insurer used for tax purposes in that prior year, if the current year is the first year that this section applies to the insurer:
- (b) closing outstanding claims reserve is the amount of the insurer’s outstanding claims reserve, calculated at the end of the current year.
Defined in this Act: amount, general insurance contract, IFRS 4, income, income year, insurer, life insurer, outstanding claims reserve
Section CR 4: added (with effect on 1 April 2008), on 6 October 2009, by section 34(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Subpart CS—Superannuation funds

Withdrawals

CS 1 Withdrawals

When this section applies
(1) This section applies when a withdrawal is made from a superannuation fund if—
- (a) the fund is—
  - (i) a fund to which the member's employer has made for the member's benefit an employer's superannuation cash contribution; or
  - (ii) a fund that has received a transfer from another superannuation fund for the member; and
- (b) the withdrawal is related to the member’s membership of the fund; and
- (c) the application of this section to the withdrawal is not excluded by any of sections CS 2 to CS 9.
Income of superannuation fund from withdrawal
(2) The superannuation fund derives from the withdrawal an amount of income calculated using the formula—
Definition of items in formula
(3) The items in the formula are defined in subsections (4) to (6).
Withdrawal
(4) Withdrawal is the total of—
- (a) the amount of money that is withdrawn from the superannuation fund:
- (b) the market value of the part of the withdrawal that is not an amount of money, on the date of the withdrawal.
Other contributions
(5) Other contributions is the part of the withdrawal that the trustee of the superannuation fund establishes is not employer-sourced superannuation savings.
Tax rate
(6) Tax rate is the basic rate of income tax set out in schedule 1, part A, clause 3 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits).
Reduction of income
(7) The superannuation fund may reduce the income by 25% for each income year to which both the following apply:
- (a) the income year is 1 of the 4 income years before the income year in which the withdrawal is made; and
- (b) in the corresponding tax year, the total of the member's taxable income and the employer's superannuation cash contributions made for the member's benefit is less than $70,000.
Timing of income
(8) The income is allocated as follows:
- (a) if the superannuation fund is wound up or becomes a foreign superannuation scheme, the income is allocated to the income year in which the withdrawal is made:
- (b) in any other case, the income is allocated to the income year following the income year in which the withdrawal is made.
Application of Tax Administration Act 1994
(9) Sections 32A to 32C of the Tax Administration Act 1994 apply when this section applies.
Defined in this Act: amount, employer, employer-sourced superannuation savings, employer's superannuation cash contribution, foreign superannuation scheme, income, income tax, income year, member, superannuation fund, tax year, taxable income, trustee, withdrawal
Compare: 2004 No 35 s CS 1
Section CS 1(1)(a)(i): substituted (with effect on 1 April 2008), on 6 October 2009, by section 35(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 1(6) Tax rate: amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CS 1(6) Tax rate: amended, on 1 April 2008, by section 324 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CS 1(7)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 35(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 1(7)(b): amended, on 1 October 2008, by section 13(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section CS 1 list of defined terms employer's superannuation cash contribution: inserted (with effect on 1 April 2008), on 6 October 2009, by section 35(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 1 list of defined terms employer's superannuation contribution: repealed (with effect on 1 April 2008), on 6 October 2009, by section 35(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Exclusions

CS 2 Exclusions of withdrawals of various kinds

Withdrawal of member’s contributions
(1) Section CS 1 does not apply to a withdrawal of a member’s contributions.
Withdrawal of employer’s contributions
(2) Section CS 1 applies to a withdrawal of the employer-sourced superannuation savings for a member’s benefit only if—
- (a) the employer increases the level of the employer's superannuation cash contributions on and after 1 April 2000, as compared with the level in the last pay period ending before 1 April 2000; and
- (b) the employer does not come within any of subsection (3)(a) to (c).
Increase not treated as such
(3) An employer who increases the level of employer's superannuation cash contributions is treated as not doing so—
- (a) to the extent to which the employer increases the level by making additional employer's superannuation cash contributions for the member’s benefit to compensate for underpaying employer's superannuation cash contributions for the member’s benefit; or
- (b) if the increase is required by a trust deed or a contract, or an amendment to a trust deed or a contract, and the requirement existed before 1 April 2000; or
- (c) if the level of employer's superannuation cash contributions does not change as a percentage of salary as between the level on and after 1 April 2000 and the level in the last pay period ending before 1 April 2000.
Superannuation fund administration costs
(4) Section CS 1 does not apply to a withdrawal for fees and expenses associated with the management and marketing of the superannuation fund.
Withdrawals from KiwiSaver schemes to buy first home
[Repealed]
(5) [Repealed]
Life, health, sickness, or accident insurance
(6) Section CS 1 does not apply to—
- (a) a withdrawal for the payment of premiums for life insurance, health insurance, sickness insurance, or accident insurance held by or for a member of the superannuation fund, whether the insurance is group insurance or individual insurance; or
- (b) a withdrawal to pay an amount claimed under insurance described in paragraph (a).
Transfer between funds
(7) Section CS 1 does not apply to a withdrawal that takes the form of a direct transfer of an amount from a superannuation fund to another superannuation fund.
Transfer from wound-up fund
(8) Section CS 1 does not apply to a withdrawal that takes the form of a direct transfer to another superannuation fund of an amount from a superannuation fund that is wound up.
Amount in fund on certain dates
(9) Section CS 1 does not apply to a withdrawal of an amount, or earnings on it, that is in the superannuation fund—
- (a) on the fund’s balance date that precedes 1 April 2000, if a trustee of the fund calculates the amount in the fund on the balance date; or
- (b) at the close of business on 31 March 2000, in any other case.
Interpretation of subsection (9)
(10) For the purposes of subsection (9),—
- (a) the amount that is in the superannuation fund is calculated according to market value:
- (b) an amount in a superannuation fund includes employer's superannuation cash contributions received after the fund’s balance date that precedes 1 April 2000 or 31 March 2000, as applicable, if the contributions relate to a pay period ending on or before the fund’s balance date or 31 March 2000, as applicable.
Application of Tax Administration Act 1994
(11) Section 32C of the Tax Administration Act 1994 applies when this section applies.
Defined in this Act: amount, employer, employer-sourced superannuation savings, employer’s superannuation cash contribution, life insurance, member, member’s contribution, pay, pay period, premium, superannuation fund, trustee, withdrawal
Compare: 2004 No 35 s CS 2
Section CS 2(2)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 36(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 2(3): amended (with effect on 1 April 2008), on 6 October 2009, by section 36(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 2(3)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 36(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 2(3)(c): amended (with effect on 1 April 2008), on 6 October 2009, by section 36(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 2(10)(b): amended (with effect on 1 April 2008), on 6 October 2009, by section 36(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 2(5) heading: repealed, on 1 April 2008, pursuant to section 325 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CS 2(5): repealed, on 1 April 2008, by section 325 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CS 2 list of defined terms employer's superannuation cash contribution: inserted (with effect on 1 April 2008), on 6 October 2009, by section 36(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 2 list of defined terms employer's superannuation contribution: repealed (with effect on 1 April 2008), on 6 October 2009, by section 36(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 2 list of defined terms KiwiSaver scheme: 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).

CS 3 Exclusion of withdrawal on grounds of hardship

Significant financial hardship
(1) Section CS 1 does not apply to a withdrawal to the extent to which the withdrawal is necessary to alleviate significant financial hardship.
Meaning of significant financial hardship
(2) In this section, significant financial hardship includes significant financial difficulties that arise because of—
- (a) a member’s inability to meet minimum living expenses; or
- (b) a member’s inability to carry out their usual occupation because of their temporary or permanent illness, injury, or disability; or
- (c) a member’s inability to meet mortgage repayments on their principal family residence resulting in the mortgagee seeking to enforce the mortgage on the residence; or
- (d) the cost of modifying a residence to meet special needs arising from a disability of a member or a member’s dependant; or
- (e) the cost of medical treatment for an illness or injury of a member or a member’s dependant; or
- (f) the cost of palliative care for a member or a member’s dependant; or
- (g) the cost of a funeral for a deceased member or a member’s deceased dependant.
Defined in this Act: member, mortgage, significant financial hardship, pay, withdrawal
Compare: 2004 No 35 s CS 3

CS 4 Exclusion of withdrawal to settle division of relationship property

Section CS 1 does not apply to a withdrawal to the extent to which the withdrawal is necessary to settle the division of relationship property under the Property (Relationships) Act 1976 upon the ending of a marriage, civil union, or de facto relationship for the purpose of whichever is applicable of sections 2A(2), 2AB(2) and 2D(4) of that Act.
Defined in this Act: withdrawal
Compare: 2004 No 35 s CS 4

CS 5 Exclusion of withdrawal paid as annuity or pension

Section CS 1 does not apply to a withdrawal if the amount withdrawn is—
- (a) used to buy an annuity that is payable for life or over 10 or more years; or
- (b) payable as an annuity for life or over 10 or more years; or
- (c) payable as a pension for life or over 10 or more years.
Defined in this Act: amount, withdrawal, year,
Compare: 2004 No 35 s CS 5

CS 6 Exclusion of withdrawal on partial retirement

Partial retirement
(1) Section CS 1 does not apply to a withdrawal made on or after the date on which a member partially retires, if, on the date the withdrawal is made,—
- (a) the member is employed for 30 hours per week or less; and
- (b) the member has reduced their working hours because they are nearing full retirement; and
- (c) the member stops contributing to the superannuation fund; and
- (d) the member’s employer stops making employer's superannuation cash contributions to the superannuation fund for the member’s benefit; and
- (e) the member gives a notice as described in subsection (2) to the trustees of the superannuation fund.
Notice
(2) The member’s notice to the trustees of the superannuation fund must—
- (a) state that the member does not intend to increase their hours in paid employment in the future; and
- (b) state that the member’s employer understands that the member’s hours in paid employment will not increase in the future; and
- (c) be signed by the employer to acknowledge that the employer’s understanding is as described in paragraph (b).
Later withdrawals
(3) A member who makes a withdrawal after giving notice as required by subsection (2) is not required to give notice for each later withdrawal if their intention has not changed.
Defined in this Act: employer, employer's superannuation cash contributions, member, notice, pay, superannuation fund, trustee, withdrawal,
Compare: 2004 No 35 s CS 6
Section CS 6(1)(d): amended (with effect on 1 April 2008), on 6 October 2009, by section 37(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 6 list of defined terms employer's superannuation cash contributions: inserted (with effect on 1 April 2008), on 6 October 2009, by section 37(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 6 list of defined terms employer's superannuation contributions: repealed (with effect on 1 April 2008), on 6 October 2009, by section 37(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CS 7 Exclusion of withdrawal when member ends employment

Ending employment because of injury, disability, or death
(1) Section CS 1 does not apply to a withdrawal made on or after the date on which a member ends their employment with an employer if the member ends their employment because the member is injured or disabled or dies.
Ending employment after period of employer's superannuation cash contributions
(2) Section CS 1 does not apply to a withdrawal from a superannuation fund of employer's superannuation cash contributions that have been made for the member by the employer, or another employer, if—
- (a) the member has been in employment throughout the period that—
  - (i) starts on the 1st day of the tax year that starts 2 tax years before the start of the tax year in which the member ends their employment; and
  - (ii) ends on the day on which the member ends their employment; and
- (b) the employer's superannuation cash contributions are made to the superannuation fund or to a superannuation fund that has transferred, whether directly or indirectly, the funds relating to its members to the superannuation fund; and
- (c) the employer's superannuation cash contributions have not been part of a withdrawal, other than a transfer between superannuation funds that is referred to in paragraph (b); and
- (d) the withdrawal—
  - (i) meets the requirements of subsections (3) and (4):
  - (ii) meets the requirements of subsection (5):
  - (iii) does not include employer-sourced superannuation savings of more than the amount found by multiplying $5,000 by the number of income years for which the employer's superannuation cash contributions were made on behalf of the member; and
- (e) the withdrawal is made at the time described in subsection (6).
Limited increase in employer contributions between income years
(3) A withdrawal meets the requirements of this subsection if, at the time of the withdrawal, employer's superannuation cash contributions have been made for the member by the employer, or another employer, such that—
- (a) the contributions relate to some or all of a period of employment that—
  - (i) starts on the 1st day of the tax year that starts 2 tax years before the tax year in which the member ends their employment; and
  - (ii) ends on the day on which the member ends their employment; and
- (b) in each of the first 2 tax years in the period referred to in paragraph (a), the contributions—
  - (i) are in total less than 150% of the total of employer's superannuation cash contributions made for the member in the previous tax year:
  - (ii) meet the requirements of subparagraph (i) after the application of subsection (4); and
- (c) in the tax year in which the member ends their employment, the contributions—
  - (i) have an annualised value that is less than 150% of the employer's superannuation cash contributions made for the member in the previous tax year:
  - (ii) meet the requirements of subparagraph (i) after the application of subsection (4).
Increases disregarded under subsection (3)(b)(i) or (c)(i)
(4) For the purposes of subsection (3), employer's superannuation cash contributions to a superannuation fund that are 150% or more of the employer's superannuation cash contributions made in the previous tax year are treated as not being so—
- (a) to the extent to which the employer increases the level by making additional employer's superannuation cash contributions for the member’s benefit to compensate for underpaying employer's superannuation cash contributions for the member’s benefit; or
- (b) if the increase occurs before 1 April 2000; or
- (c) if the increase is required by a trust deed or a contract, or an amendment to a trust deed or a contract, and the requirement existed before 1 April 2000; or
- (d) if the employer starts making employer's superannuation cash contributions for a member’s benefit under a contract, or an amendment to a contract, that was signed before 1 April 2000; or
- (e) if the level of employer's superannuation cash contributions does not change as a percentage of salary as between the level on and after 1 April 2000 and the level in the last pay period ending before 1 April 2000.
Increases in employer contributions considered consistent by Commissioner
(5) A withdrawal meets the requirements of this subsection if, at the time of the withdrawal, employer's superannuation cash contributions have been made for the member by the employer, or another employer, such that—
- (a) the contributions relate to some or all of the period that—
  - (i) starts on the 1st day of the tax year that starts 2 tax years before the tax year in which the member ends their employment; and
  - (ii) ends on the day on which the member ends their employment; and
- (b) the Commissioner considers that the contributions are consistent in size and frequency with the employer's superannuation cash contributions for other employees in comparable positions; and
- (c) the Commissioner considers that the contributions are consistent in size and frequency during the period or periods to which the employer's superannuation cash contributions for the member relate.
Time for purposes of subsection (2)
(6) For the purposes of subsection (2), the times are—
- (a) on or after the date on which a member ends their employment with an employer; or
- (b) shortly before the date on which the member ends their employment, in anticipation of the member’s ending their employment.
Ending employment in any other case
(7) If a withdrawal is made on or after the date on which a member ends their employment with an employer and the application of section CS 1 is not excluded by subsection (1) or (2), section CS 1 applies only to the withdrawal of an amount equal to the employer-sourced superannuation savings calculated for the period starting on the first day of the tax year that starts 2 tax years before the date on which the member ends their employment and ending on the date of withdrawal.
What is not ending employment
(8) Section CS 10 describes a case in which a member is treated as not ending their employment for the purposes of this section.
Defined in this Act: amount, employer, employer’s superannuation cash contribution, employer-sourced superannuation savings, member, pay, pay period, superannuation fund, tax year, withdrawal,
Compare: 2004 No 35 s CS 7
Section CS 7(2) heading: amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(2)(b): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(2)(c): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(2)(d)(iii): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(3): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(3)(b)(i): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(3)(c)(i): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(4): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(4)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(4)(d): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(4)(e): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(5): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(5)(b): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7(5)(c): amended (with effect on 1 April 2008), on 6 October 2009, by section 38(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7 list of defined terms employer's superannuation cash contribution: inserted (with effect on 1 April 2008), on 6 October 2009, by section 38(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CS 7 list of defined terms employer's superannuation contribution: repealed (with effect on 1 April 2008), on 6 October 2009, by section 38(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CS 8 Exclusion of withdrawal when member ends employment: lock-in rule

Deferral of withdrawal
(1) Section CS 1 does not apply to a withdrawal of an amount made 2 years after the date on which a member ends their employment with an employer if, when the member ends their employment, the member defers the withdrawal for 2 years after the date of ending their employment.
What is not ending employment
(2) Section CS 10 describes a case in which a member is treated as not ending their employment for the purposes of this section.
Defined in this Act: amount, employer, member, withdrawal, year,
Compare: 2004 No 35 s CS 8

CS 9 Exclusion of withdrawal from defined benefit fund when member ends employment

Defined benefit fund
(1) Section CS 1 does not apply to a withdrawal made from a defined benefit fund—
- (a) on or after the date on which a member ends their employment with an employer, irrespective of the member’s length of service; or
- (b) shortly before the date on which a member ends their employment with an employer, in anticipation of the member’s ending their employment, irrespective of the member’s length of service.
What is not ending employment
(2) Section CS 10 describes a case in which a member is treated as not ending their employment for the purposes of this section.
Defined in this Act: defined benefit fund, employer, member, withdrawal,
Compare: 2004 No 35 s CS 9

CS 10 When member treated as not ending employment

When this section applies
(1) This section applies for the purposes of sections CS 7 to CS 9.
Transfer to related employer
(2) A member is treated as not ending their employment with an employer (employer A) if the member transfers from employer A to another employer (employer B) and employer B is a related employer of employer A.
Related employer
(3) Employer B is a related employer of employer A if employer B—
- (a) is treated as a separate employer from employer A; and
- (b) is—
  - (i) a branch or division of employer A; or
  - (ii) associated with employer A.
Defined in this Act: associated person, employer, member,
Compare: 2004 No 35 s CS 10

CS 10B Exclusion of permitted withdrawals from KiwiSaver schemes and complying superannuation funds

Section CS 1 does not apply to a permitted withdrawal from a KiwiSaver scheme or a complying superannuation fund.
Defined in this Act: complying superannuation fund, KiwiSaver scheme, permitted withdrawal
Compare: 2004 No 35 s CS 10B
Section CS 10B: inserted, on 1 April 2008, by section 123 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Transfers to or from superannuation funds and superannuation schemes

CS 11 Transfer by superannuation fund to another superannuation fund

Notification of nature of amount transferred
(1) An amount transferred by a superannuation fund (the transferor fund) to another superannuation fund (the transferee fund) retains its nature in the transferee fund if—
- (a) the transferee fund is not a defined benefit fund; and
- (b) the trustees of the transferor fund, the member’s past employer, or the member’s present employer give notice to the transferee fund of the nature of the amount transferred.
No notification of nature of amount transferred
(2) If the trustees of the transferor fund, the member’s past employer, or the member’s present employer do not give notice to the transferee fund of the nature of the amount transferred, the amount transferred is treated as being, in the transferee fund, the employer-sourced superannuation savings.
Notification of nature of amounts transferred to defined benefit fund
(3) Amounts to which section CS 2(1) or (8) apply that are transferred by a superannuation fund to a defined benefit fund retain their nature in the defined benefit fund if the trustees of the superannuation fund give notice to the defined benefit fund of the nature of the amounts.
No notification of nature of amounts transferred to defined benefit fund
(4) If the trustees of the superannuation fund do not give notice to the defined benefit fund of the nature of the amounts to which section CS 2(1) or (8) apply, section CS 1 applies to the amount transferred when it is withdrawn from the defined benefit fund unless the application of section CS 1 is excluded by any of sections CS 2 to CS 9.
Defined in this Act: amount, defined benefit fund, employer, employer-sourced superannuation savings, member, notice, notify, superannuation fund, trustee,
Compare: 2004 No 35 s CS 11

CS 12 Transfer from superannuation scheme to superannuation fund

An amount transferred directly from a superannuation scheme to a superannuation fund is treated as being, in the superannuation fund, the member’s contribution.
Defined in this Act: amount, member’s contribution, superannuation fund, superannuation scheme,
Compare: 2004 No 35 s CS 12

CS 13 Investment by superannuation fund in another superannuation fund

Superannuation fund investing in another superannuation fund
(1) If a superannuation fund (superannuation fund A) is a member of another superannuation fund (superannuation fund B),—
- (a) superannuation fund A’s investment in superannuation fund B is not a transfer; and
- (b) a withdrawal of an amount related to superannuation fund A’s investment in superannuation fund B is not a transfer; and
- (c) a withdrawal of an amount related to superannuation fund A’s investment in superannuation fund B is not a withdrawal to which section CS 2 applies.
Superannuation fund investing in superannuation scheme
(2) If a superannuation fund is a member of a superannuation scheme,—
- (a) the fund’s investment in the scheme is not a transfer; and
- (b) a withdrawal by the fund related to the investment is not a transfer.
Defined in this Act: amount, member, superannuation fund, superannuation scheme, withdrawal,
Compare: 2004 No 35 s CS 13

Treatment of amounts when superannuation fund becomes superannuation scheme or vice versa

CS 14 Superannuation fund becomes superannuation scheme

Effect of change
(1) If a superannuation fund becomes a superannuation scheme, other than a foreign superannuation scheme,—
- (a) an amount in the fund at the time it becomes a superannuation scheme retains its nature; and
- (b) the following sections apply to a withdrawal from the superannuation scheme as if the scheme were a superannuation fund:
  - (i) sections CS 1 to CS 17 and RD 72 (Recovery of tax paid by superannuation funds); and
  - (ii) sections 32A, 32B, and 32C of the Tax Administration Act 1994.
Market value of amounts
(2) The amount in the superannuation fund at the time it becomes a superannuation scheme is calculated according to market value.
Defined in this Act: amount, foreign superannuation scheme, superannuation fund, superannuation scheme, withdrawal,
Compare: 2004 No 35 s CS 14

CS 15 Superannuation fund becomes foreign superannuation scheme

If a superannuation fund becomes a foreign superannuation scheme, every amount in the superannuation fund is treated as if it had been withdrawn immediately before the fund became a foreign superannuation scheme.
Defined in this Act: amount, foreign superannuation scheme, superannuation fund,
Compare: 2004 No 35 s CS 15

CS 16 Superannuation scheme becomes superannuation fund

If a superannuation scheme becomes a superannuation fund, every amount in the superannuation scheme at the time it becomes a superannuation fund is treated as being a member’s contribution to the superannuation fund.
Defined in this Act: amount, member’s contribution, superannuation fund, superannuation scheme,
Compare: 2004 No 35 s CS 16

Treatment of distributions when superannuation fund wound up

CS 17 Superannuation fund wound up

When a superannuation fund is wound up, a distribution related to a member’s membership is treated as being a withdrawal.
Defined in this Act: member, superannuation fund, withdrawal,
Compare: 2004 No 35 s CS 17

Treatment of loans to members

CS 18 Value of loan treated as fund income

When this section applies
(1) This section applies when both of the following tests are met:
- (a) a superannuation fund provides a loan in an income year to a member of the fund, directly or indirectly, and whether by one transaction or a series of transactions:
- (b) the interest, if any, accruing on the loan is less than the prescribed rate of interest which applies for fringe benefit tax purposes.
Interest shortfall
(2) The fund is treated as deriving income in the income year equal to the amount, if any, by which the interest that would have accrued on the loan for the income year at the prescribed rate of interest is more than the actual interest, if any, that arises on the loan for the income year.
Defined in this Act: fringe benefit tax, income year, interest, member, prescribed rate of interest, superannuation fund,
Compare: 2004 No 35 s GD 6(1), (2)

Subpart CT—Income from petroleum mining

CT 1 Disposal of exploratory material or petroleum mining asset

Income: disposal of exploratory material
(1) The consideration that a petroleum miner derives from disposing of exploratory material is income of the petroleum miner.
Income: disposal of petroleum mining asset
(2) The consideration that a petroleum miner derives from disposing of a petroleum mining asset is income of the petroleum miner.
Relationship with section CX 43
(3) This section is overridden by section CX 43 (Farm-out arrangements for petroleum mining).
Defined in this Act: consideration, dispose, exploratory material, income, petroleum miner, petroleum mining asset,
Compare: 2004 No 35 s CT 1

CT 2 Damage to assets

The consideration that a petroleum miner derives for damage to an asset of the kind described in section CT 7(1)(b) or (c) is income of the petroleum miner.
Defined in this Act: consideration, income, petroleum miner,
Compare: 2004 No 35 s CT 2

CT 3 Exploratory well used for commercial production

When this section applies
(1) This section applies when a petroleum miner uses an exploratory well for commercial production of petroleum, whether or not the well has been sealed and abandoned previously.
Income
(2) An amount equal to the amount of expenditure described in subsection (3) is treated as income of the petroleum miner.
Exploratory well expenditure
(3) The expenditure is exploratory well expenditure to which all the following apply:
- (a) it is directly attributable to drilling or acquiring the exploratory well; and
- (b) the petroleum miner or a holder of a previous interest in the well is or has been allowed a deduction for it as petroleum exploration expenditure; and
- (c) it is incurred in relation to the permit held currently by the petroleum miner, or a previous permit surrendered in exchange for the permit currently held under section 32(3) of the Crown Minerals Act 1991.
Timing of income
(4) The amount is allocated to the income year in which commercial production from the well starts.
Part interest
(5) If the petroleum miner has a part interest in the exploratory well when that well is first used for commercial production, the amount of expenditure treated as income under this section must bear the same proportion to the exploratory well expenditure specified in subsection (3) as that part interest bears to all interests in the well.
Defined in this Act: amount, commercial production, deduction, exploratory well, exploratory well expenditure, income, income year, permit, petroleum, petroleum exploration expenditure, petroleum miner, seal and abandonment,
Compare: 2004 No 35 s CT 3

CT 4 Partnership interests and disposal of part of asset

In this subpart, and in sections CX 42 (Disposal of ownership interests in controlled petroleum mining entities) and CX 43 (Farm-out arrangements for petroleum mining), unless the context requires otherwise,—
- (a) a partner is treated as having a share or interest in a petroleum permit or other property of a partnership to the extent of their interest in the income of the partnership:
- (b) references to the disposal of an asset apply equally to the disposal of part of an asset.
Defined in this Act: income, petroleum permit,
Compare: 2004 No 35 s CT 4

CT 5 Petroleum mining operations outside New Zealand

This subpart, and sections CX 42 (Disposal of ownership interests in controlled petroleum mining entities) and CX 43 (Farm-out arrangements for petroleum mining), apply, with any necessary modifications, to a petroleum miner who undertakes petroleum mining operations that are—
- (a) outside New Zealand and undertaken through a branch or a controlled foreign company; and
- (b) substantially the same as the petroleum mining activities governed by this subpart and sections CX 42 and CX 43.
Defined in this Act: controlled foreign company, New Zealand, petroleum miner, petroleum mining operations,
Compare: 2004 No 35 s CT 5

Definitions

CT 6 Meaning of petroleum miner

Meaning
(1) Petroleum miner, for a permit area, means a person who undertakes petroleum mining operations in the permit area.
Exclusion
(2) Petroleum miner does not include a person who undertakes petroleum mining operations for consideration that is not in the form of, or contingent on,—
- (a) the production of petroleum from the permit area; or
- (b) profits from the production of petroleum from the permit area; or
- (c) an interest or a right to an interest in the petroleum permit.
Activities: inclusions
[Repealed]
(3) [Repealed]
Activities: exclusions
[Repealed]
(4) [Repealed]
Defined in this Act: consideration, permit area, petroleum, petroleum miner, petroleum mining operations petroleum permit,
Compare: 2004 No 35 s CT 6
Section CT 6(1): substituted, on 1 April 2008, by section 326(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6(2): amended, on 1 April 2008, by section 326(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6(3) heading: repealed, on 1 April 2008, by section 326(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6(3): repealed, on 1 April 2008, by section 326(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6(4) heading: repealed, on 1 April 2008, by section 326(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6(4): repealed, on 1 April 2008, by section 326(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6 list of defined terms petroleum mining operations: inserted, on 1 April 2008, by section 326(4)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CT 6 list of defined terms removal or restoration operations: repealed, on 1 April 2008, by section 326(4)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

CT 6B Meaning of petroleum mining operations

Meaning
(1) Petroleum mining operations means an activity included in those described in subsection (2) and not excluded by subsection (3).
Activities: inclusions
(2) The activities are those carried out in connection with—
- (a) prospecting or exploring for petroleum:
- (b) developing a permit area for producing petroleum:
- (c) producing petroleum:
- (d) processing, storing, or transmitting petroleum before its dispatch to a buyer, consumer, processor, refinery, or user:
- (e) removal or restoration operations.
Activities: exclusions
(3) The activities do not include further treatment to which all the following apply:
- (a) it occurs after the well stream has been separated and stabilised into crude oil, condensate, or natural gas; and
- (b) it is done—
  - (i) by liquefaction or compression; or
  - (ii) for the extraction of constituent products; or
  - (iii) for the production of derivative products; and
- (c) it is not treatment at the production facilities.
Defined in this Act: permit area, petroleum, removal or restoration operations
Compare: 2004 No 35 s CT 6B.
Section CT 6B: inserted, on 1 April 2008, by section 327 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

CT 7 Meaning of petroleum mining asset

Meaning
(1) Petroleum mining asset means—
- (a) a petroleum permit:
- (b) an asset that—
  - (i) is acquired by a petroleum miner for the purpose of carrying on an activity described in subsection (3) in a permit area or areas; and
  - (ii) has an estimated useful life that depends on, and is no longer than, the remaining life of the petroleum permit for the area or areas:
- (c) a share or partial interest in an asset described in paragraph (a) or (b).
Exclusion
(2) Petroleum mining asset does not include land.
Activities: inclusions
(3) The activities are those carried out in connection with—
- (a) developing a permit area for producing petroleum:
- (b) producing petroleum:
- (c) processing, storing, or transmitting petroleum before its dispatch to a buyer, consumer, processor, refinery, or user:
- (d) removal or restoration operations.
Activities: exclusions
(4) The activities do not include further treatment to which all the following apply:
- (a) it occurs after the well stream has been separated and stabilised into crude oil, condensate, or natural gas; and
- (b) it is done—
  - (i) by liquefaction or compression; or
  - (ii) for the extraction of constituent products; or
  - (iii) for the production of derivative products; and
- (c) it is not treatment at the production facilities.
Defined in this Act: land, permit area, petroleum, petroleum miner, petroleum mining asset, petroleum permit, removal or restoration operations,
Compare: 2004 No 35 s CT 7

Subpart CU—Income from mineral mining

Introductory provision

CU 1 Mining company’s 2 kinds of income

Income derived by a mining company is either income from mining or income other than income from mining.
Defined in this Act: income, income from mining, mining company,
Compare: 2004 No 35 s CU 1

Income from mining

CU 2 Mining company that processes or manufactures

When this section applies
(1) This section applies when—
- (a) a mining company—
  - (i) obtains specified minerals from its mining operations; or
  - (ii) through a combination of its mining operations and its associated mining operations, brings specified minerals to the stage at which they are ready to be processed or used in a manufacturing operation; and
- (b) the company produces products by processing the specified minerals or using them in a manufacturing operation; and
- (c) the company disposes of the products.
Income classified
(2) For the income year in which the mining company disposes of the products, the Commissioner must classify the mining company’s income from the disposal as income from mining or income other than income from mining. The Commissioner must classify the income by apportioning it under subsection (3) or by making a decision under subsection (4).
Apportionment
(3) In apportioning the income, the Commissioner must make an appropriate apportionment of the value of the stock of products on hand at the start and end of the income year and must take into account the matters the Commissioner considers relevant and appropriate, including—
- (a) the capital employed, or the expenditure or losses incurred, in the mining operations, associated mining operations, and processing of the specified minerals or the use of the specified minerals in a manufacturing operation:
- (b) the extent of the steps involved in the mining operations, associated mining operations, and processing of the specified minerals or the use of the specified minerals in a manufacturing operation.
Decision
(4) In making a decision, the Commissioner must take into account the amount that would have been—
- (a) the value received or receivable for the specified minerals if they had been disposed of in the income year to a wholly independent person in the state in which they resulted from the mining operations or the combination of mining operations and associated mining operations; and
- (b) the value of the products on hand at the end of the income year if the specified minerals from which they came had been valued for the purposes of subpart EB (Valuation of trading stock (including dealer’s livestock)) in the state in which they resulted from the mining operations or the combination of mining operations and associated mining operations.
Defined in this Act: amount, associated mining operations, Commissioner, income, income from mining, income year, mining company, mining operations, specified mineral,
Compare: 2004 No 35 s CU 2

CU 3 Disposal of assets

When this section applies
(1) This section applies when—
- (a) a mining company acquires an asset, including mining prospecting information or a mining or prospecting right, by incurring mining exploration expenditure or mining development expenditure; and
- (b) the company, whether or not still a mining company, disposes of the asset.
Exclusion
(2) This section does not apply when—
- (a) a mining company acquires an asset, including mining prospecting information or a mining or prospecting right, by incurring mining exploration expenditure or mining development expenditure; and
- (b) the company, whether or not still a mining company, passes the ownership of the asset to another person; and
- (c) the passing of ownership is not because the asset is sold to the other person; and
- (d) the company does not receive, and is not entitled to receive, consideration for the passing of ownership; and
- (e) the company and the other person deal with each other over the passing of ownership at arm’s length, even if they are associated persons at a time relevant to the passing of ownership.
Income
(3) The following are income from mining of the mining company:
- (a) the consideration that the company derives from the disposal of the asset, unless paragraph (b) applies:
- (b) in the cases described in subsections (4) to (7), the consideration specified in subsection (4) or (5) or (7).
Consideration other than in cash
(4) If some or all of the consideration for the disposal is other than in cash, and the disposal is not to an associated person, the consideration that is not in cash has the value agreed between the company and the person to whom the asset is disposed of. If the company and the person do not agree, or if the Commissioner considers that the value agreed is unreasonable, the consideration that is not in cash has the value that the Commissioner decides.
Disposal to associated person
(5) If the disposal is to an associated person, the consideration for the disposal is the market value that the asset has on the date of the disposal.
When subsection (7) applies
(6) Subsection (7) applies when—
- (a) the company disposes of the asset to a person acquiring it for use in carrying on their mining operations or associated mining operations or a mining venture; and
- (b) the company and the person give notice to the Commissioner that they have agreed to apply subsection (7); and
- (c) the notice is given to the Commissioner within 1 of the following times:
  - (i) the time in which the company is required to file a return of income for the income year in which it disposes of the asset:
  - (ii) a further time allowed by the Commissioner; and
- (d) the notice specifies an amount that—
  - (i) is no more than the market value that the asset has at the date of the disposal; and
  - (ii) is not less than the amount of any part of the consideration that is in cash.
Amount specified by parties to disposal
(7) The consideration for the disposal is the amount that the company and the person specify in the notice.
Defined in this Act: amount, asset, associated mining operations, associated person, Commissioner, company, income year, mining company, mining development expenditure, mining exploration expenditure, mining operations, mining or prospecting right, mining prospecting information, mining venture, notice, return of income,
Compare: 2004 No 35 s CU 3

CU 4 Compensation for lost, destroyed, or damaged assets

When sections CU 5 to CU 8 apply
(1) Sections CU 5 to CU 8 apply when—
- (a) a mining company acquires an asset by incurring mining exploration expenditure or mining development expenditure; and
- (b) the company is allowed a deduction for the expenditure under—
  - (i) section DU 1 (Mining exploration expenditure and mining development expenditure); or
  - (ii) section DZ 12(1)(a) (Mineral mining: 1954–2005); and
- (c) the asset is lost, destroyed, or damaged; and
- (d) the company, whether or not still a mining company,—
  - (i) is paid insurance, indemnity, or compensation for the loss, destruction, or damage; or
  - (ii) is entitled to receive payment for any scrap of the asset that it disposes of.
What sections CU 5 to CU 8 apply to
(2) Sections CU 5 to CU 8 apply to any asset (asset A) that a mining company acquires by incurring mining exploration expenditure or mining development expenditure, except for an asset (asset B) used to derive income other than income from mining to which section CU 10 is applied. Sections CU 5 to CU 8 apply to asset B only if it is later used to derive income from mining and section DU 5 (Non-mining asset used to derive income from mining) is applied to it.
Defined in this Act: asset, company, deduction, income, income from mining, mining company, mining development expenditure, mining exploration expenditure, pay,
Compare: 2004 No 35 s CU 4

CU 5 Compensation and scrap payment: income from mining

Income
(1) When, under section CU 4, this section applies, the total of the following amounts is income from mining of the mining company:
- (a) the amount of insurance, indemnity, or compensation paid; and
- (b) the amount, if any, payable to the company for the disposal of any scrap of the asset.
Timing of income
(2) The income from mining is allocated to the income year in which the insurance, indemnity, or compensation is paid.
Relationship with sections CU 6 to CU 8
(3) This section is overridden by sections CU 6 to CU 8.
Defined in this Act: amount, asset, income from mining, income year, mining company, pay,
Compare: 2004 No 35 s CU 5

CU 6 Compensation and scrap payment: use to replace or repair asset

Choosing between section CU 5 and sections CU 7 and CU 8
(1) If the mining company wants sections CU 7 and CU 8 to apply instead of section CU 5, it must comply with subsection (2).
Choosing sections CU 7 and CU 8
(2) The company must—
- (a) give notice to the Commissioner that the insurance, indemnity, or compensation will be used to replace or repair the asset; and
- (b) give the notice within the time in which the company must file a return of income for the income year in which the loss, destruction, or damage occurred; and
- (c) start the replacement or repair by the end of the second income year after the income year in which the loss, destruction, or damage occurred.
Defined in this Act: asset, Commissioner, income year, mining company, notice, return of income,
Compare: 2004 No 35 s CU 6

CU 7 Compensation and scrap payment: not income from mining

When, under sections CU 4 and CU 6, this section applies, neither of the following amounts is income from mining of the mining company:
- (a) the amount of insurance, indemnity, or compensation paid; or
- (b) the amount, if any, payable to the company for the disposal of any scrap of the asset.
Defined in this Act: amount, asset, income from mining, mining company, pay,
Compare: 2004 No 35 s CU 7

CU 8 Compensation and scrap payment: more than expenditure

When this section applies
(1) This section applies when—
- (a) the mining company complies with section CU 6(2); and
- (b) the company incurs expenditure in replacing or repairing the asset; and
- (c) the company has an excess amount because the expenditure is less than the total of the following:
  - (i) the amount of insurance, indemnity, or compensation paid; and
  - (ii) the amount, if any, payable to the company for the disposal of any scrap of the asset.
Income
(2) The excess amount is income from mining of the company, whether or not the company is still a mining company when the excess amount is determined.
Timing of income
(3) The income from mining is allocated to the income year in which the replacement or repair of the asset is completed or is treated as completed.
When replacement or repair treated as completed
(4) The replacement or repair, even if not completed, is treated as completed—
- (a) on the last day of the period, if any, considered by the Commissioner to be a reasonable period in which to complete the replacement or repair; or
- (b) on the day on which work on the replacement or repair stops; or
- (c) on the day on which the asset is transferred from the company’s mining operations and used, wholly or mainly, to derive income other than income from mining; or
- (d) on the day on which the company disposes of the asset other than for scrap; or
- (e) on the day on which the company stops being a mining company.
Limitation on calculation of excess amount
(5) Expenditure incurred after the day on which the work is treated as completed is not taken into account to determine the existence or amount of an excess amount for the purposes of subsection (1)(c).
Defined in this Act: amount, asset, Commissioner, company, income, income from mining, income year, mining company, mining operations, pay,
Compare: 2004 No 35 s CU 8

CU 9 Previous deduction for income appropriated

Income
(1) An amount equal to the amount for which a mining company is allowed a deduction under section DU 4 (Income appropriated to expenditure) is income from mining of the mining company.
Timing of income
(2) The income is allocated to the income year following the income year in which the mining company is allowed the deduction.
Company stops mining
(3) A mining company that stops being a mining company before the end of the income year to which the income is allocated is treated as if it were still a mining company in the income year.
Defined in this Act: amount, deduction, income from mining, income year, mining company,
Compare: 2004 No 35 s CU 9

CU 10 Mining asset used to derive income other than income from mining

When this section applies
(1) This section applies when—
- (a) a mining company acquires an asset by incurring mining exploration expenditure or mining development expenditure; and
- (b) the company uses the asset, wholly or mainly, to derive income other than income from mining.
Income
(2) An amount equal to the market value that the asset has on the first day of each period in which it is used, wholly or mainly, to derive income other than income from mining is income from mining of the mining company.
Timing of income
(3) The income is allocated to the income year in which each first day falls.
Company stops mining
(4) A mining company that stops being a mining company before the end of the income year to which the income is allocated is treated as if it were still a mining company in the income year.
Defined in this Act: asset, income, income from mining, income year, mining company, mining development expenditure, mining exploration expenditure,
Compare: 2004 No 35 s CU 10

CU 11 Meaning of asset for sections CU 3 to CU 10

Mining company’s share or interest in asset
(1) Sections CU 3 to CU 10 apply to a share or interest that a mining company has in an asset—
- (a) to the extent to which the mining company acquired the share or interest by incurring—
  - (i) mining exploration expenditure or mining development expenditure; or
  - (ii) the exploration expenditure or development expenditure referred to in section DZ 12(2)(a) (Mineral mining: 1954–2005); and
- (b) to the extent to which the mining company uses the share or interest for the purpose of deriving income from mining.
Partner’s share or interest in asset
[Repealed]
(2) [Repealed]
Replaced or repaired asset
(3) For the purposes of sections CU 3 to CU 10,—
- (a) an asset that a mining company acquires by incurring expenditure in replacing or repairing the asset is the same asset as the one that was lost, destroyed, or damaged:
- (b) part of an asset that a mining company acquires by incurring expenditure in repairing the asset is part of the asset that was damaged.
Defined in this Act: asset, income from mining, mining company, mining development expenditure, mining exploration expenditure,
Compare: 2004 No 35 s CU 11
Section CU 11(2) heading: repealed, on 1 April 2008, by section 6(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
Section CU 11(2): repealed, on 1 April 2008, by section 6(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).

CU 12 Application of sections to resident mining operators

Sections in this subpart applying to resident mining operators
(1) Sections CU 1 to CU 8, CU 10, and CU 11 apply, with any necessary modifications, to resident mining operators as if resident mining operators were mining companies.
Additional modification of sections CU 4 and CU 11
(2) For the purposes of subsection (1),—
- (a) section CU 4(1)(b)(ii) applies as described in section DZ 12(1)(b) (Mineral mining: 1954–2005); and
- (b) section CU 11(1)(a)(ii) applies as described in section DZ 12(2)(b).
Defined in this Act: mining company, resident mining operator,
Compare: 2004 No 35 s CU 12

CU 13 Application of sections to non-resident mining operators

Sections in this subpart applying to non-resident mining operators
(1) Sections CU 3 to CU 11 apply, with any necessary modifications, to non-resident mining operators as if non-resident mining operators were mining companies, income from mining were income from a mining venture, mining operations were mining ventures, and associated mining operations were mining ventures.
Additional modification of sections CU 4 and CU 11
(2) For the purposes of subsection (1),—
- (a) section CU 4(1)(b)(ii) applies as described in section DZ 12(1)(b) (Mineral mining: 1954–2005); and
- (b) section CU 11(1)(a)(ii) applies as described in section DZ 12(2)(b).
Defined in this Act: associated mining operations, income from mining, mining company, mining operations, mining venture, non-resident mining operator,
Compare: 2004 No 35 s CU 13

CU 14 Recovery of reinvestment profit on disposal of mining shares

When this section applies
(1) This section applies when—
- (a) a company derives an amount from disposing of a mining share, including a disposal described in section CU 20; and
- (b) an amount of the company’s reinvestment profit is used in calculating the deduction for the cost of the mining share under section DU 11(2)(b) (Disposal of mining shares by company).
Income
(2) The lesser of the following amounts is income of the company:
- (a) the amount derived from the disposal of the mining share minus the deduction for the cost of the mining share; and
- (b) the amount of reinvestment profit used in calculating the deduction for the cost of the mining share.
Timing of income
(3) The income is allocated to the income year in which the mining share is disposed of.
Relationship with sections CX 44 and CX 45
(4) This section is overridden by sections CX 44 (Disposal of mining shares) and CX 45 (Disposal of mining shares acquired with reinvestment profit).
Defined in this Act: amount, company, deduction, income, income year, mining share, reinvestment profit,
Compare: 2004 No 35 s CU 14

CU 15 Recovery of reinvestment profit not used for mining purposes

When subsections (2) and (3) apply
(1) Subsections (2) and (3) apply when some or all of a company’s reinvestment profit—
- (a) is used for purposes other than mining purposes in the prescribed period; and
- (b) will not be used for mining purposes in the prescribed period.
Income
(2) The amount of reinvestment profit described by subsection (1) is income of the company.
Timing of income
(3) The income is allocated to the income year in which the amount is used for purposes other than mining purposes.
When subsections (5) and (6) apply
(4) Subsections (5) and (6) apply when some or all of a company’s reinvestment profit is not used for mining purposes in the prescribed period.
Income
(5) The reinvestment profit is income of the company.
Timing of income
(6) The income is allocated to the last income year of the prescribed period.
No longer reinvestment profit
(7) The amount referred to in subsection (2) and the reinvestment profit referred to in subsection (5) cease to be reinvestment profit.
Defined in this Act: amount, company, income, income year, mining purposes, prescribed period, reinvestment profit,
Compare: 2004 No 35 s CU 15

CU 16 Recovery of reinvestment profit on repayment of loans

When this section applies
(1) This section applies when—
- (a) a company (the lender company) makes a loan to a mining company or a mining holding company; and
- (b) the loan is made wholly or partly out of the lender company’s reinvestment profit; and
- (c) the loan is wholly or partly repaid.
Income
(2) The amount calculated using the formula in subsection (3) is income of the lender company.
Formula
(3) The formula is—
Definition of items in formula
(4) In the formula,—
- (a) reinvestment profit amount is the amount of the loan made out of the lender company’s reinvestment profit:
- (b) loan amount is the amount of the loan:
- (c) repayment is the amount repaid.
Timing of income
(5) The income is allocated to the income year in which the repayment is made.
Relationship with section CX 46
(6) This section is overridden by section CX 46 (Repayment of loans made from reinvestment profit).
Defined in this Act: amount, company, income, income year, mining company, mining holding company, pay, reinvestment profit,
Compare: 2004 No 35 s CU 16

CU 17 Repayment by mining company of amount written off

When this section applies
(1) This section applies when—
- (a) a holding company of a mining company is allowed, under section DU 12 (Amount written off by holding company) or an earlier Act, a deduction for an amount it has written off a loan it made to the mining company; and
- (b) the mining company—
  - (i) repays, to the holding company or any other person, some or all of the amount written off; or
  - (ii) is treated, under section CU 18 or CU 19, as having repaid to the holding company some or all of the amount written off.
Income
(2) The amount repaid, to the extent of the deduction, is income of the holding company.
Timing of income
(3) The income is allocated to the income year in which the mining company repays the amount or is treated as repaying the amount.
Defined in this Act: amount, deduction, holding company, income, income year, loan, mining company, pay,
Compare: 2004 No 35 s CU 17

CU 18 Amount treated as repayment for purposes of section CU 17: excess

When this section applies
(1) This section applies when,—
- (a) in an income year, a holding company of a mining company is allowed, under section DU 12 (Amount written off by holding company) or an earlier Act, a deduction for an amount it has written off a loan it made to the mining company; and
- (b) in a later income year, the holding company disposes of shares in the mining company or an interest in shares in the mining company; and
- (c) the holding company has an excess amount because the amount it derives from the disposal is more than the amount paid up in cash on the shares.
Repayment amount
(2) For the purposes of section CU 17, the excess amount is treated as repayment by the mining company of the amount written off.
Defined in this Act: amount, deduction, holding company, income year, loan, mining company, pay, share,
Compare: 2004 No 35 s CU 18

CU 19 Amount treated as repayment for purposes of section CU 17: net income

When this section applies
(1) This section applies when—
- (a) a holding company of a mining company is allowed, under section DU 12 (Amount written off by holding company) or an earlier Act, a deduction for an amount it has written off a loan it made to the mining company; and
- (b) the deduction is allocated to an income year; and
- (c) the mining company would have had net income in a tax year after the tax year that corresponds to the income year referred to in paragraph (b) (the later tax year) if—
  - (i) the situation described in subsection (2) had existed; and
  - (ii) the situation described in subsection (3) had existed.
First situation
(2) The first situation is that in the later tax year no person is allowed a deduction for the mining company’s mining exploration expenditure or mining development expenditure.
Second situation
(3) The second situation is that in the later tax year the mining company disposes of an asset in circumstances to which section CU 3 or CZ 2(1)(b) (Mining company’s 1970–71 tax year) applies and the amount received or receivable for the asset is the amount determined under subsection (4) or (5).
Amount for which asset disposed of: most cases
(4) If any of section CU 3(3)(a), (4), or (5) applies to the disposal of the asset, the amount is the consideration determined under whichever one of the provisions applies.
Amount for which asset disposed of: election of section CU 3(7)
(5) If section CU 3(7) applies to the disposal of the asset, the amount is the greater of the following up to the limit of the market value that the asset has on the date of disposal:
- (a) the part of the amount specified in the notice under section CU 3(7) that is in cash, which may be zero; and
- (b) the total amount of loans made on or before the date of disposal by all holding companies of the mining company to the mining company to the extent to which the loans—
  - (i) relate to the asset, including a part not disposed of; and
  - (ii) have been written off and allowed as a deduction under section DU 12 (Amount written off by holding company) or an earlier Act; and
  - (iii) have not been repaid, and have not been treated as repaid under this section or section CU 18 or an earlier Act, on or before the date of disposal.
Asset
(6) For the purposes of subsections (3) to (5),—
- (a) a reference to an asset means the part of the asset that is disposed of, which may be some of it or all of it, and a reference to an amount received or receivable for an asset means the amount for the part that is disposed of:
- (b) a reference to an asset includes a reference to a share or interest in the asset:
- (c) [Repealed]
- (d) every member of any other association of persons who receive income jointly or carry on activities jointly has a share or interest in each asset of the association that is the same as the member’s interest in the totality of the assets of the association.
Amount of net income
(7) For the purposes of section CU 17, the prescribed proportion of the amount that would have been the net income of the mining company is treated as repayment by the mining company of the amount written off. The repayment is treated as having been made on the day following the end of the income year in which the mining company would have had net income.
Defined in this Act: amount, deduction, holding company, income, income year, loan, mining company, mining development expenditure, mining exploration expenditure, net income, notice, pay, prescribed proportion, tax year,
Compare: 2004 No 35 s CU 19
Section CU 19(6)(c): repealed, on 1 April 2008, by section 7(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).

CU 20 Mining company or mining holding company liquidated

Treatment of shares
(1) If a mining company or a mining holding company is liquidated,—
- (a) a mining share held in the company is treated as disposed of to the company; and
- (b) a distribution received for the share on the liquidation is treated as an amount received for the disposal.
Relationship with section CU 14
(2) Section CU 14 deals with the recovery of reinvestment profit on the disposal of mining shares.
Defined in this Act: amount, liquidation, mining company, mining holding company, mining share, reinvestment profit,
Compare: 2004 No 35 s CU 20

Definitions

CU 21 Meaning of income from mining

Meaning
(1) Income from mining means the part of the income of a mining company that is derived in an income year from the company’s mining operations or associated mining operations in the tax year.
Resident mining operators and non-resident mining operators
(2) This definition applies to resident mining operators as if they were mining companies, and to non-resident mining operators as if they were mining companies, mining operations were mining ventures, and associated mining operations were mining ventures.
Defined in this Act: associated mining operations, income, income from mining, income year, mining company, mining operations, mining venture, non-resident mining operator, resident mining operator,
Compare: 2004 No 35 s CU 21

CU 22 Meaning of mining company

Meaning
(1) Mining company means a company incorporated in New Zealand to which 1 of the following applies:
- (a) the company’s only source of income is the business described in subsection (2); or
- (b) the company’s main source of income is the business described in subsection (2); or
- (c) the company’s only activity is 1 of the activities described in subsection (3); or
- (d) the company’s main activity is 1 of the activities described in subsection (3); or
- (e) the company proposes that its only activity or its main activity be 1 of the activities described in subsection (3).
Business
(2) The business referred to in subsection (1)(a) and (b) is the business of mining a specified mineral in New Zealand.
Activities
(3) The activities referred to in subsection (1)(c), (d), and (e) are—
- (a) exploring, searching, or mining for a specified mineral in New Zealand; or
- (b) performing development work for exploring, searching, or mining for a specified mineral in New Zealand.
Service for reward
(4) An activity described in subsection (3) does not include an activity done or to be done as a service to another person for reward unless the reward—
- (a) is wholly or mainly related to and dependent on the production of the specified mineral; or
- (b) arises wholly or mainly through participation in profits from the production of the specified mineral.
Defined in this Act: business, company, income, mining company, New Zealand, specified mineral,
Compare: 2004 No 35 s CU 22

CU 23 Meaning of mining development expenditure

Meaning
(1) Mining development expenditure means development expenditure that a mining company incurs in its mining operations or associated mining operations.
Inclusions
(2) Mining development expenditure includes expenditure that the company incurs—
- (a) on acquiring land as a site for its mining operations or associated mining operations:
- (b) on preparing the site for its mining operations or associated mining operations:
- (c) on restoring the site during or after its mining operations or associated mining operations:
- (d) on any of the following for its mining operations or associated mining operations:
  - (i) buildings, mineshafts, platforms, tunnels, wells, or other improvements:
  - (ii) plant or machinery, including vehicles:
  - (iii) production equipment or facilities:
  - (iv) storage facilities:
- (e) on vessels or aircraft for use wholly or mainly in its mining operations or associated mining operations:
- (f) on providing, or contributing to the cost of providing, communication equipment, fuel, light, power, or water for the site of its mining operations or associated mining operations:
- (g) on buildings or facilities that—
  - (i) are situated at, or adjacent to, the site of any of its mining operations or associated mining operations; and
  - (ii) are for use in the education, housing, or welfare of, or the supply of meals to, its employees in or connected with its mining operations or associated mining operations or in the education, housing, or welfare of, or the supply of meals to, the employees’ dependants:
- (h) on providing, or contributing to the cost of providing, communication equipment, fuel, light, power, or water for the buildings or facilities described in paragraph (g).
Exclusions
(3) Mining development expenditure does not include expenditure that the company incurs—
- (a) on a building or facility provided for the purpose of deriving income; or
- (b) on or in relation to an office building that is not situated at, or adjacent to, the site of any of its mining operations or associated mining operations.
Resident mining operators and non-resident mining operators
(4) This definition applies to resident mining operators as if they were mining companies, and to non-resident mining operators as if they were mining companies, mining operations were mining ventures, and associated mining operations were mining ventures.
Defined in this Act: associated mining operations, employee, income, mining company, mining development expenditure, mining operations, mining venture, non-resident mining operator, resident mining operator,
Compare: 2004 No 35 s CU 23

CU 24 Meaning of mining exploration expenditure

Meaning
(1) Mining exploration expenditure means expenditure that a mining company incurs in exploring or searching in New Zealand for a specified mineral.
Inclusions
(2) Mining exploration expenditure includes expenditure that the company incurs—
- (a) on acquiring mining prospecting information:
- (b) on acquiring a mining or prospecting right:
- (c) on geological mapping and geophysical surveys:
- (d) on systematic searches for areas containing specified minerals:
- (e) on searching by drilling in areas containing specified minerals:
- (f) on searching for ore containing a specified mineral within or in the vicinity of an ore body by crosscuts, drilling, drives, rises, shafts, or winzes.
Exclusions
(3) Mining exploration expenditure does not include—
- (a) mining development expenditure:
- (b) expenditure on operations in the course of working a mining property.
Resident mining operators and non-resident mining operators
(4) This definition applies to resident mining operators as if they were mining companies, and to non-resident mining operators as if they were mining companies, mining operations were mining ventures, and associated mining operations were mining ventures.
Defined in this Act: associated mining operations, mining company, mining development expenditure, mining exploration expenditure, mining operations, mining or prospecting right, mining prospecting information, mining venture, New Zealand, non-resident mining operator, resident mining operator, specified mineral,
Compare: 2004 No 35 s CU 24

CU 25 Meaning of mining operations

Meaning
(1) Mining operations means operations that—
- (a) are carried on by a mining company on a mining property in New Zealand for the purpose of deriving income; and
- (b) consist of—
  - (i) exploring, searching, or mining for 1 or more specified minerals; or
  - (ii) performing development work for exploring, searching, or mining for 1 or more specified minerals.
Resident mining operators and non-resident mining operators
(2) This definition applies to resident mining operators as if they were mining companies, and to non-resident mining operators as if they were mining companies, mining operations were mining ventures, and associated mining operations were mining ventures.
Defined in this Act: associated mining operations, income, mining company, mining operations, mining venture, New Zealand, non-resident mining operator, resident mining operator, specified mineral,
Compare: 2004 No 35 s CU 25

CU 26 Meaning of mining venture

Meaning
(1) Mining venture means a venture that—
- (a) is carried on, or is proposed to be carried on,—
  - (i) in New Zealand; and
  - (ii) as a business; and
  - (iii) under an exploration permit, prospecting permit, or mining permit granted under the Crown Minerals Act 1991 or under an existing privilege as defined in section 106 of that Act; and
- (b) consists, or is proposed to consist, wholly or mainly of—
  - (i) exploring, searching, or mining for a specified mineral in New Zealand; or
  - (ii) performing development work for exploring, searching, or mining for a specified mineral in New Zealand.
Service for reward
(2) An activity described in subsection (1)(b) does not include an activity done or to be done as a service to another person for reward unless the reward—
- (a) is wholly or mainly related to and dependent on the production of the specified mineral; or
- (b) arises wholly or mainly through participation in profits from the production of the specified mineral.
Activities not carried on jointly
(3) If 2 or more persons carry on, or propose to carry on, a joint mining venture, but 1 or more of them carries on an activity of the kind described in subsection (1)(b) outside the joint mining venture, the carrying on of the activity is not part of the joint mining venture.
Defined in this Act: business, mining venture, New Zealand, specified mineral,
Compare: 2004 No 35 s CU 26

CU 27 Meaning of resident mining operator

Meaning
(1) Resident mining operator means a person who—
- (a) is resident in New Zealand; and
- (b) is not a mining company or a petroleum mining company; and
- (c) carries on, or proposes to carry on, the activities of—
  - (i) exploring, searching, or mining for a specified mineral in New Zealand; or
  - (ii) performing development work for exploring, searching, or mining for a specified mineral in New Zealand.
How activities carried on
(2) The person must carry on the activities described in subsection (1)(c), or propose to carry them on,—
- (a) personally and actively in the field; and
- (b) as a business; and
- (c) under an exploration permit, prospecting permit, or mining permit granted under the Crown Minerals Act 1991 or under an existing privilege as defined in section 106 of that Act.
Service for reward
(3) An activity described in subsection (1)(c) does not include an activity done or to be done as a service to another person for reward unless the reward—
- (a) is wholly or mainly related to and dependent on the production of the specified mineral; or
- (b) arises wholly or mainly through participation in profits from the production of the specified mineral.
Defined in this Act: business, mining company, New Zealand, petroleum mining company, resident in New Zealand, specified mineral,
Compare: 2004 No 35 s CU 27

CU 28 Meaning of specified mineral

Meaning
(1) Specified mineral—
- (a) means alumina minerals (for example, bauxite, corundum, diaspore, and gibbsite), aluminous refractory clays containing over 30% alumina in the fired state, aluminous refractory fireclays containing over 30% alumina in the fired state, andalusite, antimony, asbestos, barite, bentonite (except bentonite mined in the area formerly known as Malvern County), bituminous shale, chromite, copper, diatomite, dolomite, feldspar, fluorite, gold, halloysite, kaolin, kyanite, lead, magnesite, manganese, mercury, mica, molybdenite, nickel, perlite, phosphate, platinum group, pyrite, silica in lump form used only in producing silicon carbide or silicon metal or ferro silicon, silica in sand form used only in producing silicon carbide, sillimanite, silver, sodium chloride, sulphur, talc, tin, titanium, titanomagnetite, tungsten, uranium, wollastonite, zeolite, zinc, and zircon:
- (b) includes a mineral that is declared to be a specified mineral in a Gazette notice given by the Minister.
Minister to consider
(2) Before giving a Gazette notice about a particular mineral, the Minister must consider whether the mineral is or is likely to be of importance—
- (a) in the industrial development of New Zealand:
- (b) as a means of reducing the quantity of industrial minerals or industrial rock required to be imported into New Zealand:
- (c) as an item of export from New Zealand.
Defined in this Act: mineral, Minister, New Zealand,
Compare: 2004 No 35 s CU 28

CU 29 Other definitions

In this Act,—
associated mining operations means operations that—
- (a) are carried on in New Zealand in association with mining operations; and
- (b) consist of the accumulation, initial treatment, and transport of specified minerals, up to the stage at which the minerals—
  - (i) are in a saleable form and in a location suitable for a person to acquire them; or
  - (ii) are ready to be processed beyond the initial treatment or to be used in a manufacturing operation
holding company, for a mining company, means a company incorporated in New Zealand that holds shares, or for which shares are held, in the mining company
initial treatment, for a specified mineral,—
- (a) means—
  - (i) breaking, cleaning, crushing, grading, grinding, leaching, screening, or sizing; or
  - (ii) a treatment that is applied before concentration or, for a specified mineral not requiring concentration, that would have been applied before concentration if the specified mineral had required concentration; or
  - (iii) concentration; and
- (b) does not include—
  - (i) calcining or sintering; or
  - (ii) the production of, or processes carried on in connection with the production of, alumina, or pellets or other agglomerated forms of iron
loan, for a holding company and a mining company, means a loan by the holding company to the mining company made when the holding company is a holding company of the mining company
mining holding company means a company incorporated in New Zealand that is engaged wholly or mainly in—
- (a) holding shares in a mining company or a petroleum mining company; or
- (b) investing money in a mining company or a petroleum mining company; or
- (c) making loans to a mining company or a petroleum mining company
mining or prospecting right—
- (a) means an authority, concession, easement, lease, licence, option, permit, privilege, right, or title relating to exploring, searching, or mining for, or carrying on an operation to recover, a specified mineral; and
- (b) includes a share or interest in any such authority, concession, easement, lease, licence, option, permit, privilege, right, or title
mining prospecting information means geological, geophysical, or technical information—
- (a) that is about the presence, absence, extent, or volume of specified minerals in an area; or
- (b) that is likely to assist in determining the presence, absence, extent, or volume of specified minerals in an area
mining purposes means—
- (a) subscribing for shares in a mining company or in a mining holding company; or
- (b) paying calls on shares in a mining company or in a mining holding company; or
- (c) making loans to a mining company to enable it—
  - (i) to finance its mining exploration expenditure or mining development expenditure; or
  - (ii) to carry on its mining operations or associated mining operations; or
- (d) making, to a mining holding company, loans that are to be used—
  - (i) to finance a mining company’s mining exploration expenditure or mining development expenditure; or
  - (ii) to finance a mining company’s mining operations or associated mining operations
mining share means a share in a mining company or a mining holding company
non-resident mining operator means a person who—
- (a) is not resident in New Zealand; and
- (b) carries on, personally and actively in the field, a mining venture
prescribed period means,—
- (a) for an amount derived from a disposal of a mining share, the income year in which the disposal occurs and the next 6 income years; or
- (b) for an amount repaid for a loan made to a mining company or a mining holding company, the income year in which the amount is repaid and the next 6 income years
prescribed proportion means the proportion that an amount (amount A) bears to another amount (amount B), when—
- (a) amount A is the amount owing on all loans made by a holding company to a mining company; and
- (b) amount B is the amount owing on all loans by all holding companies to the mining company
reinvestment profit means an amount that—
- (a) is excluded income of a company under any of sections CX 44 to CX 46 (which relate to mineral mining) or under a corresponding provision of an earlier Act; and
- (b) has not ceased to be reinvestment profit under section CU 15(7).
Defined in this Act: amount, associated mining operations, company, excluded income, holding company, income year, initial treatment, lease, loan, mining company, mining development expenditure, mining exploration expenditure, mining holding company, mining operations, mining share, mining venture, New Zealand, pay, petroleum mining company, resident in New Zealand, share, specified mineral,
Compare: 2004 No 35 s CU 29

Subpart CV—Income specific to certain entities

CV 1 Group companies

An amount that a company derives in an income year and that would not otherwise be income of the company is treated as its income if—
- (a) the company is for that income year part of a wholly-owned group of companies; and
- (b) had the group of companies been a single company, the amount would have been income of that single company.
Defined in this Act: amount, company, income, income year, wholly-owned group of companies,
Compare: 2004 No 35 s CV 1

CV 2 Consolidated groups: income of company in group

When this section applies
(1) This section applies for the purposes of section FM 8 (Transactions between group companies: income) to an amount derived by a company that is part of a consolidated group, when the amount would be income of the group if the group were 1 company.
Income
(2) The amount is treated as income of the company.
Defined in this Act: amount, company, consolidated group, income,
Compare: 2004 No 35 s HB 2(1)(e)

CV 3 Consolidated groups: arrangement for disposal of shares

When this section applies
(1) This section applies for the purposes of section FM 23 (Arrangements for disposal of shares) when shares in company A that is part of a consolidated group are disposed of by another company for consideration that is less than would have been received in an arm’s length transaction because of a reduction in the value of company A’s assets.
Income
(2) The amount that would have been received in an arm’s length transaction is treated as income derived by the other company at the time of disposal.
Defined in this Act: amount, company, consolidated group, income,
Compare: 2004 No 35 s FD 10(8)

CV 4 Amalgamated companies: amount derived after amalgamation

When this section applies
(1) This section applies for the purposes of section FO 7 (Income derived after amalgamation) when an amount is derived by the amalgamated company after an amalgamation as a result of something that an amalgamating company did or did not do.
Income
(2) The amount is income of the amalgamated company in the income year in which it is derived if it would have been income of an amalgamating company but for the amalgamation.
Defined in this Act: amalgamated company, amalgamating company, amount, income, income year,
Compare: 2004 No 35 s FE 4(b)

CV 5 Statutory producer boards

A levy received by a statutory producer board, other than a levy charged specifically for capital development, is income.
Defined in this Act: income, levy, statutory producer board,
Compare: 2004 No 35 s OC 3(c)

CV 6 Crown Research Institutes

An amount that a Crown Research Institute derives is income of the institute if the amount is for the purpose of producing outputs relating to public good science and technology, as defined in section 2 of the Foundation for Research, Science, and Technology Act 1990.
Defined in this Act: amount, Crown Research Institute, income,
Compare: 2004 No 35 s CV 2

CV 7 Australian wine producer rebate

An amount of Australian wine producer rebate derived by a New Zealand resident wine producer is income of the wine producer.
Defined in this Act: amount, Australian wine producer rebate, income, New Zealand resident,
Compare: 2004 No 35 s CV 3

CV 8 Regulations: Australian wine producer rebate

Order in Council
(1) For the purpose of enabling the Commissioner to administer the entitlement of New Zealand resident wine producers to Australian wine producer rebates for wine produced in New Zealand, the Governor-General may by Order in Council make regulations relating to—
- (a) the claim by a New Zealand resident wine producer for payment of an Australian wine producer rebate for wine produced in New Zealand that is sold in Australia:
- (b) the approval or verification of the entitlement of a New Zealand resident wine producer to a payment of an Australian wine producer rebate:
- (c) any matter necessary to give effect to a provision relating to Australian wine producer rebates in the agreement for the time being in force between the Government of New Zealand and the Government of Australia for the avoidance of double taxation and the prevention of fiscal evasion in relation to taxes on income.
Force and effect
(2) An Order in Council under subsection (1)—
- (a) has force and effect despite any provision in this Act or any other Inland Revenue Act:
- (b) may come into force on or after 1 July 2005:
- (c) may apply for Australian financial years commencing on or after 1 July 2005.
Definitions
(3) In this section,—
Australian financial year means a year starting on and including 1 July
wine has the meaning given in section 31-1 of A New Tax System (Wine Equalisation Tax) Act 1999 (Aust) and regulations made under that Act.
Defined in this Act: Australian financial year, Australian wine producer rebate, Inland Revenue Acts, New Zealand resident, pay, wine,
Compare: 2004 No 35 s CV 4

CV 9 Supplementary dividend holding companies

When this section applies
(1) This section applies to a supplementary dividend holding company that derives a dividend and related supplementary dividend in an income year when, but for section LP 8 (Relationship with exempt income rules), both dividends would be exempt income under section CW 10 (Dividend within New Zealand wholly-owned group).
Income
(2) The amount calculated under section LP 8(2) is assessable income of the supplementary dividend holding company.
Defined in this Act: amount, assessable income, dividend, exempt income, income year, supplementary dividend, supplementary dividend holding company,
Compare: 2004 No 35 s LE 3(6), (8)

CV 10 Foreign dividend payment account companies or conduit tax relief companies

[Repealed]
Section CV 10: repealed (with effect on 30 June 2009), on 6 October 2009, by section 39(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CV 11 Maori authorities

Income
(1) An amount that a member of a Maori authority derives as a distribution from the Maori authority is income of the member if the amount is—
- (a) a notional distribution under section HF 5 (Notional distributions of co-operative companies); or
- (b) a taxable Maori authority distribution under section HF 7 (Taxable Maori authority distributions).
When credits attached
(2) The amount of a taxable Maori authority distribution or notional distribution is increased by a credit that is attached or is treated as attached under section RE 24 (When amount of tax treated as Maori authority credit).
Defined in this Act: amount, co-operative company, Maori authority, Maori authority credit, member, taxable Maori authority distribution,
Compare: 2004 No 35 ss HI 4(3), HI 5(2), (3), HI 7

CV 12 Trustees: amounts received after person’s death

To the extent to which section HC 8 (Amounts received after person’s death) applies to an amount that a trustee of an estate of a deceased person receives in an income year, the amount is income of the trustee.
Defined in this Act: amount, income, income year, trustee,
Compare: 2004 No 35 s HH 8

CV 13 Amounts derived from trusts

An amount derived by a person is income of the person if it is—
- (a) beneficiary income to which sections HC 6 (Beneficiary income) and HC 17 (Amounts derived as beneficiary income) apply; or
- (b) a settlement on trust of property of the kind described in section HC 7(3) (Trustee income); or
- (c) a taxable distribution from a foreign trust to which section HC 18 (Taxable distributions from foreign trusts) applies.
Defined in this Act: amount, beneficiary income, foreign trust, income, settlement, settlor, taxable distribution, trustee income,
Compare: 2004 No 35 ss HH 1(7), HH 3(1)

CV 14 Distributions from community trusts

To the extent to which section HC 21 (Distributions from community trusts) applies to treat an amount that a community trust distributes to a person as income, the amount is income of the person.
Defined in this Act: amount, community trust, distribution, income,
Compare: 2004 No 35 s HH 3(5A)

CV 15 Amounts derived from trusts while person absent from New Zealand

To the extent to which section HC 23 (Temporary absences of beneficiaries) applies to an amount of beneficiary income or taxable distribution, the amount is income of the person derived on the day on which the person becomes resident in New Zealand again.
Defined in this Act: amount, beneficiary income, income, resident in New Zealand, taxable distribution,
Compare: 2004 No 35 s HH 3(3)

CV 16 Non-resident shippers

When this section applies
(1) This section applies when a ship that belongs to, or is chartered by, a non-resident person carries outside New Zealand cargo, mail, or passengers shipped or embarked in New Zealand.
Amount of income
(2) Five percent of the amount payable to the person for the carriage, whether payable inside or outside New Zealand, is treated as income of the person.
Exemption
(3) Despite subsection (2), the Commissioner may determine that some or all of an amount that would otherwise be income of a person under this section is a foreign-sourced amount.
Place of shipping
(4) In this section, cargo, mail, or passengers shipped or embarked at a port in New Zealand for carriage outside New Zealand are treated as carried outside New Zealand from that port, even though the ship may call at another port in New Zealand before finally leaving New Zealand.
Defined in this Act: amount, Commissioner, exempt income, foreign-sourced amount, income, income tax, New Zealand, non-resident, pay, resident in New Zealand,
Compare: 2004 No 35 ss FC 18, FC 19

CV 17 Non-resident film renters

When this section applies
(1) This section applies when a non-resident person derives an amount from 1 or more of the following activities:
- (a) renting, exhibiting, or issuing a film, or making other arrangements for its exhibition:
- (b) selling or hiring film containers, cinematographic or photographic materials, or equipment or accessories relating to a film:
- (c) selling or hiring advertising materials relating to a film.
Income and exempt income
(2) Ten percent of the amounts derived from New Zealand by the non-resident person is income of the person. The remainder is a foreign-sourced amount.
Insignificant proportion
(3) This section does not apply to a non-resident person if the amounts derived by them from activities are an insignificant proportion of the total amounts derived by them from any business carried on in New Zealand or elsewhere.
Defined in this Act: amount, arrangement, business, derived from New Zealand, exempt income, film, foreign-sourced amount, income, New Zealand, non-resident,
Compare: 2004 No 35 s FC 21(1), (2), (4)

Subpart CW—Exempt income

Income from business or trade-like activities

CW 1 Forestry companies established by the Crown, Maori owners, and holding companies buying land with standing timber from founders

When this section applies
(1) This section applies when a forestry company buys land with standing timber on it from a seller who is the Crown, the Maori owners, or a holding company of the forestry company.
Land sold by Maori Trustee, trustee for Maori owners, or Maori incorporation
(2) For the purposes of subsection (1),—
- (a) land sold to the forestry company by the Maori Trustee or by a trustee for a Maori owner is treated as if it had been sold by the beneficial owners:
- (b) land sold to the forestry company by a Maori incorporation is treated as if it had been sold by the members of the incorporation.
Exempt income
(3) The amount described in section CB 25(3) (Disposal of land with standing timber) is exempt income of the seller.
Relationship with section DP 9
(4) Section DP 9 (Cost of acquiring timber: forestry business on land bought from the Crown, Maori owners, or holding company) deals with the cost to the forestry company of acquiring the timber.
Defined in this Act: amount, exempt income, forestry company, holding company, Maori incorporation, Maori owners, standing timber, trustee,
Compare: 2004 No 35 s CW 1

CW 2 Forestry encouragement agreements

When this section applies
(1) This section applies when a person makes a forestry encouragement agreement under the Forestry Encouragement Act 1962.
Exempt income: advance
(2) An amount of income advanced to the person under the agreement is exempt income, even if the person is later relieved from some or all of their liability to repay the principal.
Exempt income: interest
(3) The amount from which the person is relieved in the circumstances described in subsection (4) is exempt income.
Circumstances for purposes of subsection (3)
(4) The circumstances are that—
- (a) the person is liable to pay interest on an advance made under the agreement; and
- (b) the interest has not been paid; and
- (c) the person has been denied a deduction for the interest; and
- (d) the person is relieved from some or all of their liability to pay the interest.
Defined in this Act: amount, deduction, exempt income, income, interest, pay,
Compare: 2004 No 35 s CW 2

CW 3 Forestry companies and Maori investment companies

When this section applies
(1) This section applies when a forestry company or a Maori investment company issues a qualifying debenture.
Exempt income
(2) Interest derived from the qualifying debenture is exempt income to the extent to which it is paid by the issue of a further qualifying debenture.
Defined in this Act: exempt income, forestry company, interest, Maori investment company, pay, qualifying debenture,
Compare: 2004 No 35 s CW 3

CW 3B Pre-1990 forest land units: emissions trading scheme

[Repealed]
Section CW 3B: repealed (with effect on 26 September 2008), on 6 October 2009, by section 40 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 3B: inserted, on 26 September 2008, by section 69 of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).

Income from holding property (excluding equity)

CW 4 Annuities under life insurance policies

When this section applies
(1) This section applies when—
- (a) a person is paid an annuity under a life insurance policy offered or entered into in New Zealand by a life insurer; or
- (b) a person is paid an annuity under a life insurance policy offered or entered into outside New Zealand by a life insurer resident in New Zealand.
Exempt income
(2) The annuity is exempt income.
Excluded annuities
(3) An annuity that is excluded income of a superannuation fund under section CX 40 (Superannuation fund deriving amount from life insurance policy) is not also exempt income of the fund under this section.
Defined in this Act: excluded income, exempt income, life insurance policy, life insurer, New Zealand, offered or entered into in New Zealand, pay, resident in New Zealand, superannuation fund,
Compare: 2004 No 35 s CW 4

CW 5 Payments of interest: post-war credits

Interest derived by a person under section 2 of the Income Tax (Repayment of Post-War Credits) Act 1959 of the United Kingdom Parliament is exempt income.
Defined in this Act: exempt income, interest,
Compare: 2004 No 35 s CW 5

CW 6 Payments of interest: farm mortgages

Exempt income
(1) Fifty percent of the interest that a person derives from a mortgage securing a loan made by a seller of a farm is exempt income, if—
- (a) the Rural Banking and Finance Corporation of New Zealand approves the mortgage; and
- (b) the Corporation gives the Commissioner notice of the approval and each variation.
Exclusions
(2) This section does not apply if the person is—
- (a) an absentee; or
- (b) a company; or
- (c) a Maori authority; or
- (d) a public authority; or
- (e) a trustee liable for income tax under subpart HC (Trusts) and section HZ 2 (Trusts that may become complying trusts); or
- (f) an unincorporated body.
Relationship with sections LZ 6 to LZ 8
(3) A person who derives interest that is exempt income under this section is not entitled to a tax credit for the interest under sections LZ 6 to LZ 8 (which relate to interest on home vendor mortgages).
Defined in this Act: absentee, Commissioner, company, exempt income, income tax, interest, Maori authority, mortgage, notice, public authority, trustee,
Compare: 2004 No 35 s CW 6

CW 7 Foreign-sourced interest

Interest that a person derives from a country or territory outside New Zealand is exempt income if—
- (a) the person was not resident in New Zealand during the period for which the interest was payable; and
- (b) the interest was exempt under the laws of the overseas country or territory from a tax that is substantially the same as income tax imposed under this Act.
Defined in this Act: exempt income, income tax, interest, New Zealand, pay, resident in New Zealand,
Compare: 2004 No 35 s CW 7

CW 8 Money lent to government of New Zealand

What this section applies to
(1) This section applies to—
- (a) interest derived from money lent under a binding contract entered into on or after 29 July 1983; and
- (b) a redemption payment made on a commercial bill to which both the following apply; issue is defined in section 2 of the Bills of Exchange Act 1908:
  - (i) it was issued on or after 29 July 1983; and
  - (ii) it was not issued under a binding contract entered into before that date.
Exempt income
(2) Interest or a redemption payment that is payable outside New Zealand is exempt income if—
- (a) it is derived by a person who is a non-resident; and
- (b) it is derived from or in relation to money lent to—
  - (i) the government of New Zealand; or
  - (ii) a local authority or a public authority; and
- (c) in the case of money lent to a local or public authority,—
  - (i) it is lent for the purposes of a non-commercial activity carried on in New Zealand by the local or public authority; and
  - (ii) the government of New Zealand has approved the exempt status of the interest or redemption payment.
Defined in this Act: commercial bill, exempt income, interest, local authority, money lent, New Zealand, non-resident, pay, public authority, redemption payment,
Compare: 2004 No 35 s CW 8

Income from equity

CW 9 Dividend derived from foreign company

Exempt income
(1) A dividend from a foreign company is exempt income if derived by a company that is resident in New Zealand.
Exclusions
(2) Subsection (1) does not apply to a dividend if the dividend is paid in relation to rights that are—
- (a) a direct income interest of less than 10% in a foreign company described in—
  - (i) section EX 31 (Exemption for ASX-listed Australian companies):
  - (ii) section EX 32 (Exemption for Australian unit trusts with adequate turnover or distributions):
  - (iii) section EX 36 (Venture capital company emigrating to grey list country: 10-year exemption):
  - (iv) section EX 37 (Grey list company owning New Zealand venture capital company: 10-year exemption):
  - (v) section EX 37B (Share in grey list company acquired under venture investment agreement):
  - (vi) section EX 39 (Terminating exemption for grey list company with numerous New Zealand shareholders):
- (b) a fixed-rate foreign equity:
- (c) rights to a deductible foreign equity distribution.
Non-application to dividends derived by certain PIEs
(3) This section does not apply to a dividend derived by a multi-rate PIE.
Defined in this Act: company, dividend, deductible foreign equity distribution, exempt income, fixed-rate foreign equity, multi-rate PIE, portfolio tax rate entity, resident in New Zealand
Section CW 9: substituted (with effect on 30 June 2009), on 6 October 2009, by section 41(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 9(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 41(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 9(3) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 41(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 9(3): substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 41(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 9 list of defined terms multi-rate PIE: inserted, on 1 April 2010, by section 41(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CW 10 Dividend within New Zealand wholly-owned group

Exempt income
(1) A dividend is exempt income if—
- (a) it is derived by a company (the recipient) that is resident in New Zealand; and
- (b) it is derived from a company (the payer) that is part of the same wholly-owned group of companies as the recipient at the time the dividend is derived; and
- (c) the payer is not a foreign company; and
- (d) the payer is not a company that can derive only exempt income; and
- (e) the requirements of subsections (2) to (6) are met.
Aligned balance dates
(2) At the time the dividend is derived,—
- (a) the recipient and the payer have income years that end on the same date; or
- (b) a difference in balance dates—
  - (i) is necessary to avoid a material distortion in the net income of 1 of them because aspects of a single business cycle would otherwise be split between 2 income years; and
  - (ii) is not part of a tax avoidance arrangement.
Exclusion: dividends from council-controlled organisations
(3) The dividend must not be derived by a local authority from—
- (a) a council-controlled organisation; or
- (b) a port company, subsidiary company of a port company, or energy company that would be a council-controlled organisation in the absence of section 6(4) of the Local Government Act 2002.
Exclusion: debt release dividends
(4) The dividend must not be the release of an obligation to repay an amount lent, treated as a dividend under section CD 5(2) (What is a transfer of value?).
Exclusion: certain friendly society dividends
(5) The dividend must not be derived by a friendly society from a company registered as an insurer under the Accident Insurance Act 1998 that is under the control of the society.
Exclusion: certain sickness, accident, or death benefit fund dividends
(6) The dividend must not be derived by a trustee in trust for a sickness, accident, or death benefit fund from a company registered as an insurer under the Accident Insurance Act 1998 that is under the control of the trustee.
Defined in this Act: amount, company, council-controlled organisation, deduction, dividend, exempt income, foreign company, friendly society, income year, local authority, net income, New Zealand, resident in New Zealand, sickness, accident, or death benefit fund, tax avoidance arrangement, trustee, wholly-owned group of companies,
Compare: 2004 No 35 s CW 10

CW 11 Dividend of conduit tax relief holding company

Exempt income: credit
(1) If a conduit tax relief (CTR) holding company derives a dividend with a CTR credit attached, the dividend is exempt income to the extent to which it is fully credited for conduit tax relief.
Exempt income: additional dividend
(2) If a CTR holding company derives a CTR additional dividend, the CTR additional dividend is exempt income.
Defined in this Act: CTR additional dividend, CTR credit, CTR holding company, dividend, exempt income, fully credited for conduit tax relief,
Compare: 2004 No 35 s CW 11

CW 12 Proceeds of share disposal by qualifying foreign equity investor

Exempt income: proceeds from disposal of share in resident company
(1) An amount that a person derives from the sale or other disposal by a qualifying foreign equity investor of a share, or option to buy a share, in a company (the resident company) is exempt income if—
- (a) the resident company is resident in New Zealand; and
- (b) the share or option, or an option or convertible note relating to the share, is bought on a day that is 12 months or more before the day of the sale or other disposal; and
- (c) the person who buys the share or option, or the option or convertible note relating to the share, and disposes of the share or option is a qualifying foreign equity investor from the time of the purchase to the time of the disposal; and
- (d) at some time in the 12-month period that starts from the time of the purchase referred to in paragraph (b), the shares of the resident company are quoted on no official list of a recognised exchange; and
- (e) the resident company meets the requirements of either or both of subsections (2) and (3).
Requirements relating to main activity of resident company
(2) A resident company meets the requirements of this subsection if, throughout the period referred to in subsection (1)(c), the resident company does not have as a main activity 1 or more of—
- (a) land development:
- (b) land ownership:
- (c) mining:
- (d) provision of financial services:
- (e) insurance:
- (f) construction of public infrastructure assets:
- (g) acquisition of public infrastructure assets:
- (h) investing with a main aim of deriving, from the investment, income in the form of interest, dividends, rent, or personal property lease payments that are not royalties.
Requirements relating to resident company that provides capital to others
(3) A resident company that has a main activity of providing capital in the form of debt or equity funding to other companies meets the requirements of this subsection if,—
- (a) throughout the period referred to in subsection (1)(c), each other company that is resident in New Zealand—
  - (i) does not have, as a main activity, an activity that is referred to in subsection (2)(a) to (c) and (e) to (g); and
  - (ii) does not have, as a main activity, an activity that is referred to in subsection (2)(d) and (h) and is not the provision of capital to other companies; and
  - (iii) does not provide capital, directly or indirectly, to a company that is resident in New Zealand and has, as a main activity, an activity that is referred to in subsection (2)(a) to (c) and (e) to (g); and
  - (iv) does not provide capital, directly or indirectly, to a company that is resident in New Zealand and has, as a main activity, an activity that is referred to in subsection (2)(d) and (h) and is not the provision of capital to other companies; and
- (b) throughout the period referred to in subsection (1)(c), each other company that is not resident in New Zealand does not provide capital, directly or indirectly, to a company that is resident in New Zealand and has, as a main activity, an activity that is referred to in subsection (2)(a) to (h); and
- (c) for each other company there is a time in the period referred to in subsection (1)(c) at which—
  - (i) the shares of the other company are quoted on no official list of a recognised exchange; and
  - (ii) the shares of the resident company are quoted on no official list of a recognised exchange.
Some definitions
(4) In this section,—
foreign exempt entity means a person who—
- (a) is established as a legal entity under the laws of a territory that is approved for the purposes of this section by the Governor-General by an Order in Council or under the laws of a part of such a territory; and
- (b) has persons (the members) who hold interests in the capital of the legal entity and who are entitled to shares of the income of the legal entity; and
- (c) under the laws of the territory or part of the territory is not subject to a tax on income other than as a body that handles income of the members; and
- (d) is resident in no territory that has laws that treat the legal entity as being subject to a tax on income other than as a body that handles income of the members; and
- (e) does not have a member who—
  - (i) has, when treated as holding the interests of any person who is associated with the member, an interest of 10% or more in the capital of the legal entity; and
  - (ii) is resident in no territory that is approved for the purpose of this section by the Governor-General by an Order in Council; and
- (f) does not have a member who, when treated as holding the interests of any person who is associated with the member, has an interest of 10% or more in the capital of the legal entity and who would—
  - (i) be entitled to receive an amount derived from a disposal to which this section would apply; and
  - (ii) receive an amount referred to in subparagraph (i) that, in the absence of this section, would have been reduced by a tax imposed by the Act on the amount or on the proceeds of the disposal in the hands of the legal entity; and
  - (iii) in any circumstances under the laws of the territory in which the member is resident or under the laws of part of the territory be entitled to receive from the government of the territory or part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness, or other compensation for the reduction referred to in subparagraph (ii); and
- (g) does not have a holder of a direct or indirect interest in the capital of the legal entity who,—
  - (i) is resident in New Zealand:
  - (ii) when treated as holding the interests of a person associated with the resident, holds a total direct or indirect interest of 10% or more
foreign exempt partnership means an unincorporated body that—
- (a) is established under the laws of a territory that is approved for the purposes of this section by the Governor-General by an Order in Council or under the laws of a part of such a territory; and
- (b) consists of persons (the partners); and
- (c) under the laws of the territory or part of the territory is not subject to a tax on income other than as a body that handles income of the partners; and
- (d) has at least 1 partner (the general partner) who is liable for all debts of the unincorporated body and who has significant involvement in, and control of, the business activities of the unincorporated body; and
- (e) has at least 1 partner (the special partner) whose liability for debts of the unincorporated body is limited and who has limited involvement in, and control of, the business activities of the unincorporated body; and
- (f) does not have a general partner who is resident in no territory that is approved for the purposes of this section by the Governor-General by an Order in Council; and
- (g) does not have a partner who—
  - (i) has, when treated as holding the interests of any person who is associated with the partner, an interest of 10% or more in the capital of the unincorporated body; and
  - (ii) is resident in no territory that is approved for the purpose of this section by the Governor-General by an Order in Council; and
- (h) does not have a partner who, when treated as holding the interests of any person who is associated with the partner, has an interest of 10% or more in the capital of the unincorporated body and who—
  - (i) would under the Act in the absence of this section, be subject to tax on an amount derived from a disposal to which this section would apply; and
  - (ii) would in any circumstances under the laws of the territory in which the partner is resident or under the laws of part of the territory be entitled to receive from the government of the territory or part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness, or other compensation for a payment of the tax referred to in subparagraph (i); and
- (i) does not have a holder of a direct or indirect interest in the capital of the unincorporated body who,—
  - (i) is resident in New Zealand:
  - (ii) when treated as holding the interests of a person associated with the resident, holds a total direct or indirect interest of 10% or more
foreign exempt person means a person who—
- (a) is resident in a territory that is approved for the purposes of this section by the Governor-General by an Order in Council; and
- (b) is not a legal entity that meets the requirements of paragraphs (a) to (c) of the definition of foreign exempt entity; and
- (c) is not part of an unincorporated body that meets the requirements of paragraphs (a) to (c) of the definition of foreign exempt partnership; and
- (d) under the laws of the territory or part of the territory derives the proceeds from a disposal of shares or options that are held by the person; and
- (e) is not a person who—
  - (i) would under the Act in the absence of this section, be subject to tax on an amount derived from a disposal to which this section would apply; and
  - (ii) would in any circumstances under the laws of the territory in which the person is resident or under the laws of part of the territory be entitled to receive from the government of the territory or part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness, or other compensation for a payment of the tax referred to in subparagraph (i); and
- (f) does not have a holder of a direct or indirect interest in the capital of the legal entity who,—
  - (i) is resident in New Zealand:
  - (ii) when treated as holding the interests of a person associated with the resident, holds a total direct or indirect interest of 10% or more.
Residency of territory
(5) For the purpose of this section, whether a person is resident in a territory other than New Zealand is determined—
- (a) under a double tax agreement that is in force between New Zealand and the territory, if there is an agreement and it provides for the residency of the person; or
- (b) otherwise, under the laws of the territory.
Approval and withdrawal of approval for territory
(6) The Governor-General may by Order in Council—
- (a) approve a territory for the purpose of this section:
- (b) withdraw the approval of a territory for the purpose of this section.
Defined in this Act: amount, associated, business, company, dividend, double tax agreement, exempt income, foreign exempt entity, foreign exempt partnership, foreign exempt person, income, insurance, interest, land, pay, personal property lease payment, qualifying foreign equity investor, recognised exchange, resident in New Zealand, royalty, share, tax,
Compare: 2004 No 35 s CW 11B
Section CW 12(4): substituted (with effect on 1 April 2008), on 6 October 2009, by section 42 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 12(4) foreign exempt entity paragraph (c): substituted, on 1 April 2008, by section 328(1)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(4) foreign exempt entity paragraph (f)(iii): amended, on 1 April 2008, by section 328(1)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(4) foreign exempt entity paragraph (f)(iii): amended, on 1 April 2008, by section 328(1)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(4) foreign exempt entity paragraph (g): added, on 1 April 2008, by section 328(1)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(4) foreign exempt partnership paragraph (c): substituted, on 1 April 2008, by section 328(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(4) foreign exempt partnership paragraph (h)(ii): amended, on 1 April 2008, by section 328(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(4) foreign exempt partnership paragraph (h)(ii): amended, on 1 April 2008, by section 328(2)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(4) foreign exempt partnership paragraph (i): added, on 1 April 2008, by section 328(2)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(4) foreign exempt person paragraph (d): substituted, on 1 April 2008, by section 328(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(4) foreign exempt person paragraph (e)(ii): amended, on 1 April 2008, by section 328(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(4) foreign exempt person paragraph (e)(ii): amended, on 1 April 2008, by section 328(3)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(4) foreign exempt person paragraph (f): added, on 1 April 2008, by section 328(3)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(5)(a): substituted, on 1 April 2008, by section 328(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12(5)(b): substituted, on 1 April 2008, by section 328(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 12 list of defined terms 1990 version provisions: repealed, on 1 April 2010, by section 594 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CW 13 Proceeds from share or option acquired under venture investment agreement

Exempt income: proceeds from share or option
(1) An amount of income that a non-resident derives from the sale or other disposal of a share, or option to buy a share, in a company is exempt income if the requirements of subsections (2) to (5) are met.
Requirement relating to company at time of acquisition
(2) The first requirement is that, when the non-resident first acquires a share, or option to buy a share, in the company in a way that meets the requirements of subsection (3), the company must have in New Zealand—
- (a) more than 50% in value of the company’s assets; and
- (b) more than 50% in number of the company’s employees.
Requirement relating to acquisition of first share or option
(3) The second requirement is that, when the non-resident first acquires a share or option to buy a share (the first interest) in the company, a person (the venture capital manager) must acquire, at the same time and on the same terms,—
- (a) the first interest, on behalf of the non-resident; and
- (b) another share or option that confers the same rights and imposes the same obligations as the first interest—
  - (i) on behalf of the Venture Investment Fund or a company owned by the Venture Investment Fund; and
  - (ii) under a venture investment agreement.
Continuing requirement relating to company
(4) The third requirement is that, while the non-resident holds the share or option, the company must not have 1 or more of the following as a main activity:
- (a) land development:
- (b) land ownership:
- (c) mining:
- (d) provision of financial services:
- (e) insurance:
- (f) construction of public infrastructure assets:
- (g) acquisition of public infrastructure assets:
- (h) investing with a main aim of deriving, from the investment, income in the form of interest, dividends, rent, or personal property lease payments that are not royalties.
Requirement relating to situation at disposition of share or option
(5) The fourth requirement is that, when the non-resident disposes of the share or option,—
- (a) the venture capital manager must have complied with the venture capital manager’s obligations under the venture investment agreement; and
- (b) the non-resident must have complied with the non-resident’s obligations under any agreement between the non-resident and the Venture Investment Fund or a company owned by the Venture Investment Fund; and
- (c) no person who is resident in New Zealand and no group of associated persons who are resident in New Zealand has a direct or indirect interest of more than 10% in the share or option.
Venture investment agreement
(6) In this section, venture investment agreement means an agreement that—
- (a) is an agreement, relating to investment in companies, between parties that include—
  - (i) a venture capital manager; and
  - (ii) the Venture Investment Fund or a company owned by the Venture Investment Fund; and
- (b) provides for investments under the agreement to be managed by the venture capital manager; and
- (c) provides that an investment under the agreement must be in a company that, when the first investment in the company under the agreement is made, has in New Zealand—
  - (i) more than 50% in value of the company’s assets; and
  - (ii) more than 50% in number of the company’s employees.
Defined in this Act: employee, income, interest, non-resident, pay, resident in New Zealand, share, venture investment agreement, Venture Investment Fund,
Compare: 2004 No 35 s CW 11C

CW 14 Dividends derived by qualifying companies

Sections CW 10 and CW 11 do not apply to treat as exempt income a dividend derived by a company that has been a qualifying company at some time before the date on which it derives the dividend, except to the extent to which the dividend is a dividend to which section CW 9 applies.
Defined in this Act: company, dividend, exempt income, qualifying company,
Compare: 2004 No 35 s HG 10(a)

CW 15 Dividends paid by qualifying companies

Exempt income of shareholder
(1) To the extent to which the amount of a dividend that a qualifying company pays to a person resident in New Zealand is more than a fully imputed distribution, the amount is exempt income of the person.
Exempt income of beneficiary
(2) If a dividend paid by a qualifying company to a trustee shareholder is, or becomes, beneficiary income of a beneficiary resident in New Zealand, the dividend is exempt income of the beneficiary.
Defined in this Act: beneficiary income, bonus issue, dividend, exempt income, fully imputed, pay, qualifying company, resident in New Zealand, shareholder, trustee,
Compare: 2004 No 35 s HG 13(1)(a), (1A)
Section CW 15(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 43(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 15 list of defined terms fully imputed: inserted (with effect on 1 April 2008), on 6 October 2009, by section 43(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Employee or contractor income

CW 16 Income of Governor-General

The following are exempt income:
- (a) the salary and allowance of the Governor-General paid under section 3 of the Civil List Act 1979:
- (b) the salary of a person acting as the Administrator of the Government paid under section 8 of the Civil List Act 1979.
Defined in this Act: exempt income, pay,
Compare: 2004 No 35 s CW 12

CW 17 Expenditure on account, and reimbursement, of employees

Exempt income: expenditure on account
(1) Expenditure on account of an employee incurred by an employer in connection with the employee’s employment or service is exempt income of the employee to the extent to which the expenditure is expenditure for which the employee would be allowed a deduction if they incurred the expenditure and if the employment limitation did not exist.
Exempt income: reimbursement
(2) An amount that an employer pays to an employee in connection with the employee’s employment or service is exempt income of the employee to the extent to which it reimburses the employee for expenditure for which the employee would be allowed a deduction if the employment limitation did not exist.
Estimated expenditure of employees
(3) For the purposes of subsection (2),—
- (a) the employer may make, for a relevant period, a reasonable estimate of the amount of expenditure likely to be incurred by the employee or a group of employees for which reimbursement is payable; and
- (b) the amount estimated is treated as if it were the amount incurred during the period to which the estimate relates.
Depreciation loss included
(4) In this section, expenditure includes an amount of depreciation loss.
Relationship with sections CW 17B and CW 17C
(5) This section does not apply to an amount referred to in section CW 17B (Relocation payments) or CW 17C (Payments for overtime meals and certain other allowances).
Defined in this Act: amount, deduction, depreciation loss, employee, employer, employment limitation, exempt income, expenditure on account of an employee, pay,
Compare: 2004 No 35 s CW 13
Section CW 17(4) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 44(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 17(4): added (with effect on 1 April 2008), on 6 October 2009, by section 44(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 17(5) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 44(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 17(5): added (with effect on 1 April 2008), on 6 October 2009, by section 44(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 17 list of defined terms depreciation loss: inserted (with effect on 1 April 2008), on 6 October 2009, by section 44(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CW 17B Relocation payments

Exempt income
(1) An amount that an employer pays to or on behalf of an employee in connection with the expenses of the employee in a work-related relocation is exempt income of the employee.
Actual expenditure
(2) The amount paid must be no more than the actual cost incurred by or on behalf of the employee on an expense that the Commissioner lists as an eligible relocation expense in a determination made under subsection (6).
Time limit
(3) Subsection (1) applies only to expenditure incurred to the end of the tax year following that in which the relocation occurs. For the purposes of this subsection, a temporary move that has not been treated as a work-related relocation under this section is ignored.
Meaning of work-related relocation
(4) Work-related relocation means a relocation of the place where an employee lives that is required—
- (a) because the employee's workplace is not within reasonable daily travelling distance of their residence; and
- (b) as a result of the employee—
  - (i) taking up new employment with a new employer; or
  - (ii) taking up new duties at a new location with their existing employer; or
  - (iii) continuing in their current position but at a new location.
Exemption from distance test
(5) The requirement in subsection (4)(a) for a person's workplace to be beyond reasonable travelling distance of their residence does not apply to a person whose accommodation forms an integral part of their work.
Determinations
(6) The Commissioner may issue a determination for the purposes of this section under section 91AAR of the Tax Administration Act 1994 to provide a list of eligible relocation expenses, and may extend or modify the list from time to time as required. The Commissioner must give at least 30 days' notice of the implementation date of any alteration.
Defined in this Act: amount, Commissioner, employee, employer, exempt income, tax year, work-related relocation
Section CW 17B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 45 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CW 17C Payments for overtime meals and certain other allowances

Exempt income: overtime meals
(1) An amount that an employer pays to or on behalf of an employee for a meal for the employee when the employee is working overtime is exempt income of the employee.
Exempt income: certain sustenance allowances
(2) An amount that an employer pays to an employee as a sustenance allowance for the employee for a day is exempt income of the employee if—
- (a) the employee works a minimum of 7 hours on the day; and
- (b) their employment requires them—
  - (i) to work outdoors and away from their employment base for most of the day; and
  - (ii) to undertake a long period of physical activity in travelling through a neighbourhood or district on foot or by bicycle; and
- (c) it is not practicable for the employer to provide sufficient sustenance on the day for the period when the employee is working outdoors; and
- (d) the allowance recognises—
  - (i) the arduous physical nature of the employee's work as described in paragraph (b); and
  - (ii) that the employer would normally provide tea, coffee, water, or similar refreshments at the employment base in the course of their business.
Eligibility requirements: overtime meals
(3) Subsection (1) applies only if—
- (a) the employee has worked at least 2 hours' overtime on the day of the meal; and
- (b) either—
  - (i) the employee's employment agreement provides for pay for overtime hours worked; or
  - (ii) the employer has an established policy or practice of paying for overtime meals.
Eligibility requirements: sustenance allowances
(4) Subsection (2) applies only if the employer has an established policy or practice of paying a sustenance allowance.
Actual cost or reasonable estimate
(5) The amount paid must be—
- (a) the actual cost to the employee, and for an overtime meal referred to in subsection (1), with documentation required for amounts over $20 per meal; or
- (b) a reasonable estimate of the expenditure likely to be incurred by the employee or a group of employees for whom an amount is payable.
Meaning of overtime
(6) For the purposes of this section, overtime, for a person and a day, means time worked for an employer on the day beyond the person's ordinary hours of work as set out in their employment agreement.
Defined in this Act: amount, employee, employer, exempt income, overtime, pay
Section CW 17C: inserted (with effect on 1 April 2008), on 6 October 2009, by section 45 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CW 18 Allowance for additional transport costs

Exempt income
(1) An allowance that an employee receives from an employer to reimburse the employee’s additional transport costs is exempt income to the extent to which the employee incurs the costs in connection with their employment and for the employer’s benefit or convenience.
Estimated expenditure of employees
(2) For the purposes of subsection (1),—
- (a) the employer may make, for a relevant period, a reasonable estimate of the amount of expenditure likely to be incurred by the employee or a group of employees for which reimbursement is payable; and
- (b) the amount estimated is treated as if it were the amount incurred during the period to which the estimate relates.
Meaning of additional transport costs
(3) In this section, additional transport costs means the costs to an employee of travelling between their home and place of work that are more than would ordinarily be expected. The costs must be attributable to 1 or more of the following factors:
- (a) the day or time of day when the work duties are performed:
- (b) the need to transport any goods or material for use or disposal in the course of the employee’s work:
- (c) the requirement to fulfil a statutory obligation:
- (d) a temporary change in the employee’s place of work while in the same employment:
- (e) any other condition of the employee’s work:
- (f) the absence of an adequate public passenger transport service that operates fixed routes and a regular timetable for the employee’s place of work.
Quantifying additional transport costs
(4) Additional transport costs are quantified as follows:
- (a) when the additional transport costs are attributed to a factor described in any of subsection (3)(a) to (e), the amount by which the costs are more than the employee’s ordinarily expected travel costs without reference to that factor:
- (b) when the additional transport costs are attributed to the factor described in subsection (3)(f), the amount by which the costs are more than $5 for each day on which the employee attends work:
- (c) except in special circumstances, the costs of travelling any distance over 70 kilometres in 1 day are not taken into account in calculating additional transport costs.
Defined in this Act: additional transport costs, amount, employee, employer, exempt income, pay,
Compare: 2004 No 35 s CW 14

CW 19 Amounts derived during short-term visits

Exempt income
(1) Income that a non-resident person derives in a tax year from performing personal or professional services in New Zealand during a visit is exempt income if—
- (a) the visit is for 92 or fewer days, counting the days of arrival and departure as a whole day each; and
- (b) the total number of days on which the person is present in New Zealand in the tax year is 92 or fewer; and
- (c) the services are performed for or on behalf of a person who is not resident in New Zealand; and
- (d) the amount derived from the personal or professional services is chargeable in the country or territory in which the person is resident with a tax that is substantially the same as income tax imposed under this Act.
Exclusion
(2) This section does not apply to the income of a public entertainer.
Meaning of public entertainer
(3) In this section, public entertainer includes—
- (a) circus performers, dancers, lecturers, motion picture artists, musicians, radio artists, singers, television artists, and theatre artists; and
- (b) athletes, boxers, wrestlers, and other professional sportspersons.
Defined in this Act: amount, exempt income, income, income tax, New Zealand, non-resident, public entertainer, resident in New Zealand, tax year,
Compare: 2004 No 35 s CW 15

CW 20 Amounts derived by visiting entertainers including sportspersons

Exempt income: cultural activities
(1) Income that a non-resident entertainer derives from carrying out their activity or performance in New Zealand during a visit is exempt income if—
- (a) the activity or performance occurs under a cultural programme of the New Zealand government or an overseas government; or
- (b) the activity or performance occurs under a cultural programme wholly or partly sponsored by the New Zealand government or an overseas government; or
- (c) the activity or performance occurs as part of a programme of an overseas foundation, trust, or other organisation that—
  - (i) exists wholly or partly to promote cultural activity; and
  - (ii) is not carried on for the private pecuniary profit of any member, proprietor, or shareholder.
Exempt income: sporting activities
(2) Income that a non-resident entertainer derives from carrying out an activity or performance that relates to a game or sport in New Zealand during a visit is exempt income if the participants are the official representatives of a body that administers the game or sport in an overseas country.
Exempt income: employer of non-resident entertainer
(3) If income derived from an activity or performance of a non-resident entertainer would be exempt income under this section if derived by the non-resident entertainer, that amount is exempt income if derived by a person who—
- (a) provides the services of the non-resident entertainer during the visit to New Zealand; and
- (b) is 1 of the following:
  - (i) the entertainer’s employer; or
  - (ii) a company of which the entertainer is an officer; or
  - (iii) a firm of which the entertainer is a principal.
Meaning of non-resident entertainer
(4) In this section, non-resident entertainer means a non-resident person, as defined in subpart YD (Residence and source in New Zealand), who carries out an activity or performance in connection with—
- (a) a solo or group performance by actors, comperes, dancers, entertainers, musicians, singers, or other artists, whether for cultural, educational, entertainment, religious, or other purposes; or
- (b) lectures, speeches, or talks for any purpose; or
- (c) a sporting event or sporting competition of any nature.
Defined in this Act: amount, company, employer, exempt income, income, New Zealand, non-resident, non-resident entertainer,
Compare: 2004 No 35 s CW 16

CW 21 Amounts derived by visiting crew of pleasure craft

Exempt income
(1) Income that a non-resident crew member derives from performing services in New Zealand relating to a pleasure craft while it is in New Zealand is exempt income if—
- (a) the services are performed for a person who is not resident in New Zealand; and
- (b) the pleasure craft is the subject of a security given under section 116 of the Customs and Excise Act 1996; and
- (c) the pleasure craft is not owned, wholly or partly or directly or indirectly, by—
  - (i) a resident of New Zealand; or
  - (ii) a controlled foreign company.
Some definitions
(2) In this section,—
non-resident crew member means a person who—
- (a) is a crew member of a pleasure craft; and
- (b) is a non-resident, a matter determined without applying section YD 1(3) (Residence of natural persons); and
- (c) is not present in New Zealand on more than 365 days in any 2-year period that starts on or after 28 May 2002; and
- (d) is not in New Zealand unlawfully under the Immigration Act 1987
pleasure craft is defined in section 2 of the Maritime Transport Act 1994.
Defined in this Act: amount, controlled foreign company, exempt income, income, New Zealand, non-resident, non-resident crew member, pleasure craft, resident in New Zealand, year,
Compare: 2004 No 35 s CW 17

CW 22 Amounts derived by overseas experts and trainees in New Zealand by government arrangement

Exempt income: personal services
(1) Income that a non-resident person derives from performing personal services, including professional services, in New Zealand during a visit is exempt income if—
- (a) the services are performed for or on behalf of a non-resident employer; and
- (b) the purpose of the visit is all or any of the following:
  - (i) providing professional or expert advice or assistance:
  - (ii) teaching or lecturing:
  - (iii) making investigations:
  - (iv) receiving education, training, or experience; and
- (c) the visit occurs under an arrangement for assistance entered into by the government of New Zealand.
Exempt income: maintenance or bursaries
(2) An amount of income that a non-resident person derives from a payment of maintenance or of an allowance, or from a bursary or scholarship, provided for or paid to the person during or in relation to their presence in New Zealand during a visit, is exempt income if—
- (a) the purpose of the visit is all or any of the following:
  - (i) providing professional or expert advice or assistance:
  - (ii) teaching or lecturing:
  - (iii) making investigations:
  - (iv) receiving education, training, or experience; and
- (b) the visit occurs under an arrangement for assistance entered into by the government of New Zealand.
Some definitions
(3) In this section,—
arrangement for assistance entered into by the government of New Zealand means an arrangement entered into by the government of New Zealand—
- (a) in relation to or under—
  - (i) the Commonwealth Education Scheme; or
  - (ii) a programme of the United Nations, or any specialised agency of the United Nations, for cultural, economic, educational, expert, professional, or technical assistance; or
- (b) for the purpose of providing education, training, or experience for officers of the Samoan, Cook Islands, Niuean, or Tokelauan public services, or for persons resident in Samoa, the Cook Islands, Niue, or Tokelau; or
- (c) with the government of any other country or with any international organisation, if it is an arrangement that—
  - (i) is for the purpose of providing cultural, economic, educational, expert, professional, or technical assistance, or administrative or other training, or the means or facilities for making investigations, whether upon a bilateral, co-operative, multilateral, mutual, or unilateral basis; and
  - (ii) is in principle similar to any arrangement to which paragraph (a) or (b) applies
international organisation means an organisation whose members are sovereign powers, whether countries of the Commonwealth or foreign sovereign powers, or the governments of those countries or powers
non-resident person means a person who would not be resident in New Zealand if they were not present in New Zealand under an arrangement for assistance entered into by the government of New Zealand. The residence of the person is determined without applying section YD 1(3) (Residence of natural persons).
Defined in this Act: amount, arrangement, arrangement for assistance entered into by the government of New Zealand, Commonwealth, employer, exempt income, income, international organisation, New Zealand, non-resident person, pay, resident in New Zealand,
Compare: 2004 No 35 s CW 18

CW 23 Income for military or police service in operational area

When this section applies
(1) This section applies when a member of the New Zealand Defence Force or the police (the member) derives income for serving in an operational area.
Exempt income
(2) The following are exempt income of the member:
- (a) an operational allowance:
- (b) an amount that the ministerial committee decides under subsection (3) is exempt income.
Ministerial committee
(3) A ministerial committee that includes the Prime Minister, the Minister of Defence, the Minister of Police, the Minister of Finance, and the Minister of Foreign Affairs may, for the purposes of subsection (2)(b), decide that an amount of income derived by a member for being in an operational area is exempt income.
Some definitions
(4) In this section,—
operational allowance, for a member, means the amount of an allowance payable by the Government of New Zealand that—
- (a) is paid directly and solely to the member for being in an operational area; and
- (b) is not—
  - (i) a regular force gratuity:
  - (ii) a bonus or bounty for re-engagement in a regular force
operational area means an area—
- (a) to which the Minister of Defence has ordered the deployment of New Zealand Defence Force members for a specific mission authorised by the Government; and
- (b) that the Chief of Defence Force delineates for that mission.
Defined in this Act: amount, exempt income, income, New Zealand, operational allowance, operational area,
Compare: 2004 No 35 s CW 19

CW 24 Deferred military pay for active service

Exempt income
(1) Deferred military pay that is granted or paid under the Defence Act 1990 to a person for service in the New Zealand armed forces in an active service area is exempt income.
Some definitions
(2) In this section,—
active service area means an area outside New Zealand that is designated as an active service area by the Minister of Defence, with the agreement of the Minister of Finance
deferred military pay means pay declared to be deferred by the Minister of Defence, with the agreement of the Minister of Finance.
Defined in this Act: active service area, deferred military pay, exempt income, New Zealand, pay,
Compare: 2004 No 35 s CW 20

CW 25 Value of board for religious society members

The value of personal board and lodging and other basic personal necessities received by a member of a religious society or order is exempt income if—
- (a) the member’s sole occupation is service in a religious society or order; and
- (b) it is in the nature of the service that members are not paid for their work and do not receive a reward for it, other than those necessities.
Defined in this Act: exempt income, pay,
Compare: 2004 No 35 s CW 21

CW 26 Jurors’ and witnesses’ fees

Fees paid by the Crown to jurors and to witnesses, other than expert witnesses, are exempt income.
Defined in this Act: exempt income, pay,
Compare: 2004 No 35 s CW 22

Certain income of transitional resident

CW 27 Certain income derived by transitional resident

Income derived by a person who is a transitional resident is exempt income if the income is a foreign-sourced amount that is none of the following:
- (a) employment income of a type described in section CE 1 (Amounts derived in connection with employment) in connection with employment or service performed while the person is a transitional resident:
- (b) income from a supply of services.
Defined in this Act: employment income, exempt income, foreign-sourced amount, income, transitional resident,
Compare: 2004 No 35 s CW 22B

Income from living allowances, compensation, and government grants

CW 28 Pensions

Exempt income
(1) The following are exempt income:
- (a) a pension or allowance under the War Pensions Act 1954, other than a veteran’s pension:
- (b) a pension or allowance of any other kind granted in New Zealand or overseas by any government relating to any war or to disability attributable to or aggravated by service in the armed forces or the police:
- (c) a payment of portable New Zealand superannuation:
- (d) a payment of portable veteran’s pension:
- (e) an overseas pension.
Meaning of overseas pension
(2) In this section, overseas pension means—
- (a) an overseas pension, to the extent of sums subtracted under section 70 of the Social Security Act 1964, by the department currently responsible for administering that Act, from—
  - (i) a monetary benefit paid under Part 1 of the Act; or
  - (ii) a monetary benefit, other than New Zealand superannuation or a veteran’s pension, paid under the Social Welfare (Transitional Provisions) Act 1990:
- (b) an overseas pension to the extent to which it is subject to an arrangement under section 70(3) of the Social Security Act 1964 but not to the extent of the equivalent amount of New Zealand superannuation, veteran’s pension, or income-tested benefit paid under section 70(3)(b) of that Act.
Defined in this Act: amount, exempt income, income-tested benefit, New Zealand superannuation, overseas pension, pay, portable New Zealand superannuation, portable veteran’s pension, veteran’s pension,
Compare: 2004 No 35 s CW 23

CW 29 Reinvested amounts from foreign superannuation schemes in Australia

An amount of income derived in an income year by a natural person as a withdrawal from a foreign superannuation scheme is exempt income if,—
- (a) in the income year, the person invests the amount in another foreign superannuation scheme; and
- (b) each foreign superannuation scheme is constituted in Australia and is—
  - (i) an Australian approved deposit fund:
  - (ii) an Australian exempt public sector superannuation scheme:
  - (iii) an Australian regulated superannuation fund:
  - (iv) an Australian retirement savings account.
Defined in this Act: amount, Australian approved deposit fund, Australian exempt public sector superannuation scheme, Australian regulated superannuation fund, Australian retirement savings account, exempt income, foreign superannuation scheme, income, income year,
Compare: 2004 No 35 s CW 23B

CW 30 Annuities from Crown Bank Accounts

An annuity is exempt income if—
- (a) it is granted by the Executive Council of New Zealand; and
- (b) it is paid from the Crown Bank Account; and
- (c) it is not designated as being subject to tax.
Defined in this Act: exempt income, New Zealand, pay, tax,
Compare: 2004 No 35 s CW 24

CW 31 Services for members of Parliament

Travel, accommodation, attendance, and communication services, as defined in section 20A(7) of the Civil List Act 1979, are exempt income if they—
- (a) are—
  - (i) referred to in section 20A of that Act:
  - (ii) paid under section 25 of that Act; and
- (b) are provided to—
  - (i) a person to whom any of section 25(1)(b) to (e) of that Act applies:
  - (ii) a member of the family of a person described in subparagraph (i).
Defined in this Act: exempt income, pay,
Compare: 2004 No 35 s CW 25

CW 32 Maintenance payments

The following are exempt income:
- (a) child support or spousal maintenance under the Child Support Act 1991:
- (b) a payment in the nature of maintenance out of money belonging to a person’s spouse, civil union partner or de facto partner, or former spouse, former civil union partner, or former de facto partner.
Defined in this Act: exempt income, pay,
Compare: 2004 No 35 s CW 26

CW 33 Allowances and benefits

Exempt income
(1) The following are exempt income:
- (a) a monetary benefit under the Social Security Act 1964, except an income-tested benefit:
- (b) a payment under Part 5 or 13 of the Accident Insurance Act 1998, or under Part 11 of the Injury Prevention, Rehabilitation, and Compensation Act 2001, of any of the following kinds:
  - (i) a payment to an insured person for treatment or rehabilitation:
  - (ii) an independence allowance:
  - (iii) a funeral grant:
  - (iv) a survivor’s grant:
  - (v) a childcare payment:
- (c) a participation allowance under regulations made under the Social Security Act 1964:
- (d) a disabled workshop payment:
- (e) an amount derived by a trustee of a trust created for the benefit of persons harmed by thalidomide, or a distribution to a beneficiary from the trust:
- (f) an amount derived by a trustee of the New Zealand Agent Orange Trust that represents the settlement fund and income attributable to the fund, or a distribution to a beneficiary from the trust.
Meaning of disabled workshop payment
(2) In this section, disabled workshop payment means a payment to a disabled person for undertaking therapeutic activities in a sheltered workshop, as defined in the Disabled Persons Employment Promotion Act 1960, or in a similar workshop, if the average amount paid in a tax year is $50 or less per week.
Defined in this Act: amount, disabled workshop payment, exempt income, income, income-tested benefit, pay, tax year, trustee,
Compare: 2004 No 35 s CW 27

CW 34 Compensation payments

Exempt income
(1) An amount of income from the following payments is exempt income:
- (a) a payment relating to incapacity for work:
- (b) a payment under the Workers Compensation Act 1956:
- (c) a payment under the Criminal Injuries Compensation Act 1963:
- (d) a distribution from funds approved by the Minister in charge of War Pensions to ex-prisoners of war held in German concentration camps in World War 2:
- (e) a payment under the laws of a State of the Federal Republic of Germany or the Republic of Austria to the victims of National Socialist persecution:
- (f) payments under schedule 1 of the Crown Forest Assets Act 1989 (except clause 3(b)):
- (g) payments of compensation, solatium payments, or payments to lessors for the purchase of leases under the Maori Reserved Land Amendment Act 1997 (but not interest paid under section 23 of the Act).
Some definitions
(2) In this section,—
accident insurance contract is defined in section 13 of the Accident Insurance Act 1998
payment relating to incapacity for work means a payment of 1 of the following kinds made to a person because they are, or another person is, incapacitated for work
- (a) a payment by a friendly society, but not a payment referred to in paragraph (d) or (e) of the definition of accident compensation payment in section CF 1(2) (Benefits, pensions, compensation, and government grants):
- (b) a payment from a sickness, accident, or death benefit fund to which the person was a contributor when the period of incapacity began, but not a payment referred to in paragraph (d) or (e) of the definition of accident compensation payment in section CF 1(2):
- (c) a payment under a policy of personal sickness or accident insurance, or an accident insurance contract, but neither a payment referred to in paragraph (d) or (e) or (f) of the definition of accident compensation payment in section CF 1(2) nor a payment calculated according to loss of earnings or profits.
Defined in this Act: accident insurance contract, exempt income, friendly society, interest, lease, pay, payment relating to incapacity for work, sickness, accident, or death benefit fund
Compare: 2004 No 35 s CW 28

CW 35 Personal service rehabilitation payments

An amount paid to a person for an income year as a personal service rehabilitation payment is exempt income of the person if—
- (a) they are paid the amount under the Injury Prevention, Rehabilitation, and Compensation Act 2001; and
- (b) they pay an amount to another person for providing them in the income year a key aspect of social rehabilitation referred to in the definition of personal service rehabilitation payment; and
- (c) the amount paid is equal to or more than the amount of personal service rehabilitation payment for the income year after taking into account any amount of tax withheld.
Defined in this Act: amount, amount of tax, exempt income, income year, pay, personal service rehabilitation payment
Compare: 2004 No 35 s CW 28B
Section CW 35: substituted, on 1 July 2008, by section 329 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

CW 36 Scholarships and bursaries

A basic grant or an independent circumstances grant under regulations made under section 303 of the Education Act 1989 is not exempt income, but any other scholarship or bursary for attendance at an educational institution is exempt income.
Defined in this Act: exempt income,
Compare: 2004 No 35 s CW 29

CW 37 Film production grants

[Repealed]
Section CW 37: repealed (with effect on 1 October 2009), on 6 October 2009, by section 46(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Income of certain entities

CW 38 Public authorities

Exempt income
(1) An amount of income derived from sinking funds relating to the debt of a public authority is exempt income.
Exempt income
(2) Any other amount of income derived by a public authority is exempt income.
Exclusion: amounts received in trust
(3) Subsection (2) does not apply to an amount of income that a public authority derives as a trustee.
Exclusion: superannuation schemes
(4) Subsection (2) does not apply to a public authority to the extent to which it is a superannuation scheme.
Exclusion: certain public authorities
(5) Subsection (2) does not apply to an amount of income derived by the following public authorities:
- (a) Public Trust:
- (b) State enterprises:
- (c) Crown Research Institutes.
Meaning of public authority
(6) In this section, public authority includes the Reserve Bank of New Zealand.
Defined in this Act: amount, Crown Research Institute, exempt income, income, public authority, State enterprise, superannuation scheme, trustee,
Compare: 2004 No 35 s CW 31

CW 39 Local authorities

Exempt income
(1) An amount of income derived from sinking funds relating to the debt of a local authority is exempt income.
Exempt income
(2) Any other amount of income derived by a local authority is exempt income.
Exclusion: amounts received in trust
(3) Subsection (2) does not apply to an amount of income that a local authority derives as a trustee.
Exclusion: certain amounts from commercial undertakings
(4) Subsection (2) does not apply to an amount of income that—
- (a) is derived by a local authority; and
- (b) is not rates; and
- (c) is derived from—
  - (i) a council-controlled organisation, other than a council-controlled organisation operating a hospital as a charitable activity on behalf of the local authority; or
  - (ii) an organisation that is a port company, a subsidiary of a port company, or an energy company and that would be a council-controlled organisation in the absence of section 6(4) of the Local Government Act 2002.
Exclusion: local authority as port operator
(5) Subsection (2) does not apply to an amount of income derived by a local authority in its capacity as a port operator from a port-related commercial undertaking. Port operator and port-related commercial undertaking are defined in section 38(4) of the Port Companies Act 1988.
Defined in this Act: amount, council-controlled organisation, exempt income, income, local authority, trustee,
Compare: 2004 No 35 s CW 32
Section CW 39(4)(c)(i): substituted, on 1 April 2008, by section 330 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

CW 40 Local and regional promotion bodies

Exempt income: beautification societies
(1) An amount of income derived by an association or society is exempt income if—
- (a) the association or society is established mainly to—
  - (i) advertise, beautify, or develop a city or other district so as to attract population, tourists, trade, or visitors:
  - (ii) create, develop, or increase amenities for the general public in a city or other district; and
- (b) none of the funds of the association or society is used, or is or may become available to be used, for any other purpose that is not a charitable purpose.
Exclusion: council-controlled organisation
(2) Subsection (1) does not apply to an amount of income derived—
- (a) by a council-controlled organisation:
- (b) by a local authority from a council-controlled organisation.
Exempt income: trustees of Cornwall Park
(3) An amount of income that the trustees of Cornwall Park, Auckland, derive from the property of the trust is exempt income.
Defined in this Act: amount, charitable purpose, council-controlled organisation, exempt income, income, local authority, trustee,
Compare: 2004 No 35 s CW 33
Section CW 40 list of defined terms associated person: repealed (with effect on 1 April 2008), on 6 October 2009, by section 47 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CW 41 Charities: non-business income

Exempt income
(1) The following are exempt income:
- (a) an amount of income derived by a trustee in trust for charitable purposes:
- (b) an amount of income derived by a society or institution established and maintained exclusively for charitable purposes and not carried on for the private pecuniary profit of any individual.
Exclusion: trustees, society, or institution not registered
(2) This section does not apply to an amount of income if, at the time that the amount of income is derived, the trustee or trustees of the trust, the society, or the institution is not, or are not, a tax charity.
Exclusion: business income
(3) This section does not apply to an amount of income derived from a business carried on by, or for, or for the benefit of a trust, society, or institution of a kind referred to in subsection (1).
Exclusion: council-controlled organisation income
(4) This section does not apply to an amount of income derived by—
- (a) a council-controlled organisation, other than a council-controlled organisation operating a hospital as a charitable activity:
- (b) a local authority from a council-controlled organisation, other than from a council-controlled organisation operating a hospital as a charitable activity on behalf of the local authority.
Definition
(5) In this section and sections CW 42 and CW 43, tax charity means,—
- (a) a trustee or trustees of a trust, a society, or an institution, registered as a charitable entity under the Charities Act 2005:
- (b) a trustee or trustee of a trust, a society, or an institution (the entity), that––
  - (i) has started, before 1 July 2008, to take reasonable steps in the process of preparing an application for registering the entity as a charitable entity under the Charities Act 2005; and
  - (ii) intends to complete the process of preparing an application described in subparagraph (i); and
  - (iii) has not been notified by the Commissioner that the entity is not a tax charity:
- (c) a trustee or trustee of a trust, a society, or an institution, that is or are non-resident and carrying out its or their charitable purposes outside New Zealand, and which is approved as a tax charity by the Commissioner in circumstances where registration as a charitable entity under the Charities Act 2005 is unavailable.
Defined in this Act: amount, business, charitable purpose, council-controlled organisation, exempt income, income, local authority, tax charity, trustee
Compare: 2004 No 35 s CW 34
Section CW 41(2): amended, on 1 July 2008, by section 20(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section CW 41(4): substituted, on 1 April 2008, by section 331 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 41(5) heading: added, on 1 July 2008, by section 20(2) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section CW 41(5): added, on 1 July 2008, by section 20(2) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section CW 41 list of defined terms registered as a charitable entity: repealed, on 1 July 2008, by section 20(3) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section CW 41 list of defined terms tax charity: inserted, on 1 July 2008, by section 20(3) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

CW 42 Charities: business income

Exempt income
(1) Income derived directly or indirectly from a business carried on by, or for, or for the benefit of a trust, society, or institution of a kind referred to in section CW 41(1) is exempt income if—
- (a) the trust, society, or institution carries out its charitable purposes in New Zealand; and
- (b) the trustee or trustees of the trust, the society, or the institution is or are, at the time that the income is derived, a tax charity; and
- (c) no person with some control over the business is able to direct or divert, to their own benefit or advantage, an amount derived from the business. Subsections (3) to (8) expand on this subsection.
Exclusion
(2) This section does not apply to an amount of income derived by—
- (a) a council-controlled organisation, other than a council-controlled organisation operating a hospital as a charitable activity:
- (b) a local authority from a council-controlled organisation, other than from a council-controlled organisation operating a hospital as a charitable activity on behalf of the local authority.
Carrying on a business: trustee
(3) For the purposes of subsection (1), a trustee is treated as carrying on a business if—
- (a) the trustee derives rents, fines, premiums, or other revenues from an asset of the trust; and
- (b) the asset was disposed of to the trust by a person of a kind described in subsection (5)(b);
- (c) and either—
  - (i) the person retains or reserves an interest in the asset; or
  - (ii) the asset will revert to the person.
Charitable purposes in New Zealand and overseas
(4) For the purposes of subsection (1)(a), if the charitable purposes of the trust, society, or institution are not limited to New Zealand, income derived from the business in a tax year is apportioned reasonably between those purposes in New Zealand and those outside New Zealand. Only the part apportioned to the New Zealand purposes is exempt income.
Control over business
(5) For the purposes of subsection (1)(c) for an income year, a person is treated as having some control over the business, and as being able to direct or divert amounts from the business to their own benefit or advantage if, in the tax year,—
- (a) they are, in any way, whether directly or indirectly, able to determine, or materially influence the determination of,—
  - (i) the nature or extent of a relevant benefit or advantage; or
  - (ii) the circumstances in which a relevant benefit or advantage is, or is to be, given or received; and
- (b) their ability to determine or influence the benefit or advantage arises because they are—
  - (i) a settlor or trustee of the trust by which the business is carried on; or
  - (ii) a shareholder or director of the company by which the business is carried on; or
  - (iii) a settlor or trustee of a trust that is a shareholder of the company by which the business is carried on; or
  - (iv) a person associated with a settlor, trustee, shareholder, or director referred to in any of subparagraphs (i) to (iii).
Control: settlor asset disposed of to trust
(6) For the purposes of subsection (5), a person is treated as a settlor of a trust, and as gaining a benefit or advantage in the carrying on of a business of the trust, if—
- (a) they have disposed of an asset to the trust, and the asset is used by the trust in the carrying on of the business; and
- (b) they retain or reserve an interest in the asset, or the asset will revert to them.
No control
(7) For the purposes of subsection (1)(c), a person is not treated as having some control over the business merely because—
- (a) they provide professional services to the trust or company by which the business is carried on; and
- (b) their ability to determine, or materially influence the determination of, the nature or extent of a relevent benefit or advantage arises because they—
  - (i) provide the services in the course of and as part of carrying on, as a business, a professional public practice; or
  - (ii) are a statutory trustee company; or
  - (iii) are Public Trust; or
  - (iv) are the Maori Trustee.
Benefit or advantage
(8) For the purposes of subsection (1)(c), a benefit or advantage to a person—
- (a) may or may not be something that is convertible into money:
- (b) unless excluded under paragraph (d), includes deriving an amount that would be income of the person under 1 or more of the following provisions:
  - (i) section CA 1(2) (Amounts that are income):
  - (ii) sections CB 1 to CB 23 (which relate to income from business or trade-like activities):
  - (iii) section CB 32 (Property obtained by theft):
  - (iv) sections CC 1 (Land), CC 3 to CC 8 (which relate to income from financial instruments), and CC 9 (Royalties):
  - (v) section CD 1 (Dividend):
  - (vi) sections CE 1 (Amounts derived in connection with employment) and CE 8 (Attributed income from personal services):
  - (vii) section CF 1 (Benefits, pensions, compensation, and government grants):
  - (viii) section CG 3 (Bad debt repayment):
  - (ix) sections CQ 1 (Attributed controlled foreign company income) and CQ 4 (Foreign investment fund income):
- (c) includes retaining or reserving an interest in an asset in the case described in subsection (3), if the person has disposed of the asset to the trust or the asset will revert to them:
- (d) does not include earning interest on money lent, if the interest is payable at no more than the current commercial rate, given the nature and term of the loan.
Non-exempt business income
(9) If an amount derived from the carrying on of a business by or for a trust is not exempt income because of a failure to comply with subsection (1)(c), the amount is trustee income.
Defined in this Act: amount, associated person, business, charitable purpose, company, council-controlled organisation, director, exempt income, income, income year, interest, local authority, money lent, New Zealand, pay, shareholder, statutory trustee company, tax charity, trustee, trustee income
Compare: 2004 No 35 s CW 35
Section CW 42(1)(b): amended, on 1 July 2008, by section 21(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section CW 42(2): substituted, on 1 April 2008, by section 332 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section CW 42(5): amended (with effect on 1 April 2008), on 6 October 2009, by section 48 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 42(7): amended (with effect on 1 April 2008), on 6 October 2009, by section 48 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 42(8): amended (with effect on 1 April 2008), on 6 October 2009, by section 48 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 42(9): amended (with effect on 1 April 2008), on 6 October 2009, by section 48 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CW 42 list of defined terms tax charity: inserted, on 1 July 2008, by section 21(2) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

CW 43 Charitable bequests

Exempt income
(1) An amount of income derived by a deceased’s executor or administrator is exempt income to the extent to which the requirements of subsections (2) and (3) are met, having regard to all relevant matters including—
- (a) the terms of the deceased’s will, including the rights of annuitants, legatees, and other beneficiaries; and
- (b) the nature and extent of the debts and liabilities of, and other charges against, the estate and their likely effect on the income and assets available for distribution to the beneficiaries; and
- (c) the shares and prospective shares of the beneficiaries in the income and assets of the estate.
Gift to charity
(2) The first requirement is that the amount arises from or is attributable to assets of the estate that have been left to a trust, society, or institution of a kind referred to in section CW 41(1).
Exempt in hands of charity
(3) The second requirement is that the amount, if derived by the trust, society, or institution or by a business carried on by, or for, or for the benefit of it, would be exempt income under section CW 41 or CW 42.
Timing of registration as charitable entity
(4) An amount of income derived by a deceased’s executor or administrator that is derived during the period beginning on the deceased’s date of death and ending at the end of the income year that follows the income year in which the deceased died is not prevented from being exempt income under this section merely because the trustee or trustees of the trust, the society, or the institution is not, or are not, a tax charity.
Requirements of sections CW 41 and CW 42 disregarded
(5) For the purposes of subsection (4), until the end of the income year that follows the income year in which the deceased died, the requirements of sections CW 41 and CW 42 for the trustee or trustees of the trust, the society, or the institution to be a tax charity must be disregarded when applying those sections for the purposes of this section.
Amounts derived after end of certain period
(6) This section does not apply to an amount of income derived after the end of the income year that follows the income year in which the deceased died if, at the time that the amount of income is derived, the trustee or trustees of the trust, the society, or the institution is not, or are not, a tax charity.
Defined in this Act: amount, business, distribution, exempt income, income, New Zealand, tax charity
Compare: 2004 No 35 s CW 36
Section CW 43(4): amended, on 1 July 2008, by section 22(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section CW 43(5): amended, on 1 July 2008, by section 22(2) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section CW 43(6): amended, on 1 July 2008, by section 22(3) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section CW 43 list of defined terms registered as a charitable entity: repealed, on 1 July 2008, by section 22(4) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section CW 43 list of defined terms tax charity: inserted, on 1 July 2008, by section 22(4) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

CW 44 Friendly societies

An amount of income derived by a friendly society is exempt income, except to the extent to which the amount is derived from—
- (a) a business carried on beyond the membership of the friendly society; or
- (b) a company registered as an insurer under the Accident Insurance Act 1998.
Defined in this Act: amount, business, company, exempt income, friendly society, income,
Compare: 2004 No 35 s CW 37

CW 45 Funeral trusts

Interest or a dividend derived by a trustee in trust for a fund is exempt income if, when the interest or dividend is derived by the trustee,—
- (a) the sole purpose of the fund is the payment of the expenses associated with the funerals of—
  - (i) employees of an employer:
  - (ii) spouses, civil union partners, de facto partners, and dependants of employees of the employer:
  - (iii) surviving spouses, civil union partners, de facto partners, and surviving dependants of deceased employees of the employer; and
- (b) the employer has at least 10 employees; and
- (c) all persons eligible for benefits from the fund are eligible equally for benefits from the fund; and
- (d) no contributions to the fund are made by a person who is not the employer or an employee of the employer; and
- (e) the fund is approved by the Commissioner.
Defined in this Act: Commissioner, dividend, employee, employer, exempt income, interest, pay, trustee,
Compare: 2004 No 35 s CW 38

CW 46 Bodies promoting amateur games and sports

An amount of income derived by a club, society, or association is exempt income if—
- (a) the club, society, or association is established mainly to promote an amateur game or sport; and
- (b) the game or sport is conducted for the recreation or entertainment of the general public; and
- (c) no part of the funds of the club, society, or association is used or is available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them.
Defined in this Act: amount, associated person, exempt income, income,
Compare: 2004 No 35 s CW 39

CW 47 TAB and racing clubs

Exempt income: racing organisations
(1) An amount of income derived by any of the following bodies is exempt income:
- (a) the New Zealand Racing Board:
- (b) New Zealand Thoroughbred Racing:
- (c) Harness Racing New Zealand:
- (d) the New Zealand Greyhound Racing Association (Incorporated).
Exempt income: racing clubs
(2) An amount of income derived by a racing club, as defined in section 5 of the Racing Act 2003, is exempt income, if none of the club’s funds is used or is available to be used for the private pecuniary profit of a member of the club or an associate of a member.
Defined in this Act: amount, associated person, exempt income, income,
Compare: 2004 No 35 s CW 40

CW 48 Income from conducting gaming-machine gambling

An amount of income derived by a person that is gross gambling proceeds from gaming-machine gambling is exempt income if—
- (a) the person is authorised to conduct the gaming-machine gambling under the Gambling Act 2003 by a gaming-machine operator’s licence and a gaming-machine venue licence; and
- (b) the person complies with the Gambling Act 2003 in applying and distributing the net gambling proceeds from the gaming-machine gambling.
Defined in this Act: exempt income, gaming-machine gambling, gaming-machine operator’s licence, gaming-machine venue licence, gross gambling proceeds, net gambling proceeds,
Compare: 2004 No 35 s CW 40B

CW 49 Bodies promoting scientific or industrial research

Exempt income
(1) An amount of income derived by a society or association established mainly to promote or encourage scientific or industrial research is exempt income if—
- (a) the society or association is approved by the Royal Society of New Zealand; and
- (b) none of its funds is used or available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them.
Exclusion
(2) This section does not apply to a Crown Research Institute.
Defined in this Act: amount, associated person, Crown Research Institute, exempt income, income,
Compare: 2004 No 35 s CW 41

CW 50 Veterinary services bodies

Exempt income: veterinary clubs
(1) An amount of income derived by a veterinary association, club, or society is exempt income if—
- (a) the association, club, or society was established mainly to promote efficient veterinary services in New Zealand; and
- (b) none of its funds is used or available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them.
Exempt income: Veterinary Council
(2) An amount of income derived by the Veterinary Council of New Zealand is exempt income.
Defined in this Act: amount, associated person, exempt income, income, New Zealand,
Compare: 2004 No 35 s CW 42

CW 51 Herd improvement bodies

An amount of income derived by a herd improvement association or society is exempt income if—
- (a) the association or society was established mainly to promote the improvement of the standard of dairy cattle in New Zealand; and
- (b) none of its funds is used or available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them.
Defined in this Act: amount, associated person, exempt income, income, New Zealand,
Compare: 2004 No 35 s CW 43

CW 52 Community trusts

An amount of income derived by the trustee of a community trust is exempt income.
Defined in this Act: amount, community trust, exempt income, income, trustee,
Compare: 2004 No 35 s CW 44

CW 53 Distributions from complying trusts

To the extent to which section HC 20 (Distributions from complying trusts) applies to an amount that a person derives as a beneficiary of a trust, the amount is exempt income.
Defined in this Act: amount, complying trust, distribution, exempt income,
Compare: 2004 No 35 s HH 3(5)

CW 54 Foreign-sourced amounts derived by trustees

To the extent to which section HC 26 (Foreign-sourced amounts: resident trustees) applies to a foreign-sourced amount that a trustee who is resident in New Zealand derives in an income year, the amount is exempt income.
Defined in this Act: exempt income, foreign-sourced amount, income year, non-resident, resident in New Zealand, trustee,
Compare: 2004 No 35 s HH 4(3B)

CW 55 Maori authority distributions

A distribution from a Maori authority to a member, to the extent to which it is not income under section CV 11 (Maori authorities) is exempt income.
Defined in this Act: exempt income, income, Maori authority, member,
Compare: 2004 No 35 s HI 5(1)

CW 55BA Tertiary education institutions

An amount of income derived by a tertiary education institution that is established under Part 14 of the Education Act 1989 and is not carried on for the private pecuniary profit of any individual is exempt income.
Defined in this Act: exempt income, income
Section CW 55BA: inserted, on 1 July 2008, by section 23 of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Partners and partnerships

Heading: inserted, on 1 April 2008, by section 8(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).

CW 55B Amounts of exempt income for partners

A person who is a partner has an amount of exempt income to the extent to which an amount of exempt income results from the application of subpart HG (Joint venturers, partners, and partnerships) to them and their partnership.
Defined in this Act: amount, exempt income, partner, partnership
Section CW 55B: inserted, on 1 April 2008, by section 8(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).

Income from certain activities

CW 56 Non-resident aircraft operators

Exempt income
(1) An amount of income derived by a non-resident aircraft operator from air transport from New Zealand is exempt income to the extent to which the Commissioner determines that an aircraft operator resident in New Zealand is, in circumstances corresponding to the circumstances of the non-resident aircraft operator, exempt from, or not liable to, income tax imposed by the laws of the country or territory in which the non-resident aircraft operator is resident.
Determination
(2) A determination by the Commissioner for the purposes of subsection (1) may relate to a class of non-resident aircraft operators or a class of resident aircraft operators.
Some definitions
(3) In this section,—
air transport from New Zealand—
- (a) means the carriage outside New Zealand by an aircraft of cargo, mail, or passengers emplaned or embarked on the aircraft at an airport in New Zealand; and
- (b) if the aircraft calls at another airport in New Zealand before leaving New Zealand on the flight for which the emplaning or embarking occurred, includes that New Zealand portion of the flight
non-resident aircraft operator means a person who—
- (a) is engaged in the business of operating an aircraft for air transport from an airport; and
- (b) is resident in a country or territory outside New Zealand and is not resident in New Zealand.
Defined in this Act: air transport from New Zealand, amount, business, Commissioner, exempt income, income, income tax, New Zealand, non-resident aircraft operator, resident in New Zealand,
Compare: 2004 No 35 s CW 45

CW 57 Non-resident company involved in exploration and development activities

Exempt income
(1) An amount of income derived by a non-resident company from exploration and development activities in an offshore permit area is exempt income if it is derived in the period that—
- (a) starts on the beginning of the 2005–06 income year for the non-resident company; and
- (b) ends on 31 December 2009.
Some definitions
(2) In this section,—
exploration and development activities means the following activities undertaken for the purposes of identifying and developing exploitable petroleum deposits or occurrences in an offshore permit area
- (a) operating a ship to provide seismic survey readings:
- (b) drilling an exploratory well or other well
offshore permit area means an area of land that is—
- (a) in New Zealand; and
- (b) on the seaward side of the mean high-water mark; and
- (c) a permit area or part of a permit area.
Defined in this Act: amount, exempt income, exploration and development activities, exploratory well, New Zealand, non-resident company, offshore permit area, permit area,
Compare: 2004 No 35 s CW 45B

CW 58 Disposal of companies’ own shares

An amount of income derived by a company from disposing of shares in the company is exempt income if—
- (a) the company acquired the shares; and
- (b) the acquisition was treated under section 67A(1) of the Companies Act 1993 as not resulting in the cancellation of the shares.
Defined in this Act: amount, cancellation, company, exempt income, income, share,
Compare: 2004 No 35 s CW 46

CW 59 New Zealand companies operating in Niue

Exempt income: income wholly or mainly from Niue
(1) An amount of income derived by a company incorporated in New Zealand that derives its income wholly or mainly from Niue is exempt income.
Exclusion
(2) Subsection (1) does not apply if the company, if it were a foreign company, would at any time during the income year in which the amount is derived be a controlled foreign company.
Exempt income: dividends
(3) A dividend derived from a company incorporated in New Zealand that derives its income wholly or mainly from Niue is exempt income, unless the dividend is derived by—
- (a) a person who is resident in New Zealand; or
- (b) a company that is a controlled foreign company at any time during the income year in which the amount is derived; or
- (c) a trustee of a trust of which a settlor or beneficiary is resident in New Zealand during the income year in which the amount is derived.
Exempt income: Niue development projects
(4) An amount of income derived by a company incorporated in New Zealand from a business or enterprise that the company carries on in Niue is exempt income if—
- (a) the business or enterprise is declared by an Order in Council made under subsection (7) to be a development project for the purposes of this section; and
- (b) the company’s income is derived wholly or mainly from that business or enterprise; and
- (c) the amount is derived from sources in Niue; and
- (d) the amount is derived while the Order in Council is in force.
Exclusions
(5) Subsections (1), (3), and (4) do not apply to—
- (a) an amount of income derived from sources in New Zealand; or
- (b) a dividend, to the extent to which it constitutes distribution of an amount derived by the company from sources in New Zealand.
Attributed CFC income and FIF income
(6) This section does not restrict the application of section CQ 1 (Attributed controlled foreign company income), or CQ 4 (Foreign investment fund income), or the FIF rules. For the purposes of the FIF rules, a company that derives its income wholly or mainly from Niue and has exempt income under subsection (1) is treated as a foreign company.
Order in Council declaring Niue development project
(7) The Governor-General may make an Order in Council declaring a business or enterprise to be a development project for the purposes of this section if satisfied that the business or enterprise—
- (a) has been or will be entered upon wholly or mainly for the purpose of developing Niue; or
- (b) is or will be important in the development of Niue.
Defined in this Act: amount, attributed CFC income, business, company, controlled foreign company, dividend, exempt income, FIF, FIF rules, foreign company, income, income year, resident in New Zealand, settlor, source in New Zealand, trustee,
Compare: 2004 No 35 s CW 47

CW 59B Income of and distributions by certain international funds

Trustees
(1) An amount derived by a person is exempt income of the person if they are—
- (a) the trustee of the Niue International Trust Fund:
- (b) the trustee of the Tokelau International Trust Fund.
Distributions
(2) An amount derived by a person is exempt income of the person if the income is a distribution by—
- (a) the trustee of the Niue International Trust Fund:
- (b) the trustee of the Tokelau International Trust Fund.
Defined in this Act: amount, distribution, exempt income, income, Niue International Trust Fund, Tokelau International Trust Fund, trustee
Compare: 2004 No 35 ss CW 49C, CW 49D
Section CW 59B: inserted, on 1 April 2008, by section 333 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

CW 60 Stake money

Stake or prize money for a dog race, horse race, or trotting race is exempt income if—
- (a) it is paid by a club that is licensed to use the totalisator under the Racing Act 2003; or
- (b) the race is held outside New Zealand.
Defined in this Act: exempt income, New Zealand, pay,
Compare: 2004 No 35 s CW 48

CW 61 Providing standard-cost household service

Exempt income under determination
(1) An amount of income derived in an income year by a natural person from providing a standard-cost household service is exempt income if the amount is exempt income under a determination made under section 91AA(2)(a) of the Tax Administration Act 1994.
When amount treated as expenditure
(2) If subsection (1) does not apply, and the amount of standard-cost household service is less than the amount of income of the person, the person is treated, under a determination made under section 91AA of that Act, as incurring an amount of expenditure in providing the services.
Allocation
(3) For the purposes of subsection (2), the allocation of the amount of the expenditure occurs under section BD 4 (Allocation of deductions to particular income years).
Defined in this Act: amount, deduction, exempt income, income, income tax liability, income year, standard-cost household service,
Compare: 2004 No 35 s CW 49

CW 62 Interest paid under the KiwiSaver Act 2006

Interest paid by the Commissioner under section 84 of the KiwiSaver Act 2006 is exempt income.
Defined in this Act: Commissioner, exempt income, interest,
Compare: 2004 No 35 s CW 49B

CW 62B Voluntary activities

Exempt income
(1) When a volunteer, in undertaking a voluntary activity, derives an amount that is a reimbursement payment to cover actual expenses incurred by them, the amount is exempt income of the volunteer.
Estimated expenditure
(2) For the purposes of subsection (1)—
- (a) a person may make a reasonable estimate of the amount of expenditure likely to be incurred by the volunteer for which reimbursement is payable; and
- (b) the amount estimated is treated as if it were the amount incurred.
Payments partly reimbursement and partly honorarium
(3) If the person paying the amount to the volunteer makes a payment to them that is only partly a reimbursement of expenses, the person must identify the portion of the amount that is the reimbursement, and treat the remainder as an honorarium, being a schedular payment to which the PAYE rules apply.
Who is a volunteer?
(4) For the purposes of this section, a volunteer means a person who freely undertakes an activity in New Zealand—
- (a) chosen either by themselves or by a group of which they are a member; and
- (b) that provides a benefit to a community or another person; and
- (c) for which there is no purpose or intention of private pecuniary profit for the person.
Honoraria
(5) For the purposes of this section, and schedule 4, part B (Rates of tax for schedular payments), an honorarium means an amount that a person receives for providing services that—
- (a) is paid at a rate that is less than the market rate for providing the services; and
- (b) is an amount for which, in the normal course, no payment is fixed for the services provided.
Nature of reimbursement payment
(6) For the purposes of this section, it does not matter whether—
- (a) an amount of a reimbursement payment is paid in 1 sum or not:
- (b) the amount is paid during an income year or at the end of an income year.
Relationship with section RD 8(3)
(7) A determination made by the Commissioner under section RD 8(3) (Schedular payments) may apply to modify an amount of expenditure under this section.
Defined in this Act: amount, exempt income, honorarium, income year, New Zealand, pay, PAYE rules, schedular payment, volunteer
Section CW 62B: inserted (with effect on 1 April 2009), on 6 October 2009, by section 50(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CW 63 Avoidance arrangements

An amount is exempt income if it is treated as exempt income under—
- (a) section GA 1 (Commissioner’s power to adjust):
- (b) section GB 23 (Excessive remuneration to relatives).
Defined in this Act: amount, exempt income,
Compare: 2004 No 35 ss GB 1(1)–(2C), GD 3(1), (2)

CW 64 Exemption under other Acts

An amount of income expressly exempted from income tax by any other Act is exempt income.
Defined in this Act: amount, exempt income, income, income tax,
Compare: 2004 No 35 s CW 50

Subpart CX—Excluded income

Goods and services tax

CX 1 Goods and services tax

The following are excluded income of a registered person:
- (a) output tax on goods and services they supply:
- (b) goods and services tax (GST) payable to them by the Commissioner.
Defined in this Act: Commissioner, excluded income, goods, GST, GST payable, output tax, pay, registered person, services,
Compare: 2004 No 35 s CX 1

Fringe benefits

Introductory provisions

CX 2 Meaning of fringe benefit

Meaning
(1) A fringe benefit is a benefit that—
- (a) is provided by an employer to an employee in connection with their employment; and
- (b) either—
  - (i) arises in a way described in any of sections CX 6, CX 9, CX 10, or CX 12 to CX 16; or
  - (ii) is an unclassified benefit; and
- (c) is not a benefit excluded from being a fringe benefit by any provision of this subpart.
Arrangement to provide benefit
(2) A benefit that is provided to an employee through an arrangement made between their employer and another person for the benefit to be provided is treated as having been provided by the employer.
Past, present, or future employment
(3) It is not necessary to the existence of a fringe benefit that an employment relationship exists when the employee receives the benefit.
Relationship with subpart RD
(4) Sections RD 25to RD 63 (which relate to fringe benefit tax) deal with the calculation of the taxable value of fringe benefits.
Arrangements
(5) A benefit may be treated for the purposes of the FBT rules as being provided by an employer to an employee under—
- (a) section GB 31 (FBT arrangements: general):
- (b) section GB 32 (Benefits provided to employee’s associates).
Defined in this Act: arrangement, associated person, employee, employer, employment, FBT rules, fringe benefit, unclassified benefit,
Compare: 2004 No 35 s CX 2
Section CX 2(5): amended, on 1 April 2010 (applying for the 2010–11 and later income years), by section 51(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CX 2 list of defined terms FBT rules: inserted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 51(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CX 3 Excluded income

A fringe benefit is excluded income of the employee.
Defined in this Act: employee, excluded income, fringe benefit,
Compare: 2004 No 35 s CX 3

CX 4 Relationship with assessable income

To the extent to which a benefit that an employer provides to an employee in connection with their employment is assessable income, the benefit is not a fringe benefit.
Defined in this Act: assessable income, employee, employer, employment, fringe benefit,
Compare: 2004 No 35 s CX 4

CX 5 Relationship with exempt income

Exempt income not fringe benefit
(1) To the extent to which a benefit that an employer provides to an employee in connection with their employment is exempt income, the benefit is not a fringe benefit.
Exclusions
(2) Subsection (1) does not apply to—
- (a) a payment of a premium on a life insurance policy that is excluded from being expenditure on account of an employee under section CE 5(3)(f) to (i) (Meaning of expenditure on account of an employee):
- (b) an allowance that is exempt income under section CW 17 (Expenditure on account, and reimbursement, of employees) to the extent to which it is made to enable the employee to provide a benefit to another person.
Exempt cash payment not fringe benefit
(3) To the extent to which a benefit that an employer provides to an employee in connection with their employment would have been exempt income if it had been paid in cash, the benefit is not a fringe benefit.
Exclusion
(4) Subsection (3) does not apply to interest, dividends, or an allowance under subsection (2)(b).
Defined in this Act: dividend, employee, employer, employment, exempt income, expenditure on account of an employee, fringe benefit, interest, life insurance policy, pay, premium,
Compare: 2004 No 35 s CX 5

Fringe benefits

CX 6 Private use of motor vehicle

When fringe benefit arises
(1) A fringe benefit arises when—
- (a) a motor vehicle is made available to an employee for their private use; and
- (b) the person who makes the vehicle available to the employee—
  - (i) owns the vehicle:
  - (ii) leases or rents the vehicle:
  - (iii) has a right to use the vehicle under an agreement or arrangement with the employee or a person associated with the employee.
Exclusion: work-related vehicles
(2) Subsection (1) does not apply when the vehicle is a work-related vehicle.
Exclusion: emergency calls
(3) Subsection (1) does not apply when the vehicle is used for an emergency call.
Exclusion: absences from home
(4) Subsection (1) does not apply when the employee is absent from home, with the vehicle, for a period of at least 24 hours continuously, if the employee is required, in the performance of their duties, to use a vehicle and regularly to be absent from home.
Use on part of day
(5) For the purposes of subsections (3) and (4), the whole of the day on which a motor vehicle is used as described in the applicable subsection is treated as a day on which the vehicle is not available for private use.
Defined in this Act: emergency call, employee, fringe benefit, lease, motor vehicle, private use, work-related vehicle,
Compare: 2004 No 35 s CX 6

CX 7 Employer or associated person treated as having right to use vehicle under arrangement

When this section applies
(1) This section applies for the application of the fringe benefit tax (FBT) rules to an agreement or arrangement—
- (a) between an employer, or a person associated with the employer, and an employee, or a person associated with the employee; and
- (b) transferring to the employer or person associated with the employer a right to use a motor vehicle under terms agreed between the parties.
Person treated as having right to use vehicle
(2) The employer or associated person is treated as having a right to use the motor vehicle for a period during which the employee—
- (a) uses the vehicle privately:
- (b) has a right to use the vehicle privately.
Defined in this Act: employee, employer, FBT rules, fringe benefit tax, lease, motor vehicle,
Compare: 2004 No 35 s CX 6B

CX 8 Private use of motor vehicle: use by more than 1 employee

If, on any day, a motor vehicle is made available by an employer for the private use of more than 1 employee, this availability is treated as a single instance. The taxable value of the fringe benefit is reduced by the total amount of any contributions paid by an employee or employees.
Defined in this Act: amount, contribution, employee, employer, fringe benefit, motor vehicle, pay, private use,
Compare: 2004 No 35 s CX 7

CX 9 Subsidised transport

A fringe benefit arises when an employer provides subsidised transport to an employee.
Defined in this Act: employee, employer, fringe benefit, subsidised transport,
Compare: 2004 No 35 s CX 8

CX 10 Employment-related loans

When fringe benefit arises
(1) A fringe benefit arises when an employer provides a loan to an employee.
Exclusions
(2) Subsection (1) does not apply to a loan made—
- (a) as an employee share loan:
- (b) under a share purchase scheme:
- (c) by a superannuation fund to the extent to which the value of the loan constitutes income of the fund under section CS 18 (Value of loan treated as fund income):
- (d) as an advance of salary and wages, if,—
  - (i) in the period for which the employer is required to forward a return to the Commissioner under sections RD 25to RD 63 (which relate to fringe benefit tax), the total outstanding of such advances to the employee is no more than $2,000; and
  - (ii) the contract of employment does not require the employer to make the advance.
Loan owing
(3) The employer provides a fringe benefit in a tax year in which the loan is owing. The circumstances in which a loan is owing include a case in which, under the arrangement for the loan, an amount is payable in the future, or would be payable in the future if a particular event happened, and the employee or an associated person is or would be liable to pay the amount.
Defined in this Act: amount, arrangement, associated person, employee, employee share loan, employer, employment-related loan, fringe benefit, income, pay, share purchase scheme, superannuation fund, tax year,
Compare: 2004 No 35 s CX 9

CX 11 Employment-related loans: loans by life insurers

When fringe benefit treated as arising
(1) A life insurer provides a benefit that is treated as an employment-related loan if—
- (a) the life insurer makes a loan to a person who holds a life insurance policy (person A) or to a person associated with person A; and
- (b) the life insurance policy is offered or entered into in New Zealand; and
- (c) either—
  - (i) the loan is made because of the capacity or status of person A as a policyholder; or
  - (ii) the interest charged on the loan depends on the capacity or status of person A as a policyholder.
Life insurer as employer
(2) For the purposes of the FBT rules, the life insurer is treated as an employer and person A or the person associated with them is treated as an employee.
Meaning of life insurer
(3) In this section, life insurer—
- (a) means a person who is the insurer under the life insurance policy:
- (b) includes—
  - (i) a person associated with the life insurer:
  - (ii) a person with whom the life insurer has entered into an arrangement relating to the making of the loan.
Defined in this Act: arrangement, associated person, employee, employer, employment-related loan, FBT rules, fringe benefit, interest, life insurance policy, life insurer, offered or entered into in New Zealand,
Compare: 2004 No 35 s CX 10

CX 12 Services for members of Parliament

A fringe benefit arises when travel, accommodation, attendance, and communications services are exempt income under section CW 31 (Services for members of Parliament).
Defined in this Act: exempt income, fringe benefit,
Compare: 2004 No 35 s CX 11

CX 13 Contributions to superannuation schemes

When fringe benefit arises
(1) A fringe benefit arises when an employer contributes to a superannuation scheme for the benefit of an employee.
Exclusion
(2) This section does not apply if the contribution is an employer's superannuation cash contribution.
Defined in this Act: contribution, employee, employer, employer's superannuation cash contribution, fringe benefit, superannuation scheme,
Compare: 2004 No 35 s CX 12
Section CX 13(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 52(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CX 13 list of defined terms employer's superannuation cash contribution: inserted (with effect on 1 April 2008), on 6 October 2009, by section 52(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CX 13 list of defined terms employer's superannuation contribution: repealed (with effect on 1 April 2008), on 6 October 2009, by section 52(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CX 14 Contributions to sickness, accident, or death benefit funds

A fringe benefit arises when an employer makes a contribution for the benefit of an employee to a sickness, accident, or death benefit fund.
Defined in this Act: contribution, employee, employer, fringe benefit, sickness, accident, or death benefit fund,
Compare: 2004 No 35 s CX 13

CX 15 Contributions to funeral trusts

A fringe benefit arises when an employer makes a contribution to a fund in the circumstances described in section CW 45 (Funeral trusts).
Defined in this Act: contribution, employer, fringe benefit,
Compare: 2004 No 35 s CX 14

CX 16 Contributions to life or health insurance

When fringe benefit arises
(1) A fringe benefit arises when an employer pays a specified insurance premium or makes a contribution to the insurance fund of a friendly society for the benefit of an employee.
Exclusion
(2) This section does not apply to a premium or contribution described in section CZ 15 (Accident insurance contracts before 1 July 2000).
Meaning of specified insurance premium
(3) In this section, specified insurance premium means a premium paid for the benefit of an employee, their spouse, civil union partner or de facto partner, or their child on a policy described in any of subsections (4) to (6).
Life insurance
(4) The first kind of policy referred to in subsection (3) is a policy of insurance on the life of the employee or their spouse, civil union partner or de facto partner, or on their joint lives, or on the life of their child, to which all the following apply:
- (a) for policies other than whole of life policies, the minimum term is—
  - (i) 10 years; or
  - (ii) 5 years, for a policy whose maturity date is no earlier than the date on which a life assured reaches 60 years of age; and
- (b) the only benefits payable earlier than 10 years from the start of the policy or its maturity date, whichever is earlier, are—
  - (i) benefits payable for the death of a life assured; or
  - (ii) additional benefits payable for an accident to a life assured or disease or sickness of a life assured; and
- (c) the policy—
  - (i) provides for a payment on the death of a life assured of a benefit that is not a return of premiums, is substantially capital, and is not materially less than the total benefit payable under the policy otherwise than for death; or
  - (ii) is a policy on the life of a person who, because of ill health or physical disability, is unable to effect a policy of the kind described in subparagraph (i) at ordinary rates; or
  - (iii) is a deferred life assurance policy on the life of a child.
Life insurance: pension benefit
(5) The second kind of policy referred to in subsection (3) is a policy described in subsection (4), or that would be described if it met the requirements of subsection (4)(c)(i), and under which the only benefits payable are for a life assured and by way of—
- (a) a pension starting on or after the date on which the life assured reaches 60 years of age and continuing for the life of the employee, their spouse, civil union partner or de facto partner, or their child; or
- (b) on the death of the life assured,—
  - (i) the return of the part of the premiums paid for the assurance to secure the payment of a pension dependent on the life of the employee, their spouse, civil union partner or de facto partner, or their child; and
  - (ii) the payment of the part of each bonus declared on the policy attributable to the part of the premiums described in subparagraph (i).
Health insurance
(6) The third kind of policy referred to in subsection (3) is a policy of insurance under which the benefits are payable only for—
- (a) an accident, whether fatal or not, to the employee, their spouse, civil union partner or de facto partner, or their child; or
- (b) disease or sickness of the employee, their spouse, civil union partner or de facto partner, or their child.
Defined in this Act: contribution, employee, employer, friendly society, fringe benefit, life insurance, pay, specified insurance premium, year,
Compare: 2004 No 35 s CX 15

CX 17 Benefits provided to employees who are shareholders or investors

Benefit provided in connection with employment
(1) If a company or a trustee of a group investment fund provides a non-cash benefit to an employee who holds shares in the company or who is an investor in the fund, the benefit is treated as having been provided in connection with the employment. The shares or investment may be held in the employee’s own right or beneficially.
Whether fringe benefit or dividend
(2) A company or a trustee of a group investment fund that has provided a non-cash benefit to an employee who holds shares in the company or who is an investor in the fund may choose to treat the benefit as a fringe benefit or a dividend. If the company or trustee does not make an election, the benefit is treated as a fringe benefit. If the company or trustee chooses to treat the benefit as a dividend, the FBT rules do not apply.
Exclusion
(3) Neither subsection (1) nor subsection (2) applies to a non-cash benefit provided by a company to a non-executive director of the company.
Non-cash benefits
(4) Subsection (2) applies to non-cash benefits that would,—
- (a) in the absence of section CD 32 (Employee benefits), be dividends under section CD 4 (Transfers of value generally) if provided to a person in their capacity as a shareholder:
- (b) in the absence of section CX 4 , be unclassified benefits if provided to a person in their capacity as an employee.
Notice of election
(5) The company or trustee must give notice to the Commissioner of the election referred to in subsection (2)in the time allowed for filing a fringe benefit tax return for the period in which the benefit was provided.
Defined in this Act: Commissioner, company, dividend, employee, employment, FBT rules, fringe benefit, fringe benefit tax, group investment fund, investor, non-executive director, notice, return, share, shareholder, trustee, unclassified benefit,
Compare: 2004 No 35 s CX 16

CX 18 Benefits provided to associates of both employees and shareholders

When this section applies
(1) This section applies when—
- (a) a benefit provided to an associated person of an employee would be treated as a fringe benefit under section GB 32 (Benefits provided to employee’s associates) in the absence of section CX 4; and
- (b) the employer is a company; and
- (c) the associated person is also associated with a shareholder in the company; and
- (d) the associated person is not a company; and
- (e) the associated person is not a shareholder in the company; and
- (f) the benefit would be a dividend if provided to the shareholder.
FBT rules apply, not dividend rules
(2) The benefit is subject to the FBT rules and is treated as not being a dividend.
Defined in this Act: associated person, company, dividend, employee, employer, FBT rules, fringe benefit, shareholder,
Compare: 2004 No 35 s GC 15(3), (4)

Exclusions and limitations

CX 19 Benefits provided instead of allowances

When not fringe benefit
(1) A benefit that an employer provides to an employee in connection with their employment is not a fringe benefit to the extent to which it removes the need that would otherwise exist for the employer to pay the employee an allowance of 1 of the following kinds:
- (a) an allowance that, if it had been paid,—
  - (i) would have been exempt income under section CW 17 (Expenditure on account, and reimbursement, of employees); and
  - (ii) would have been paid for reasons other than to enable the employee to provide a benefit to another person; or
- (b) an allowance that reimburses the employee for transport costs that—
  - (i) would have been incurred both in connection with their employment and for the benefit of the employer in travelling between home and work; and
  - (ii) would have been attributable to any 1 or more of the factors set out in section CW 18(3) (Allowance for additional transport costs); or
  - (c) an amount that, if it had been paid, would have been exempt income under section CW 17B (Relocation payments).
Temporary change in workplace
(2) A benefit that an employer provides to an employee is not a fringe benefit if it—
- (a) is in substitution for an allowance described in subsection (1)(b); and
- (b) is brought about because the employee has a temporary change in their place of work while in the same employment; and
- (c) reimburses the employee for transport costs that would have been incurred relating to travel by 1 or more of the employee’s spouse, civil union partner, or de facto partner, and relatives for the purpose of visiting the employee in the temporary place of work; and
- (d) has a value that is no more than the amount that would be provided under the allowance described in subsection (1)(b).
Defined in this Act: employee, employer, employment, exempt income, fringe benefit, pay, relative,
Compare: 2004 No 35 s CX 17
Section CX 19(1)(b)(ii): amended (with effect on 1 April 2008), on 6 October 2009, by section 53 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CX 19(1)(c): added (with effect on 1 April 2008), on 6 October 2009, by section 53 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CX 20 Benefits to enable performance of duties

The taxable value of a benefit that an employer provides to an employee by way of subsidised transport, or in the form of expenditure that an employer incurs on accommodation or transport provided to an employee, is zero if the expenditure—
- (a) relates to travel by the employee in order for them to perform their employment duties; and
- (b) does not relate to the providing or taking of leave or a vacation; and
- (c) is not increased as a result of the benefit.
Defined in this Act: employee, employer, subsidised transport,
Compare: 2004 No 35 s CX 18

CX 21 Business tools

When use of business tool not fringe benefit
(1) The private use of a business tool that an employer provides to an employee, and the availability for private use of such a business tool, is not a fringe benefit if—
- (a) the business tool is provided mainly for business use; and
- (b) the cost of the business tool to the employer, including the amount of any deduction for the cost of the business tool that the employer may make under section 20(3)of the Goods and Services Tax Act 1985 , is no more than $5,000.
Use away from employer’s premises
(2) For the purposes of subsection (1), a business tool that is not taken to and used on the employer’s premises may nevertheless be provided mainly for business use if the employee performs a significant part of the employee’s employment duties away from the premises.
Defined in this Act: business tool, business use, employee, employer, fringe benefit,
Compare: 2004 No 35 s CX 18B

CX 22 Benefits to non-executive directors

A transfer of value to a non-executive director that is a dividend under section CD 20(2) (Benefits of shareholder-employees or directors) is not a fringe benefit if it is made solely because of their capacity as a non-executive director.
Defined in this Act: dividend, fringe benefit, non-executive director, transfer of value,
Compare: 2004 No 35 s CX 19

CX 23 Benefits provided on premises

When not fringe benefit
(1) A benefit, other than free, discounted, or subsidised travel, accommodation, or clothing, is not a fringe benefit if the benefit is—
- (a) provided to the employee by the employer of the employee and received or used by the employee on the premises of—
  - (i) the employer:
  - (ii) a company that is part of the same group of companies as the employer:
- (b) provided to the employee by a company that is part of the same group of companies as the employer of the employee and received or used by the employee on the premises of—
  - (i) the employer:
  - (ii) the company that provides the benefit.
Premises of person
(2) In this section, the premises of a person—
- (a) include premises that the person owns or leases:
- (b) include premises, other than those referred to in paragraph (a), on which an employee of the person is required to perform duties for the person:
- (c) do not include premises occupied by an employee of the person for residential purposes.
Defined in this Act: company, employee, employer, fringe benefit, group of companies, lease,
Compare: 2004 No 35 s CX 20

CX 24 Benefits related to health or safety

A benefit that an employer provides to an employee is not a fringe benefit to the extent to which it—
- (a) is related to the employee’s health or safety; and
- (b) is aimed at hazard management in the workplace as contemplated in the Health and Safety in Employment Act 1992; and
- (c) would be excluded by section CX 23 from being a fringe benefit if provided on the employer’s premises.
Defined in this Act: employee, employer, employment, fringe benefit,
Compare: 2004 No 35 s CX 20B

CX 25 Benefits provided by charitable organisations

When not fringe benefit
(1) A charitable organisation that provides a benefit to an employee does not provide a fringe benefit except to the extent to which—
- (a) the employee receives the benefit mainly in connection with their employment; and
- (b) the employment consists of the carrying on by the organisation of a business whose activity is outside its benevolent, charitable, cultural, or philanthropic purposes.
When employer provides charge facilities
(2) Subsection (1)does not apply, and the benefit provided is a fringe benefit, if a charitable organisation provides a benefit to an employee by way of short-term charge facilities and the value of the benefit from the short-term charge facilities for the employee in a tax year is more than 5% of the employee’s salary or wages for the tax year.
Meaning of short-term charge facilities
(3) For the purposes of the FBT rules, a short-term charge facility means an arrangement that—
- (a) enables an employee of a charitable organisation to obtain goods or services that have no connection with the organisation or its operations by buying or hiring the goods or services or charging the cost of the goods or services to an account; and
- (b) places the liability for some or all of the payment for the goods or services on the organisation; and
- (c) is not a fringe benefit under section CX 10.
Defined in this Act: business, charitable organisation, employee, employment, fringe benefit, pay, short-term charge facility,
Compare: 2004 No 35 s CX 21

CX 26 Non-liable payments

A benefit received by an employee is not a fringe benefit to the extent to which it is received in a quarter or in an income year in which they derive 1 or more pay-as-you-earn (PAYE) income payments, all of which are not liable for income tax.
Defined in this Act: employee, fringe benefit, income tax, income year, PAYE income payment, quarter,
Compare: 2004 No 35 s CX 22

CX 27 Assistance with tax returns

An employer’s assistance with the preparation of an employee’s income statement or return of income is not a fringe benefit when the expenditure incurred in providing the assistance is expenditure for which the employee would have been allowed a deduction, if it had been incurred by the employee, under section DB 3 (Determining tax liabilities).
Defined in this Act: deduction, employee, employer, fringe benefit, income statement, return of income,
Compare: 2004 No 35 s CX 23

CX 28 Accommodation

The value of accommodation that an employer provides to an employee in connection with the employment or services is not a fringe benefit.
Defined in this Act: accommodation, employee, employer, employment, fringe benefit,
Section CX 28: substituted (with effect on 1 April 2008), on 6 October 2009, by section 54(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CX 29 Entertainment

When not fringe benefit
(1) A benefit in a form of entertainment described in section DD 2 (Limitation rule) that an employer provides to an employee is not a fringe benefit. This subsection is overridden by subsection (2).
When is fringe benefit
(2) A benefit in a form of entertainment described in section DD 2 that an employer provides to an employee is a fringe benefit if—
- (a) the employee does not receive or use it in the course of employment; and
- (b) the employee does not receive or use it as a necessary consequence of their employment duties; and
- (c) either—
  - (i) the employee may choose when to receive or use the benefit; or
  - (ii) the entertainment is of a kind described in section DD 7 (Entertainment outside New Zealand).
Defined in this Act: employee, employer, employment, fringe benefit,
Compare: 2004 No 35 s CX 25

CX 30 Distinctive work clothing

When not fringe benefit
(1) Distinctive work clothing that an employer provides to an employee is not a fringe benefit, whether provided by sale or otherwise.
Meaning of distinctive work clothing
(2) In this section, distinctive work clothing means clothing, including a single item of clothing, that—
- (a) is worn by an employee as, or as part of, a uniform that can be identified with the employer—
  - (i) through the permanent and prominent display of a name, logo, or other identification that the employer regularly uses in carrying on their activity or undertaking; or
  - (ii) because the colour scheme, pattern, or style is readily associated with the employer; and
- (b) is worn in the course, or as an incident, of employment; and
- (c) is not clothing that employees would normally wear for private purposes.
Defined in this Act: distinctive work clothing, employee, employer, employment, fringe benefit,
Compare: 2004 No 35 s CX 26

CX 31 Contributions to income protection insurance

An employer who satisfies a liability to pay, or contribute to the payment of, a premium for income protection insurance for the benefit of an employee does not provide a fringe benefit to the employee if a payment of the insurance to the employee would be assessable income of the employee.
Defined in this Act: contribution, employee, employer, fringe benefit, pay,
Compare: 2004 No 35 s CX 26B

CX 32 Services provided to superannuation fund

A fringe benefit does not arise if services are provided to a superannuation fund to the extent to which the superannuation fund would have been allowed a deduction for the expenditure incurred in providing the services if the expenditure had been incurred by the superannuation fund.
Defined in this Act: deduction, fringe benefit, superannuation fund,
Compare: 2004 No 35 s CX 27

CX 33 Goods provided at discount by third parties

When this section applies
(1) This section applies when an employer and a person who is not associated with the employer have an arrangement through which goods are provided by the person at a discount.
When not fringe benefit
(2) A discount provided by the person to an employee in a group of employees is not a fringe benefit if—
- (a) the person offers a discount to a group of persons that—
  - (i) negotiates the discount on an arm’s-length basis; and
  - (ii) does not include the group of employees; and
  - (iii) is comparable in number to the group of employees; and
- (b) the discount offered to the group of employees is the same or less than the discount offered to the group described in paragraph (a).
Defined in this Act: arrangement, associated person, employee, employer, fringe benefit,
Compare: 2004 No 35 s CX 27B

Definitions

CX 34 Meaning of emergency call

Emergency call means a visit that an employee is required to make, to which all the following apply
- (a) the employee makes the visit from their home in the course of their employment; and
- (b) the purpose of the visit is to provide—
  - (i) essential services relating to the operation of the plant or machinery of the employer, or of their client or customer; or
  - (ii) essential services relating to the maintenance of services provided by a local authority or a public authority; or
  - (iii) essential services relating to the carrying on of a business for the supply of energy or fuel to the public; or
  - (iv) emergency services relating to the health or safety of any person; and
- (c) the employer, their client or customer, or a member of the public requests the services; and
- (d) except when paragraph (b)(iv) applies, the services are required to be performed between the hours of 6.00 pm and 6.00 am on days other than a Saturday, Sunday, or statutory public holiday, and at any time on other days.
Defined in this Act: business, emergency call, employee, employer, employment, local authority, public authority,
Compare: 2004 No 35 s CX 28

CX 35 Meaning of employee share loan

Meaning
(1)
Employee share loan means a loan made to an employee if—
- (a) the loan is made for the sole purpose of enabling the employee to acquire, under a scheme of acquisition,—
  - (i) shares, rights, or options in the company that is their employer:
  - (ii) shares, rights, or options in a company that is associated with their employer; and
- (b) the employee uses the loan only for the purpose of the acquisition; and
- (c) the employee beneficially owns the shares, rights, or options throughout the term of the loan; and
- (d) the employee must immediately repay the loan in full if they stop being the beneficial owner of any of the shares, rights, or options; and
- (e) the company issuing the shares, rights, or options must maintain a dividend-paying policy throughout the term of the loan.
Exclusions
(2) This section does not apply—
- (a) to shares, rights, or options in a qualifying company:
- (b) to a loan made under a share purchase scheme:
- (c) to an employer and an employee who are associated persons.
Defined in this Act: associated person, company, dividend, employee, employee share loan, employer, pay, qualifying company, share,
Compare: 2004 No 35 s CX 29

CX 36 Meaning of private use

Private use, for a motor vehicle, includes—
- (a) the employee’s use of the vehicle for travel between home and work; and
- (b) any other travel that confers a private benefit on the employee.
Defined in this Act: employee, motor vehicle, private use,
Compare: 2004 No 35 s CX 30

CX 37 Meaning of unclassified benefit

Unclassified benefit means a fringe benefit that arises if an employer provides an employee with a benefit in connection with their employment that is—
- (a) not a benefit referred to in any of sections CX 6to CX 16; and
- (b) not a benefit excluded under this subpart.
Defined in this Act: employee, employer, employment, fringe benefit, unclassified benefit,
Compare: 2004 No 35 s CX 31

CX 38 Meaning of work-related vehicle

Meaning
(1) Work-related vehicle, for an employer, means a motor vehicle that prominently and permanently displays on its exterior,—
- (a) if the employer owns the vehicle, the form of identification that the employer regularly uses in carrying on their undertaking or activity; or
- (b) if the employer rents the vehicle, the form of identification—
  - (i) that the employer regularly uses in carrying on their undertaking or activity; or
  - (ii) that the person from whom it is rented regularly uses in carrying on their undertaking or activity.
Exclusion: car
(2) Subsection (1)does not apply to a car.
Exclusion: private use
(3) A motor vehicle is not a work-related vehicle on any day on which the vehicle is available for the employee’s private use, except for private use that is—
- (a) travel to and from their home that is necessary in, and a condition of, their employment; or
- (b) other travel in the course of their employment during which the travel arises incidentally to the business use.
Defined in this Act: business use, car, employee, employer, employment, motor vehicle, work-related vehicle,
Compare: 2004 No 35 s CX 32

Insurance

CX 39 Life insurers and fully reinsured persons

Persons to whom this section applies
(1) The amounts described in subsection (2) are excluded income of—
- (a) a life insurer:
- (b) a person who is carrying on a business of providing life insurance but who is treated as not carrying on a business of providing life insurance because they have full reinsurance.
Excluded income
(2) The amounts are—
- (a) a premium derived by the life insurer or the person under a life insurance policy; or
- (b) a claim receivable by the life insurer or the person under a life reinsurance policy.
Defined in this Act: amount, business, claim, excluded income, full reinsurance, life insurance, life insurance policy, life insurer, life reinsurance policy, premium,
Compare: 2004 No 35 s CX 33

CX 40 Superannuation fund deriving amount from life insurance policy

When this section applies
(1) This section applies when a superannuation fund invests funds in a life insurance policy offered or entered into in New Zealand.
Excluded income
(2) An amount that the superannuation fund derives from the policy is excluded income.
Defined in this Act: amount, excluded income, life insurance policy, offered or entered into in New Zealand, superannuation fund,
Compare: 2004 No 35 s CX 34

CX 41 Resident insurance underwriters

When this section applies
(1) This section applies when a natural person or an unincorporated body of natural persons—
- (a) is resident in New Zealand; and
- (b) carries on a business of providing general insurance or guarantees against loss, damage, or risk; and
- (c) as part of the business, is liable under an insurance contract, whether or not named in it, to pay, or to contribute towards the payment of, some or all of an amount claimable by the person insured under the contract.
Excluded income
(2) Income that the natural person or persons derive from carrying on the business outside New Zealand is excluded income to the extent to which it is income not referred to in any of section YD 4(7)or (10) to (12) (Classes of income treated as having New Zealand source).
Defined in this Act: amount, business, excluded income, general insurance, income, insurance contract, New Zealand, pay, resident in New Zealand,
Compare: 2004 No 35 s CX 35

Petroleum mining

CX 42 Disposal of ownership interests in controlled petroleum mining entities

Excluded income
(1) The consideration that a person derives from disposing of shares or trust interests in a controlled petroleum mining entity is excluded income of the person.
Application of Tax Administration Act 1994
(2) Section 65of the Tax Administration Act 1994 applies when this section applies.
Defined in this Act: consideration, controlled petroleum mining entity, dispose, excluded income, share,
Compare: 2004 No 35 s CX 36

CX 43 Farm-out arrangements for petroleum mining

Farm-in expenditure under a farm-out arrangement is excluded income of a petroleum miner who is the farm-out party in the farm-out arrangement.
Defined in this Act: excluded income, farm-in expenditure, farm-out arrangement, farm-out party, petroleum miner,
Compare: 2004 No 35 s CX 37

Mineral mining

CX 44 Disposal of mining shares

When subsection (2)applies
(1) Subsection (2)applies when—
- (a) a mining company derives an amount from disposing of a mining share; and
- (b) the disposal is to a person other than a mining company or a mining holding company; and
- (c) the company has an excess amount because the amount derived from disposing of the share is more than the cost of the share calculated under section DU 11(2) (Disposal of mining shares by company); and
- (d) the excess amount would, in the absence of this section, be income of the company under any of sections CB 1to CB 5 (which relate to income from business or trade-like activities).
Excluded income
(2) The excess amount is excluded income of the company to the extent to which it is, or is to be, used for mining purposes in the prescribed period.
When subsection (4)applies
(3) Subsection (4) applies when—
- (a) a mining company (the seller) derives an amount from disposing of a mining share; and
- (b) the disposal is to a mining company or to a mining holding company (the buyer); and
- (c) the seller has an excess amount because the amount derived from disposing of the share is more than the cost of the share calculated under section DU 11(2); and
- (d) the excess amount would, in the absence of this section, be income of the seller under any of sections CB 1to CB 5.
Excluded income
(4) The excess amount is excluded income of the seller to the extent to which it consists of mining shares issued to it in the buyer.
Defined in this Act: amount, excluded income, income, mining company, mining holding company, mining purposes, mining share, prescribed period,
Compare: 2004 No 35 s CX 38

CX 45 Disposal of mining shares acquired with reinvestment profit

When subsection (2) applies
(1) Subsection (2) applies when—
- (a) a company derives an amount from disposing of a mining share; and
- (b) an amount of the reinvestment profit of the company is used in calculating the deduction for the cost of the mining share under section DU 11(2) (Disposal of mining shares by company); and
- (c) some or all of the amount derived from the disposal would, in the absence of this section, be income of the company under section CU 14 (Recovery of reinvestment profit on disposal of mining shares).
Excluded income
(2) The amount that would be income is excluded income of the company to the extent to which it is, or is to be, used for mining purposes in the prescribed period.
When subsection (4) applies
(3) Subsection (4) applies when—
- (a) a company (the seller) derives an amount from disposing of a mining share; and
- (b) the disposal is to a mining company or to a mining holding company (the buyer); and
- (c) an amount of the reinvestment profit of the seller is used in calculating the deduction for the cost of the mining share under section DU 11(2); and
- (d) some or all of the amount derived from the disposal would, in the absence of this section, be income of the seller under section CU 14.
Excluded income
(4) The amount that would be income is excluded income of the seller to the extent to which it consists of mining shares issued to it in the buyer.
When subsection (6) applies
(5) Subsection (6) applies when—
- (a) a company derives an amount from disposing of a mining share; and
- (b) the disposal is of the kind described in section CU 20 (Mining company or mining holding company liquidated); and
- (c) an amount of the reinvestment profit of the company is used in calculating the deduction for the cost of the mining share under section DU 11(2); and
- (d) some or all of the amount derived from the disposal would, in the absence of this section, be income of the company under section CU 14.
Excluded income
(6) The amount that would be income is excluded income of the company to the extent to which it consists of mining shares.
Defined in this Act: amount, company, deduction, excluded income, income, mining company, mining holding company, mining purposes, mining share, prescribed period, reinvestment profit,
Compare: 2004 No 35 s CX 39

CX 46 Repayment of loans made from reinvestment profit

When this section applies
(1) This section applies when an amount would, in the absence of this section, be income of a company under section CU 16 (Recovery of reinvestment profit on repayment of loans).
Excluded income
(2) The amount is excluded income of the company to the extent to which it is, or is to be, used for mining purposes in the prescribed period.
Defined in this Act: amount, company, excluded income, income, mining purposes, prescribed period,
Compare: 2004 No 35 s CX 40

Government grants

CX 47 Government grants to businesses

When this section applies
(1) This section applies when—
- (a) a local authority or a public authority makes a payment to a person for a business that the person carries on; and
- (b) the payment—
  - (i) is in the nature of a grant or subsidy; or
  - (ii) is a grant-related suspensory loan; and
- (c) the payment is not in the nature of an advance or loan; and
- (d) the payment is made to the person in relation to—
  - (i) expenditure that they incur and for which they would be allowed a deduction in the absence of section DF 1 (Government grants to businesses):
  - (ii) expenditure that they incur in acquiring, constructing, installing, or extending an asset for which they have an amount of depreciation loss.
Excluded income
(2) The payment is excluded income of the person.
Exclusions
(3) This section does not apply to a grant made under the Agriculture Recovery Programme for the Lower North Island and Eastern Bay of Plenty, to the extent to which the grant relates to expenditure—
- (a) incurred by the recipient before the grant; and
- (b) for which the recipient would be allowed a deduction in the absence of section DF 1.
Defined in this Act: amount, business, deduction, depreciation loss, excluded income, grant-related suspensory loan, local authority, pay, public authority,
Compare: 2004 No 35 s CX 41
Section CX 47(1)(d)(i): substituted (with effect on 1 April 2008), on 6 October 2009, by section 56(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CX 47(3) heading: substituted (with effect on 1 October 2009), on 6 October 2009, by section 56(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CX 47(3): substituted (with effect on 1 October 2009), on 6 October 2009, by section 56(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CX 47 list of defined terms large budget screen production grant: repealed (with effect on 1 October 2009), on 6 October 2009, by section 52(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CX 48 Amounts remitted as condition of new start grant

When this section applies
(1) This section applies when in an income year of a person—
- (a) the person carries on a business of—
  - (i) animal husbandry:
  - (ii) poultry-keeping:
  - (iii) beekeeping:
  - (iv) breeding horses other than bloodstock:
  - (v) horticulture:
  - (vi) cropping; and
- (b) the person is paid a new start grant for the business for an event that is declared to be an emergency event; and
- (c) the person in carrying on the business—
  - (i) incurs a liability for expenditure or loss before the declaration of the emergency event; and
  - (ii) before the date that is 3 months after the end of the period for which the declaration applies, takes the liability into account in calculating the person’s taxable income for an income year; and
- (d) the liability referred to in paragraph (c)(i) is forgiven or otherwise remitted—
  - (i) as a prerequisite for the payment of the new start grant; and
  - (ii) before the date that is 18 months after the end of the period for which the declaration applies; and
- (e) the amount of the remitted liability is income of the person under section CG 2 (Remitted amounts).
Excluded income
(2) The remitted liability is excluded income of the person to the extent to which it is the greater of zero and the amount calculated using the formula—
remitted amount − current loss − loss balance − other loss.
Definition of items in formula
(3) In the formula,—
- (a) remitted amount is the amount of the remitted liability:
- (b) current loss is the net loss that the person would have for the income year in which the liability is remitted in the absence of this section:
- (c) loss balance is the loss balance that is available to the person for offset against net income for the income year in which the liability is remitted:
- (d) other loss is a loss that—
  - (i) is incurred by a person associated with the person who receives the new start grant; and
  - (ii) meets the requirements of subsection (4).
Loss incurred by associated person from business or land
(4) The loss referred to in subsection (3)(d)—
- (a) is incurred by a person who—
  - (i) carries on or has carried on the business for which the new start grant is paid or owns or has owned an estate in fee simple or leasehold estate in land used in the business; and
  - (ii) in the opinion of the Commissioner, is under a substantial degree of control by the person; and
  - (iii) in the opinion of the Commissioner, has a substantial identity of interests with the person; and
- (b) is incurred from—
  - (i) the business referred to in paragraph (a)(i):
  - (ii) land that is used in the business; and
- (c) is, for the income year in which the liability is remitted,—
  - (i) a tax loss component of the associated person:
  - (ii) a loss balance for the associated person; and
- (d) is included in the calculation in subsection (3) to the extent determined by the Commissioner, having regard to the interests of the associated person that are separate from those of the person.
Notice to associated person
(5) The Commissioner must give to the associated person notice of a determination under subsection (4)(d).
Defined in this Act: business, capital limitation, deduction, diminished value, emergency event, general limitation, general permission, income, income year, new start grant, notice, pay,
Compare: 2004 No 35 s CX 41B
Section CX 48(1): substituted, on 6 October 2009, by section 57(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CX 48 list of defined terms emergency event: inserted, on 6 October 2009, by section 57(2)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CX 48 list of defined terms qualifying event: repealed, on 6 October 2009, by section 57(2)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CX 48B Issue of post-1989 forest land units

[Repealed]
Section CX 48B: repealed (with effect on 26 September 2008), on 6 October 2009, by section 58 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CX 48B: inserted, on 26 September 2008, by section 70 of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).

Government funding of film and television

Heading: inserted (with effect on 1 October 2009), on 6 October 2009, by section 59 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CX 48C Government funding additional to government screen production payments

When this section applies
(1) This section applies when a public authority makes a payment to a person for a project if—
- (a) the payment is not in the nature of a grant or subsidy; and
- (b) the payment is not a grant-related suspensory loan; and
- (c) the person receives a government screen production payment for the project in addition to the payment.
Excluded income
(2) The payment is excluded income of the person.
Defined in this Act: excluded income, government screen production payment, grant-related suspensory loan, pay, public authority,
Section CX 48C: inserted (with effect on 1 October 2009), on 6 October 2009, by section 59 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Research and development

Heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 60(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CX 48D Tax credits for expenditure on research and development

The amount of a tax credit that a person has under subpart LH (Tax credits for expenditure on research and development) is excluded income of the person.
Defined in this Act: amount, excluded income, tax credit,
Section CX 48D: inserted (with effect on 1 April 2008), on 6 October 2009, by section 60(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Superannuation and savings

CX 49 Employer’s superannuation contributions

An employer’s superannuation contribution is excluded income of—
- (a) the employee for whose benefit the contribution is provided; and
- (b) the trustees of the superannuation scheme to whom the contribution is made.
Defined in this Act: employee, employer’s superannuation contribution, excluded income, superannuation scheme, trustee,
Compare: 2004 No 35 s CX 42

CX 50 Tax credits for KiwiSaver and complying superannuation funds

An amount paid as a tax credit under subpart MK (Tax credits for KiwiSaver schemes and complying superannuation funds) is excluded income of the person deriving the amount.
Defined in this Act: amount, Commissioner, excluded income, pay, tax credit,
Compare: 2004 No 35 s CP 1

CX 50B Contributions to retirement savings schemes

Excluded income
(1) A retirement scheme contribution is excluded income of a person if they are—
- (a) the person for whose benefit the contribution is made to the extent to which the contribution is an amount of—
  - (i) money:
  - (ii) an imputation credit or a Maori authority credit that is used to meet the liability of the retirement scheme contributor for RSCT on the contribution:
- (b) the retirement savings scheme.
Exclusions
(2) Subsection (1)(a) does not apply if the person for whose benefit the contribution is made—
- (a) is non-resident, and the contribution is non-resident passive income:
- (b) supplies to the retirement scheme contributor or the retirement savings scheme, a tax rate applying to the amount of tax withheld that is less than the retirement scheme prescribed rate for the person:
- (c) includes the amount of the contribution in a return of income for the income year in which the contribution is made.
Defined in this Act: excluded income, income year, non-resident, non-resident passive income, retirement savings scheme, retirement scheme contribution, retirement scheme contributor, retirement scheme prescribed rate, return of income,
Compare: 2004 No 35 s CX 42B
Section CX 50B: inserted, on 1 April 2008, by section 334 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Farming, forestry, or fishing

CX 51 Income equalisation schemes

A refund under section EH 8(Refund of excess deposit), EH 42 (Refund of excess deposit), or EH 68 (Refund of excess deposit) is excluded income.
Defined in this Act: excluded income,
Compare: 2004 No 35 s CX 43

Emissions units under Climate Change Response Act 2002

Heading: inserted (with effect on 26 September 2008), on 6 October 2009, by section 61 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CX 51B Disposal of pre-1990 forest land emissions units

Who this section applies to
(1) This section applies to a person who disposes of a pre-1990 forest land emissions unit other than by surrender.
Excluded income: disposal
(2) An amount of income that the person derives from the disposal is excluded income if, at the time of the disposal, the person would not derive income, other than exempt income or excluded income, from a disposal without timber of the pre-1990 forest land to which the emissions unit relates.
Defined in this Act: amount, emissions unit, excluded income, income, pre-1990 forest land, pre-1990 forest land emissions unit, surrender,
Section CX 51B: inserted (with effect on 26 September 2008), on 6 October 2009, by section 61 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Environmental restoration

CX 52 Refund from environmental restoration account

A refund to a person under section EK 9 (Refund of payment if excess, lacking details) is excluded income of the person.
Defined in this Act: excluded income,
Compare: 2004 No 35 s CX 43B

Inflation-indexed instruments

CX 53 Credits for inflation-indexed instruments

When this section applies
(1) This section applies when—
- (a) an amount payable to a person who is a lender for money lent is determined by a fixed relationship to 1 or more indices of general price inflation in New Zealand; and
- (b) an amount on account of an increase in the amount payable is credited to the lender’s account by the borrower; and
- (c) the credit represents a recovery of a decrease, previously debited in account, in the amount payable over a previous period.
Excluded income
(2) The credit is excluded income of the lender.
Defined in this Act: amount, excluded income, money lent, New Zealand, pay,
Compare: 2004 No 35 s CX 44

Share-lending arrangements

CX 54 Share-lending collateral under share-lending arrangements

An amount of share-lending collateral derived by a person under a share-lending arrangement is excluded income of the person.
Defined in this Act: amount, excluded income, share-lending arrangement, share-lending collateral,
Compare: 2004 No 35 s CX 44B

Portfolio investment income

CX 55 Proceeds from disposal of investment shares

What this section applies to
(1) This section applies in an income year to the following entities unless the entity is assured, under an arrangement with another person, of having a gain on the disposal:
- (a) a portfolio investment entity other than a life fund PIE:
- (b) the New Zealand Superannuation Fund:
- (c) a life insurer.
Excluded income
(2) An amount that the entity derives from the disposal in the income year of a share issued by a company referred to in subsection (3) is—
- (a) excluded income of the entity for the income year, if the entity is described in subsection (1)(a) or (b); or
- (b) excluded income of the entity for the income year to the extent to which the amount is actuarially determined to be policyholder base income, if the entity is a life insurer.
Particular company
(3) The company referred to in subsection (2) is,—
- (a) at all times in the income year, a company resident in New Zealand and not treated under and for the purposes of a double tax agreement as not resident in New Zealand; or
- (b) a company that meets the following requirements:
  - (i) a company that, at all times in the income year, is resident in Australia and not treated as resident in a country other than Australia under an agreement between Australia and the other country, that would be a double tax agreement if negotiated between New Zealand and the other country; and
  - (ii) a company that, at the start of the income year or at the time the shares are first acquired in the income year, is included in an approved index under the ASX Market Rules made under Chapter 7 of the Corporations Act 2001 (Aust); and
  - (iii) a company that, at all times in the income year, is required under the Income Tax Assessment Act 1997 (Aust) and the Income Tax Assessment Act 1936 (Aust) to maintain a franking account.
Non-participating redeemable shares
(4) This section does not apply to a non-participating redeemable share.
Defined in this Act: actuarially determined, amount, arrangement, company, double tax agreement, excluded income, income, income year, life fund PIE, life insurer, non-participating redeemable share, policyholder base income portfolio investment entity, resident in Australia, resident in New Zealand, share,
Section CX 55: substituted, on 1 April 2010, by section 63(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CX 56 Attributed income of certain investors in multi-rate PIEs

When this section applies
(1) This section applies when an investor in a multi-rate PIE derives income attributed under section CP 1 (Attributed income of investors in multi-rate PIEs) in an income year, and—
- (a) the prescribed investor rate for the investor in the relevant calculation period is more than zero; and
- (b) that rate is not more than the tax rate notified under section HM 60 (Notified rates) in relation to the investor when the PIE calculates—
  - (i) its income tax liability under section HM 47 (Calculation of tax liability or tax credit of multi-rate PIEs) in relation to the income; or
  - (ii) a voluntary payment under section HM 45 (Voluntary payments) that is intended to be a final payment of its income tax liability in relation to the income.
When this section does not apply
(2) This section does not apply when—
- (a) the PIE calculates its income tax liability using the quarterly calculation option under section HM 43 (Quarterly calculation option) and the amount is attributed to an investor who is treated under section HM 61 (Certain exiting investors zero-rated) as zero-rated:
- (b) an amount of attributed PIE income is derived by a trustee who has chosen a prescribed investor rate referred to in schedule 6, table 1, row 5 or 7 (Prescribed rates: PIE investments and retirement scheme contributions), as applicable.
Excluded income
(3) The amount is excluded income of the investor.
Defined in this Act: amount, attribution period, calculation period, excluded income, income, income tax liability, income year, investor, multi-rate PIE, pay, PIE, prescribed investor rate, quarter,
Section CX 56: substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 65(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CX 56(2)(b): amended, on 1 April 2010 (applying for income years beginning on or after 1 April 2010), by section 8(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

CX 56B Distributions to investors in multi-rate PIEs

An amount of income derived by an investor in a multi-rate PIE as a distribution of or dividend of the PIE is excluded income of the investor.
Defined in this Act: amount, dividend, excluded income, income, investor, multi-rate PIE,
Section CX 56B: inserted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 65(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CX 56C Distributions to investors by listed PIEs

Resident investors
(1) If an investor in a listed PIE derives an amount in an income year as a distribution by or dividend of the PIE, the amount is excluded income of the investor if they—
- (a) are resident; and
- (b) are a natural person or a trustee; and
- (c) do not include the amount as income in a return of income for the income year.
Imputed dividends
(2) If subsection (1)(a) to (c) does not apply to the investor, the amount is excluded income to the extent to which the amount of the distribution or dividend is more than the amount that is fully credited as described in section CD 43(26) (Available subscribed capital amount).
Defined in this Act: amount, dividend, excluded income, income year, investor, listed PIE, PIE, resident return of income, trustee,
Section CX 56C: inserted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 65(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

CX 57 Credits for investment fees

When this section applies
(1) This section applies when—
- (a) a multi-rate PIE includes a credit for fees in the calculation of its tax liability under section HM 47 (Calculation of tax liability or tax credit of multi-rate PIEs) in relation to an investor in an investor class of the PIE; and
- (b) an amount of the credit is attributed to the investor as a member of the class.
Excluded income
(2) The amount allocated is excluded income of the investor.
Defined in this Act: amount, excluded income, investor, investor class, multi-rate PIE, PIE,
Section CX 57: substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 66(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Minors’ beneficiary income

CX 58 Amounts derived by minors from trusts

To the extent to which section HC 35 (Beneficiary income of minors) applies to an amount of beneficiary income, the amount is excluded income of the minor.
Defined in this Act: amount, beneficiary income, excluded income, minor,
Compare: 2004 No 35 ss HH 3A–3F

CX 59 Taxable distributions from non-complying trusts

An amount that a person derives in an income year as a taxable distribution from a non-complying trust under section HC 19 (Taxable distributions from non-complying trusts) is excluded income of the person.
Defined in this Act: amount, exempt income, income year, non-complying trust, taxable distribution,
Compare: 2004 No 35 s HH 3(4)

Transactions between companies in consolidated groups

CX 60 Intra-group transactions

When this section applies
(1) This section applies for the purposes of section FM 8 (Transactions between group companies: income) when a company that is part of a consolidated group derives an amount from a transaction or arrangement with another company that is part of the same group and the amount would not be income if the group were 1 company.
Excluded income
(2) The amount is excluded income of the company.
Defined in this Act: amount, company, consolidated group, excluded income, income,
Compare: 2004 No 35 s HB 2(1)(a)

Avoidance arrangements

CX 61 Avoidance arrangements

An amount is excluded income if it is treated as excluded income under—
- (a) section GA 1 (Commissioner’s power to adjust):
- (b) section GB 23 (Excessive remuneration to relatives).
Defined in this Act: amount, excluded income,
Compare: 2004 No 35 ss GB 1(1)–(2C), GD 3(1), (2)

Partners and partnerships

Heading: added, on 1 April 2008, by section 9(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).

CX 62 Amounts of excluded income for partners

A person who is a partner has an amount of excluded income to the extent to which an amount of excluded income results from the application of subpart HG (Joint venturers, partners, and partnerships) to them and their partnership.
Defined in this Act: amount, excluded income, partner, partnership,
Section CX 62: added, on 1 April 2008, by section 9(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).

Subpart CZ—Terminating provisions

CZ 1 Share purchase agreement income before 19 July 1968

In sections CE 1 to CE 4 (which relate to employment income), share purchase agreement does not include any agreement entered into before 19 July 1968.
Defined in this Act: share purchase agreement
Compare: 2004 No 35 s CZ 1

CZ 2 Mining company’s 1970–71 tax year

When this section applies
(1) This section applies when—
- (a) section 152 or 153 of the Land and Income Tax Act 1954 (as in force before the commencement of section 153F of the Act) applied to a mining company for the 1970–71 tax year; and
- (b) the company acquires an asset by incurring the exploration expenditure or development expenditure referred to in section 27(3)(a) of the Land and Income Tax Amendment Act 1971.
Application of subpart CU
(2) The provisions of subpart CU (Income from mineral mining) apply, with any necessary modifications, as follows:
- (a) section CU 3 (Disposal of assets) applies to the company as if every reference in the section to an asset included a reference to an asset of the kind described in subsection (1)(b) that the company disposes of in the 1971–72 tax year or a later tax year:
- (b) section CU 3 applies to a person who acquires an asset of the kind described in subsection (1)(b) from the company as if every reference in the section to an asset included a reference to such an asset that the person acquires in the 1971–72 tax year or a later tax year:
- (c) section CU 10 (Mining asset used to derive income other than income from mining) applies to the company as if every reference in the section to an asset included a reference to an asset of the kind described in subsection (1)(b) that the company uses, wholly or mainly, to derive income other than income from mining in the 1971–72 tax year or a later tax year.
Resident and non-resident mining operators
(3) This section applies, with any necessary modifications, to an asset of the kind referred to in paragraph (i) of item “a” of the formula in section 31(3) of the Land and Income Tax Amendment Act (No 2) 1972 that a resident mining operator acquires or that a non-resident mining operator acquires.
Defined in this Act: income, income from mining, mining company, non-resident mining operator, resident mining operator, tax year,
Compare: 2004 No 35 s CZ 2

CZ 3 Exchange variations on 8 August 1975

When this section applies
(1) This section applies when—
- (a) a person carrying on a business in New Zealand—
  - (i) receives a loan in 2 or more instalments for the purposes of the business; or
  - (ii) makes a loan in 2 or more instalments in the course of carrying on the business; and
- (b) an exchange variation arises in relation to the whole or partial repayment of the loan; and
- (c) the person derives an amount or incurs a loss through the exchange variation.
Income or deduction
(2) The amount derived is income of the person and the loss incurred is a deduction that they are allowed.
Instalments and repayments
(3) For the purposes of this section, unless the terms of the loan expressly provide otherwise,—
- (a) each instalment is treated as a separate loan; and
- (b) repayments are applied so that the separate loans are repaid in the order in which they were received.
Exclusion
(4) This section does not apply to a financial arrangement to which the financial arrangements rules apply.
Some definitions
(5) In this section,—
exchange variation, for the repayment of some or all of the loan, excluding interest, means a variation by virtue of a fluctuation in the value of the currency or currencies of 1 or more countries other than New Zealand in relation to New Zealand currency, that occurs between—
- (a) the amount of the repayment expressed in New Zealand currency at the time at which the repayment was made; and
- (b) the amount expressed in New Zealand currency that would have been required to make that repayment on or at the later of 8 August 1975 and the time at which the loan was first made
loan means,—
- (a) for money lent, to a person, on or after 1 January 1974 and on or before 22 January 1985, money that—
  - (i) was lent with the consent of the Minister under the Capital Issues (Overseas) Regulations 1965 or the Overseas Investment Regulations 1974 or with the consent of the Reserve Bank under the Exchange Control Regulations 1978, as applicable; and
  - (ii) was lent in a currency other than New Zealand currency; and
  - (iii) was expressed to be repayable in a currency other than New Zealand currency:
- (b) for money lent, by a person, on or after 1 January 1974 and on or before 22 January 1985, money that—
  - (i) was lent with the consent of the Reserve Bank under the Exchange Control Regulations 1978 if required; and
  - (ii) was expressed to be repayable in a currency other than New Zealand currency:
- (c) for money lent, to a person, on or after 23 January 1985, money that—
  - (i) is lent in a currency other than New Zealand currency; and
  - (ii) is expressed to be repayable in a currency other than New Zealand currency:
- (d) in relation to money lent, by a person, on or after 23 January 1985, money that is expressed to be repayable in a currency other than New Zealand currency.
Defined in this Act: amount, business, deduction, exchange variation, financial arrangement, financial arrangements rules, income, loan, money lent, New Zealand, pay,
Compare: 2004 No 35 s CZ 3

CZ 4 Mineral mining: company making loan before 1 April 1979

When this section applies
(1) This section applies when sections CU 17 to CU 19 (which relate to the repayment by a mining company of an amount written off) would have applied to a loan by a company to another company made on or before 31 March 1979 if the Income Tax Amendment Act 1979 had not been enacted.
Application of sections CU 17 to CU 19
(2) The sections apply, as far as applicable, to such a loan as if section 45 of the Income Tax Amendment Act 1979 were the only provision of it that had been enacted.
Defined in this Act: company, mineral,
Compare: 2004 No 35 s CZ 4

CZ 5 Exempt interest: overseas money lent to government or local or public authority before 29 July 1983

Exempt income
(1) Amounts that a non-resident derives are exempt income if they are derived from—
- (a) stock or debentures issued before 29 July 1983 by the government of New Zealand or by a local authority or a public authority, the interest on which is payable out of New Zealand; or
- (b) loans entered into before 29 July 1983, the interest on which was to be exempt from income tax in New Zealand under an agreement or arrangement made with the government of New Zealand.
Application posted or received before 29 July 1983
(2) For the purposes of subsection (1)(b), a loan entered into on or after 29 July 1983 is treated as having been entered into before that date if an exemption of a kind referred to in that provision was authorised as a result of an application received by or posted to the government of New Zealand before 29 July 1983.
Defined in this Act: amount, arrangement, debenture, exempt income, income tax, interest, local authority, money lent, New Zealand, non-resident, pay, public authority,
Compare: 2004 No 35 s CZ 5

CZ 6 Commercial bills before 31 July 1986

Income: redemption
(1) The amount that a person receives on the redemption of a commercial bill owned by the person is income of the person.
Income: disposal
(2) The value of a commercial bill on the day its owner disposes of it is income of the owner. This subsection does not apply if the disposal is a transfer under a relationship agreement.
Defined in this Act: amount, commercial bill, income, relationship agreement,
Compare: 2004 No 35 s CZ 6

CZ 7 Primary producer co-operative companies: 1987–88 income year

Income: sale of asset
(1) If a primary producer co-operative company disposes of an asset for which the company was allowed a deduction under section 200 of the Income Tax Act 1976 for the 1987–88 income year or an earlier income year, the company is treated as deriving income in the income year of disposal of an amount equal to the lesser of—
- (a) the total of all deductions relating to the asset that were allowed under section 200; and
- (b) the amount that the company derived from the disposal of the asset.
Income: payments to shareholders
(2) If a primary producer co-operative company has been allowed a deduction under section 200 for the 1987–88 income year or an earlier income year, and a payment has been made to a shareholder of the company either on the surrender of any of their shares or on the liquidation of the company, part of the payment is treated as income of the shareholder. The part that is income is determined under subsection (3).
Amounts attributable to deductions
(3) The part of the payment that is treated as income is only such part as—
- (a) is more than the available subscribed capital per share calculated under the slice rule of the shares surrendered or held on liquidation by the shareholder; and
- (b) is attributable to an increase in the value of the company’s assets that was caused by the company applying or appropriating a deduction allowed under section 200.
Some definitions
(4) In this section,—
primary producer co-operative company means a company that, at the end of the 1987–88 income year,—
- (a) was a primary producer co-operative company, as defined in section 200(1) and (9); and
- (b) could qualify for a deduction under section 200(4)
section 200 means section 200 of the Income Tax Act 1976 as it was in force before it was repealed by section 41(1) of the Income Tax Amendment Act (No 5) 1988 (which, in general, allowed primary producer co-operative companies to claim a deduction for profits that were reinvested in certain defined primary produce activities and assets).
Defined in this Act: amount, available subscribed capital, income, income year, liquidation, pay, primary producer co-operative company, section 200, share, shareholder, slice rule,
Compare: 2004 No 35 s CZ 7

CZ 8 Farm-out arrangements for petroleum mining before 16 December 1991

Excluded income
(1) Excess expenditure under a farm-out arrangement entered into before 16 December 1991 is excluded income of the transferor.
Some definitions
(2) In subsection (1), excess expenditure, farm-out arrangement, and transferor have the same meanings as in section 214D of the Income Tax Act 1976 immediately before its repeal by section 15 of the Income Tax Amendment Act (No 5) 1992.
Defined in this Act: excess expenditure, excluded income, farm-out arrangement, transferor,
Compare: 2004 No 35 s CZ 8

CZ 9 Available capital distribution amount: 1965 and 1985–1992

Section CD 44(7)(e)
(1) For the purposes of section CD 44(7)(e) (Available capital distribution amount), a company derives a capital gain amount if—
- (a) before 1 April 1988, a net profit or gain was derived by the company to which section 4(5) of the Income Tax Act 1976, and not section 4(5A) of the Income Tax Act 1976, applied immediately before those provisions were repealed by section 31(1) of the Income Tax Amendment Act (No 5) 1988; or
- (b) an amount is derived by the company that is attributable to—
  - (i) a deduction allowed in the 1985–86 or 1986–87 tax year for livestock under section 86E of the Income Tax Act 1976; or
  - (ii) a revaluation of livestock in any of the 1986–87 to 1991–92 tax years under section 86A of the Income Tax Act 1976; or
  - (iii) a deduction allowed in the 1988–89 tax year for the revaluation of trading stock of wine, brandy, and whisky under section 87A of the Income Tax Act 1976.
Section CD 44(14)(b)
(2) For the purposes of section CD 44(14)(b),—
- (a) the amount has been excluded by section 4(3) of the Land and Income Tax Act 1954 from treatment as a dividend; or
- (b) the issue has been excluded by section 3(3) of the Income Tax Act 1976 from treatment as a bonus issue.
Defined in this Act: amount, bonus issue, company, dividend, trading stock,
Compare: 2004 No 35 s CZ 9

CZ 9B Available capital distribution amount: 1988 to 2010

When this section applies
(1) This section applies for the purposes of section CD 44 (Available capital distribution amount) in relation to capital gain amounts derived or capital loss amounts incurred in the period that starts on 1 April 1988 and ends on 31 March 2010.
Related person transactions
(2) No capital gain amount is derived or capital loss amount incurred by a company disposing of property under an arrangement with a related person. But this subsection does not apply if—
- (a) the company is a close company; and
- (b) the related person is not a company; and
- (c) the disposal is not on the liquidation of the company.
Meaning of related person
(3) In this section, related person means a person related to a company (the first company) because 1 of the following applies to the person and the first company:
- (a) the person owns, can control, directly or indirectly, or has the right to acquire 20% or more of the first company's ordinary shares; or
- (b) the person owns, can control, directly or indirectly, or has the right to acquire 20% or more of the voting rights of shareholders in the first company; or
- (c) the person is a company and the first company owns, can control, directly or indirectly, or has the right to acquire 20% or more of the ordinary shares in the person; or
- (d) the person is a company and the first company owns, can control, directly or indirectly, or has the right to acquire 20% or more of the voting rights of shareholders in the company; or
- (e) the person is a company and 20% or more of the shares or voting rights in the person are owned or controlled by persons that also own, control, or have the right to acquire 20% or more of the shares or voting rights in the first company; or
- (f) the person is a partner or co-venturer of the first company; or
- (g) the person is the trustee of a trust and the first company, or a person who is a related person of the first company under this subsection, benefits or can benefit under the trust, directly or indirectly; or
- (h) the person is a partnership and 1 or more persons, that are related persons of the first company under this subsection, are entitled to 50% or more of the partnership's assets or profits or are able to control the partnership.
Look-through relatives and nominees
(4) For the purposes of subsection (3), a person is treated as holding anything held by—
- (a) their spouse, civil union partner, or de facto partner; or
- (b) their child; or
- (c) a child of their spouse, civil union partner, or de facto partner; or
- (d) a spouse, civil union partner, or de facto partner of their child, or of a child of their spouse, civil union partner, or de facto partner.
Look-through interposed companies
(5) For the purposes of subsection (3)(e), if shares or voting rights in a company are owned or controlled by another company, a look-through approach must be applied. The look-through approach requires that—
- (a) the shares or voting rights are treated as if owned or controlled by the shareholders in the other company; and
- (b) if a shareholder in the other company is a company, that shareholder's portion of the shares or voting rights are treated as if owned or controlled by the shareholders in the shareholder company; and
- (c) the approach is applied in the same way to any chain of companies, whatever the length of the chain.
Relationship with section CD 44
(6) Section CD 44(7)(c) (Available capital distribution amount) overrides this section.
Defined in this Act: amount, close company, company, liquidation, related person, share, shareholder, trustee
Section CZ 9B: inserted, on 1 April 2010, by section 67 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section CZ 9B(6) heading: added, on 1 April 2010 (applying for the 2010–11 and later income years), by section 9(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section CZ 9B(6): added, on 1 April 2010 (applying for the 2010–11 and later income years), by section 9(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

CZ 10 Transitional relief for calculation of attributed repatriation dividends: 2 July 1992

Loans made by CFC to intermediary before 2 July 1992
(1) Subsection (2) applies for the purposes of calculating attributed repatriation from a controlled foreign company (CFC) to the extent to which—
- (a) the CFC made a loan before 8.00 pm New Zealand standard time on 2 July 1992; and
- (b) the loan enabled another person (the intermediary) to make a loan to a New Zealand resident associated with the CFC; and
- (c) the loan is not a loan that is an arrangement subject to section GB 8 (Arrangements involving attributed repatriation from CFCs); and
- (d) the New Zealand resident associated person repays the intermediary and the intermediary repays the CFC; and
- (e) the CFC uses the proceeds to make a loan directly to the New Zealand resident associated person.
Loan to associate: treated as existing for whole accounting period
(2) The loan to the New Zealand resident associated person is treated as if it were in existence at the start of the accounting period of the CFC in which it is in fact made.
Property acquired under contract binding before 2 July 1992
(3) Subsection (4) applies for the purposes of calculating attributed repatriation from a CFC if the CFC—
- (a) acquires any property (including an amount accruing on a financial arrangement) under a binding contract entered into before 8.00 pm New Zealand standard time on 2 July 1992; and
- (b) the acquisition is not as a result of any voluntary action taken by the CFC after that time.
Acquired property: treated as existing for whole accounting period
(4) The property is treated as if it were held by the CFC at the start of the accounting period of the CFC in which it is in fact acquired.
Defined in this Act: accounting period, arrangement, associated person, attributed repatriation, CFC, controlled foreign company, financial arrangement, New Zealand, New Zealand resident, pay,
Compare: 2004 No 35 s CZ 10

CZ 11 Recovery of deductions for software acquired before 1 April 1993

What this section applies to
(1) This section applies to any of the following items for the acquisition of which a person was allowed a deduction before 1 April 1993:
- (a) the copyright in software:
- (b) the right to use the copyright in software:
- (c) the right to use software.
Income
(2) An amount derived from the disposal of the item is income.
Relationship with sections EE 44 to EE 52 and EZ 20
(3) Sections EE 44 to EE 52 (which relate to disposals and similar events) apply to the item. Section EZ 20 (Adjusted tax value for software acquired before 1 April 1993) deals with the adjusted tax value of the item.
Defined in this Act: adjusted tax value, amount, income,
Compare: 2004 No 35 s CZ 11

CZ 12 General insurance with risk period straddling 1 July 1993

When this section applies
(1) This section applies when—
- (a) a company carries on a business of providing general insurance or guarantees against loss, damage, or risk, immediately before and on 1 July 1993; and
- (b) the company holds a reinsurance contract for the general insurance that covers a period of risk starting before 1 July 1993 and ending after 1 July 1993; and
- (c) the company pays the premiums under the contract outside New Zealand.
Income
(2) An amount derived by the company from a claim under the reinsurance contract is income of the company if the event giving rise to the claim occurs on or after 1 July 1993.
Timing
(3) The income is allocated to the income year in which the event giving rise to the claim occurs.
Defined in this Act: amount, business, company, general insurance, income, income year, New Zealand, pay, reinsurance contract,
Compare: 2004 No 35 s CZ 12

CZ 13 Treatment of units and interests in unit trusts and group investment funds on issue as at 1 April 1996

Units and interests in unit trusts and group investment funds
(1) All units in a unit trust and interests in a group investment fund on issue on 1 April 1996 are treated, on and from that date, as not having been issued on terms that their redemption would be subject to the slice rule.
Election made for units or interests
(2) All units or interests to which subsection (1) applies and for which an election has been made relying on paragraph (c) of the definition of the term shares of the same class in section YA 1 (Definitions) are treated on and from 1 April 1996 as if the election made in reliance upon paragraph (c) had never been made.
Exclusion
(3) This section does not apply to a unit or interest if the manager or trustee of the unit trust or group investment fund so chooses, by giving notice to the Commissioner before 1 April 1996, in which case the relevant unit or interest is treated, on and from 1 April 1996, as having been issued on terms that its redemption would be subject to the slice rule.
Defined in this Act: Commissioner, group investment fund, notice, shares of the same class, slice rule, trustee, unit trust,
Compare: 2004 No 35 s CZ 13

CZ 14 Treatment of superannuation fund interests in group investment funds on 1 April 1999

When this section applies
(1) This section applies when a superannuation fund has an interest in a group investment fund on 1 April 1999.
Exclusions from dividends
(2) Section CD 22(4) (Returns of capital: off-market share cancellations) does not apply to the interest.
Trustee’s election
(3) If a trustee of a group investment fund chose on or before 31 March 1999 to treat a superannuation fund interest in a group investment fund as subject to section CD 22(4),—
- (a) subsection (2) does not apply to the interest:
- (b) section CD 22(2) applies to the interest on and after 1 April 1999.
Defined in this Act: dividend, group investment fund, interest, superannuation fund, trustee,
Compare: 2004 No 35 s CZ 14

CZ 15 Accident insurance contracts before 1 July 2000

A premium or contribution referred to in section CX 16(2) (Contributions to life or health insurance) is—
- (a) a premium or contribution paid for an accident insurance contract, as defined in section 13 of the Accident Insurance Act 1998, that was in force before 1 July 2000; or
- (b) a premium or contribution paid for a contract to which section 188(1)(a) of that Act applied, to the extent to which it related to cover and entitlements for work-related personal injury, that was in force before 1 July 2000.
Defined in this Act: contribution, pay,
Compare: 2004 No 35 s CZ 15

CZ 16 Interest payable to exiting company: 2001

Interest payable under schedule 4, clause 12 of the Dairy Industry Restructuring Act 2001 to an exiting company, as defined in section 5 of the Act, as a result of a buy-out of the company’s interests in the New Zealand Dairy Board is exempt income.
Defined in this Act: exempt income, interest, pay,
Compare: 2004 No 35 s CZ 16

CZ 17 Dividend of exiting company: 2001

If an exiting company, as defined in section 5 of the Dairy Industry Restructuring Act 2001, derives a dividend as a result of a buy-out of the company’s interests in the New Zealand Dairy Board under schedule 4 of the Act, the dividend is exempt income.
Defined in this Act: dividend, exempt income,
Compare: 2004 No 35 s CZ 17

CZ 18 Benefit provider approved within 6 months of 25 November 2003

When this section applies
(1) This section applies when a person (the provider)—
- (a) is—
  - (i) an incorporated body; or
  - (ii) a trustee; and
- (b) provides accident insurance, health insurance, life insurance, or other health and welfare benefits to natural persons (the recipients); and
- (c) either—
  - (i) was approved as a sickness, accident, or death benefit fund by the Commissioner on or before 24 November 2003; or
  - (ii) administers a fund that was approved as a sickness, accident, or death benefit fund by the Commissioner on or before 24 November 2003; and
- (d) has been approved by the Commissioner as an organisation that the Commissioner considers operates on the principles of mutuality for recipients—
  - (i) within the 6 months starting on 25 November 2003; or
  - (ii) in a further period allowed by the Commissioner, if the provider satisfies the Commissioner that the provider was not aware of the requirement for the Commissioner’s approval in sufficient time to obtain the approval under subparagraph (i).
Exempt income
(2) An amount derived by a provider is exempt income if—
- (a) the amount is not derived from a business carried on by the provider beyond the circle of the recipients; and
- (b) each of the recipients is—
  - (i) a beneficiary of the trust for which the provider is the trustee:
  - (ii) a member of the provider:
  - (iii) a member of an organisation that directly or indirectly controls the provider:
  - (iv) a relative of a person described in any of subparagraphs (i) to (iii).
Defined in this Act: amount, business, Commissioner, exempt income, life insurance, relative, sickness, accident, or death benefit fund, trustee,
Compare: 2004 No 35 s CZ 18

CZ 19 Community trust receipts in 2004–05 or 2005–06 tax year

An amount of income derived by a trustee or company is exempt income if—
- (a) the amount would be exempt income under section CW 41 (Charities: non-business income) or CW 42 (Charities: business income) but for the trustee or company making a dividend, distribution, or settlement to a community trust in the 2004–05 or 2005–06 tax year on the winding up of the trust or company; and
- (b) either—
  - (i) the corpus of the trust was provided by the community trust; or
  - (ii) the company is wholly owned by the community trust.
Defined in this Act: amount, community trust, company, corpus, dividend, exempt income, income, tax year, trustee,
Compare: 2004 No 35 s CZ 19

CZ 20 Disposal of personal property lease asset under specified lease

When this section applies
(1) This section applies for the purposes of section FZ 2 (Effect of specified lease on lessor and lessee) when a personal property lease asset that is leased under a specified lease is sold, assigned or leased on or after the term of the lease.
Income of lessor: when lease ends before term
(2) The amount of the excess described in section FZ 2(5)(c) is treated as income derived by the lessor in the income year in which the lease is terminated.
Income of lessor: when lease ends
(3) The amount of the excess described in section FZ 2(7) is treated as income derived by the lessor in the income year in which the term of the lease ends.
Income of lessee
(4) The amount of the excess described in section FZ 2(8) is income of the lessee in the income year in which the asset is disposed of.
Defined in this Act: amount, income year, lessee, lessor, personal property lease asset, specified lease, term of the lease,
Compare: 2004 No 35 s FC 6(7), (8)

CZ 21 Superannuation fund loans made to members before 1 April 1989

When this section applies
(1) This section applies for the purposes of section CS 18 (Value of loan treated as fund income) in the case of a loan made by a superannuation fund to a member if—
- (a) it was made before 1 April 1989; and
- (b) the rate of interest payable on the loan cannot be reviewed.
Prescribed rate of interest varied
(2) The prescribed rate of interest is treated as being—
- (a) the non-concessionary rate of interest for the tax year in which the loan agreement was signed or, if not in writing, agreed to by all parties, in the case of a loan made before 1 April 1985:
- (b) the prescribed rate of interest for the quarter in which the loan agreement was signed or, if not in writing, agreed to by all parties, in any other case.
Defined in this Act: interest, member, non-concessionary rate of interest, pay, prescribed rate of interest, quarter, superannuation fund, tax year,
Compare: 2004 No 35 s GD 6(3)

CZ 22 Geothermal wells between 31 March 2003 and 17 May 2006

When this section applies
(1) This section applies to a person’s geothermal well when—
- (a) the well is—
  - (i) both started and completed between 31 March 2003 and 17 May 2006:
  - (ii) acquired between 31 March 2003 and 17 May 2006; and
- (b) the person—
  - (i) uses the well, or has the well available for use, after the end of the well’s geothermal energy proving period in deriving income or carrying on a business for the purpose of deriving income:
  - (ii) disposes of the well.
Income: using well
(2) For a person to whom subsection (1)(b)(i) applies, the person has, for the first income year in which this section applies, an amount of income equal to the total amount of deductions that the person is allowed for the well under section DZ 7 of the Income Tax Act 1994, section DZ 15 of the Income Tax Act 2004, and section DZ 16 (Geothermal wells between 31 March 2003 and 17 May 2006) for all income years.
Income: disposing of well
(3) For a person to whom subsection (1)(b)(ii) applies, the person has, for the first income year in which this section applies, an amount of income equal to the lesser of—
- (a) the amount derived from disposing of the well; and
- (b) the total amount of deductions that the person is allowed for the well under section DZ 7 of the Income Tax Act 1994, section DZ 15 of the Income Tax Act 2004, and section DZ 16 for all income years.
Defined in this Act: amount, business, deduction, dispose, geothermal energy proving period, geothermal well, income, income year,
Compare: 2004 No 35 s CZ 20

Part D
Deductions

Subpart DA—General rules

DA 1 General permission

Nexus with income
(1) A person is allowed a deduction for an amount of expenditure or loss, including an amount of depreciation loss, to the extent to which the expenditure or loss is—
- (a) incurred by them in deriving—
  - (i) their assessable income; or
  - (ii) their excluded income; or
  - (iii) a combination of their assessable income and excluded income; or
- (b) incurred by them in the course of carrying on a business for the purpose of deriving—
  - (i) their assessable income; or
  - (ii) their excluded income; or
  - (iii) a combination of their assessable income and excluded income.
General permission
(2) Subsection (1) is called the general permission.
Avoidance arrangements
(3) Section GB 33 (Arrangements involving depreciation loss) may apply to override the general permission in relation to an amount of depreciation loss.
Defined in this Act: amount, assessable income, business, deduction, depreciation loss, excluded income, general permission, loss,
Compare: 2004 No 35 s DA 1

DA 2 General limitations

Capital limitation
(1) A person is denied a deduction for an amount of expenditure or loss to the extent to which it is of a capital nature. This rule is called the capital limitation.
Private limitation
(2) A person is denied a deduction for an amount of expenditure or loss to the extent to which it is of a private or domestic nature. This rule is called the private limitation.
Exempt income limitation
(3) A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving exempt income. This rule is called the exempt income limitation.
Employment limitation
(4) A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving income from employment. This rule is called the employment limitation.
Withholding tax limitation
(5) A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving non-resident passive income of the kind referred to in section RF 2(3) (Non-resident passive income). This rule is called the withholding tax limitation.
Non-residents’ foreign-sourced income limitation
(6) A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving non-residents’ foreign-sourced income. This rule is called the non-residents’ foreign-sourced income limitation.
Relationship of general limitations to general permission
(7) Each of the general limitations in this section overrides the general permission.
Defined in this Act: amount, capital limitation, deduction, employment limitation, exempt income, exempt income limitation, general limitation, general permission, income from employment, loss, non-residents’ foreign-sourced income, non-residents’ foreign-sourced income limitation, private limitation, withholding tax limitation,
Compare: 2004 No 35 s DA 2

DA 3 Effect of specific rules on general rules

Supplements to general permission
(1) A provision in any of subparts DB to DZ may supplement the general permission. In that case, a person to whom the provision applies does not have to satisfy the general permission to be allowed a deduction.
Express reference needed to supplement
(2) A provision in any of subparts DB to DZ takes effect to supplement the general permission only if it expressly states that it supplements the general permission.
Relationship of general limitations to supplements to general permission
(3) Each of the general limitations overrides a supplement to the general permission in any of subparts DB to DZ, unless the provision creating the supplement expressly states otherwise.
Relationship between other specific provisions and general permission or general limitations
(4) A provision in any of subparts DB to DZ may override any 1 or more of the general permission and the general limitations.
Express reference needed to override
(5) A provision in any of subparts DB to DZ takes effect to override the general permission or a general limitation only if it expressly states that—
- (a) it overrides the general permission or the relevant limitation; or
- (b) the general permission or the relevant limitation does not apply.
Part E
(6) No provision in Part E (Timing and quantifying rules) supplements the general permission or overrides the general permission or a general limitation.
Defined in this Act: deduction, general limitation, general permission, supplement,
Compare: 2004 No 35 s DA 3

DA 4 Treatment of amount of depreciation loss

The capital limitation does not apply to an amount of depreciation loss merely because the item of property is itself of a capital nature.
Defined in this Act: amount, capital limitation, depreciation loss,
Compare: 2004 No 35 s DA 4

Subpart DB—Specific rules for expenditure types

Taxes

DB 1 Taxes, other than GST, and penalties

No deduction
(1) A person is denied a deduction for the following:
- (a) income tax:
- (b) a tax imposed in a country or territory outside New Zealand that is substantially the same as income tax:
- (c) ancillary tax, unless listed in subsection (2):
- (d) a civil penalty under Part 9 of the Tax Administration Act 1994:
- (e) a tax, a penalty, or interest on unpaid tax that is—
  - (i) payable under the laws of a country or territory outside New Zealand; and
  - (ii) substantially the same as a civil penalty as defined in section 3(1) of the Tax Administration Act 1994, or a criminal penalty under Part 9 of the Act, or interest imposed under Part 7 of the Act.
Some ancillary tax excluded
(2) Subsection (1) does not apply to—
- (a) pay-as-you-earn (PAYE):
- (b) fringe benefit tax (FBT):
- (c) employer’s superannuation contribution tax (ESCT):
- (d) resident withholding tax (RWT):
- (e) non-resident withholding tax (NRWT).
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: ancillary tax, deduction, ESCT, FBT, general permission, income tax, New Zealand, NRWT, pay, PAYE, RWT, tax,
Compare: 2004 No 35 s DB 1

DB 2 Goods and services tax

No deduction
(1) A registered person is denied a deduction for the following:
- (a) input tax on a supply of goods or services to them:
- (b) goods and services tax (GST) payable by them to the Commissioner.
Deduction
(2) A registered person is allowed a deduction for output tax on a supply of goods or services that section 21 or 21I(1) to (3) of the Goods and Services Tax Act 1985 treats them as making, but only to the extent to which—
- (a) they are allowed a deduction for expenditure that they incur in acquiring or producing the goods or services; or
- (b) they are allowed a deduction for an amount of depreciation loss for the goods or services.
Exclusion
(3) Subsection (2) does not apply to an amount that relates to the application of a capital asset—
- (a) for the principal purpose of making taxable supplies, when the asset was acquired or produced other than for the principal purpose of making taxable supplies; or
- (b) other than for the principal purpose of making taxable supplies, when the asset was acquired or produced for the principal purpose of making taxable supplies; or
- (c) other than for the purpose of deriving income.
Depreciable property
(4) The provisions that apply when an amount of depreciation loss is quantified by reference to the cost of an item of depreciable property to a person are in section EE 54 (Cost: GST).
Link with subpart DA
(5) The link between this section and subpart DA (General rules) is as follows:
- (a) subsection (1) overrides the general permission:
- (b) subsection (2) supplements the general permission; the general limitations still apply.
Defined in this Act: amount, Commissioner, deduction, depreciable property, depreciation loss, general limitation, general permission, goods, GST, GST payable, income, input tax, output tax, pay, registered person, services, supplement, taxable supply,
Compare: 2004 No 35 s DB 2
Section DB 2(2): amended (with effect on 1 April 2008), on 7 December 2009, by section 10 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

DB 3 Determining tax liabilities

Deduction
(1) A person is allowed a deduction for expenditure that they incur in connection with the following matters:
- (a) calculating or determining their income tax liability for a tax year:
- (b) calculating or determining the GST payable by them in a taxable period:
- (c) preparing, instituting, or presenting an objection or challenge to, or an appeal following, a determination or assessment made under this Act or an earlier Act, the Tax Administration Act 1994, or the Goods and Services Tax Act 1985:
- (d) making a contribution towards the expenditure incurred by another person if—
  - (i) the other person is allowed a deduction for that expenditure; and
  - (ii) the expenditure relates to a matter affecting the determination of the first person’s liability for income tax or GST; and
  - (iii) the first person has objected to, challenged, or appealed against an assessment or determination made in relation to the matter under this Act or an earlier Act, the Tax Administration Act 1994, or the Goods and Services Tax Act 1985.
Exclusions
(2) This section does not apply to expenditure that a person incurs in connection with the following matters:
- (a) a matter arising from a return of income or a return under the Goods and Services Tax Act 1985 that was fraudulent or wilfully misleading:
- (b) an offence under any of the Inland Revenue Acts:
- (c) a shortfall penalty assessed under this Act or an earlier Act, the Tax Administration Act 1994, or the Goods and Services Tax Act 1985 (but not an assessment that is later cancelled):
- (d) an objection, challenge, or appeal that is inconsequential or frivolous:
- (e) a matter arising under the Goods and Services Tax Act 1985 to the extent to which it relates to a taxable activity that does not constitute a business for the purposes of this Act.
Taxable activity
(3) In this section, taxable activity is defined in section 6 of the Goods and Services Tax Act 1985.
Link with subpart DA
(4) This section supplements the general permission and overrides the capital limitation, the private limitation, and the employment limitation. The other general limitations still apply.
Defined in this Act: amount, assessment, business, capital limitation, deduction, employment limitation, general limitation, general permission, GST, GST payable, income tax liability, Inland Revenue Acts, pay, private limitation, return of income, supplement, tax year, taxable activity, taxable period,
Compare: 2004 No 35 s DB 3
Section DB 3(4): substituted (with effect on 1 April 2008), on 6 October 2009, by section 68(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section DB 3(4) list of defined terms capital limitation: inserted (with effect on 1 April 2008), on 6 October 2009, by section 68(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

DB 4 Chatham Islands dues

Deduction
(1) A person is allowed a deduction for expenditure incurred on dues levied under the Chatham Islands Council Act 1995 that relate to goods that the person uses in connection with carrying on a business.
Timing of deduction
(2) The deduction is allocated to the income year in which the dues are paid.
Exclusion of expenditure: other deductions
(3) Expenditure to which subsection (1) applies must not be taken into account in calculating the cost of the goods for the purpose of a deduction relating to the goods under any other provision of this Act.
Link with subpart DA
(4) The link between this section and subpart DA (General rules) is as follows:
- (a) subsection (1) supplements the general permission and overrides the capital limitation; the other general limitations still apply:
- (b) subsection (3) overrides the general permission.
Defined in this Act: business, capital limitation, deduction, general permission, general limitation, income year, pay, supplement,
Compare: 2004 No 35 s DB 4

Financing costs

DB 5 Transaction costs: borrowing money for use as capital

Deduction
(1) A person is allowed a deduction for expenditure incurred in borrowing money that is used as capital in deriving their income.
Link with subpart DA
(2) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income,
Compare: 2004 No 35 s DB 5

DB 6 Interest: not capital expenditure

Deduction
(1) A person is allowed a deduction for interest incurred.
Exclusion
(2) Subsection (1) does not apply to interest for which a person is denied a deduction under section DB 1.
Conduit financing arrangements
[Repealed]
(3) [Repealed]
Link with subpart DA
(4) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, interest,
Compare: 2004 No 35 s DB 6
Section DB 6(3) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 69(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section DB 6(3): repealed (with effect on 30 June 2009), on 6 October 2009, by section 69(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

DB 7 Interest: most companies need no nexus with income

Deduction
(1) A company is allowed a deduction for interest incurred.
Exclusion: qualifying company
(2) Subsection (1) does not apply to a qualifying company.
Exclusion: exempt income
(3) If a company (company A) derives exempt income or another company (company B) that is part of the same wholly-owned group of companies derives exempt income, subsection (1) applies to company A only if all the exempt income is 1 or more of the following:
- (a) dividends; or
- (b) income exempted under section CW 58 (Disposal of companies’ own shares); or
- (c) income exempted under section CW 60 (Stake money) and ancillary to the company’s business of breeding.
Exclusion: non-resident company
(4) If a company is a non-resident company, subsection (1) applies only to the extent to which the company incurs interest in the course of carrying on a business through a fixed establishment in New Zealand.
Exclusion: interest related to tax
(5) Subsection (1) does not apply to interest for which a person is denied a deduction under section DB 1.
Consolidated groups
(6) Section FM 12 (Expenditure when deduction would be denied to consolidated group) may apply to allow a deduction under this section to a company that is part of a consolidated group.
Conduit financing arrangements
[Repealed]
(7) [Repealed]
Link with subpart DA
(8) This section supplements the general permission and overrides the capital limitation, the exempt income limitation, and the withholding tax limitation. The other general limitations still apply.
Defined in this Act: business, capital limitation, company, consolidated group, deduction, dividend, exempt income, exempt income limitation, fixed establishment, general limitation, general permission, income, interest, New Zealand, non-resident company, qualifying company, supplement, wholly-owned group of companies, withholding tax limitation,
Compare: 2004 No 35 s DB 7
Section DB 7(7) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 70(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section DB 7(7): repealed (with effect on 30 June 2009), on 6 October 2009, by section 70(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

DB 8 Interest: money borrowed to acquire shares in group companies

Deduction: borrowing to acquire group company shares
(1) A company is allowed a deduction for interest incurred on money borrowed to acquire shares in another company that is part of the same group of companies.
Exclusion: group not in existence at year end
(2) Subsection (1) does not apply if the 2 companies are not part of the same group of companies at the end of the tax year that corresponds to the income year in which the deduction is allowed.
Deduction: interest after resident’s restricted amalgamation
(3) A company is allowed a deduction for interest incurred on money borrowed to acquire shares in another company that has ended its existence on a resident’s restricted amalgamation.
Exclusion: group not in existence immediately before resident’s restricted amalgamation
(4) Subsection (3) does not apply if the 2 companies were not part of the same group of companies immediately before the resident’s restricted amalgamation.
Application from income year of resident’s restricted amalgamation
(5) Subsection (3) applies in the income year in which the resident’s restricted amalgamation occurs and in later income years.
Consolidated groups
(6) Section FM 12 (Expenditure when deduction would be denied to consolidated group) may apply to allow a deduction under this section to a company that is part of a consolidated group.
Conduit financing arrangements
[Repealed]
(7) [Repealed]
Link with subpart DA
(8) This section supplements the general permission and overrides the capital limitation, the exempt income limitation, and the withholding tax limitation. The other general limitations still apply.
Defined in this Act: company, consolidated group, deduction, exempt income limitation, general limitation, general permission, group of companies, income year, interest, resident’s restricted amalgamation, share, supplement, withholding tax limitation,
Compare: 2004 No 35 s DB 8
Section DB 8(7) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 71(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section DB 8(7): repealed (with effect on 30 June 2009), on 6 October 2009, by section 71(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

DB 9 Interest incurred on money borrowed to acquire shares in qualifying companies

Deduction for interest incurred
(1) The deduction that a shareholder in a qualifying company has for interest in an income year is reduced by the amount of non-cash dividends, other than taxable bonus issues, derived by them or an associated person from the company in the income year.
Exempt income
(2) In determining the amount of the deduction that the shareholder has for the interest, section CW 15(1) (Dividends paid by qualifying companies) does not apply to treat as exempt income a distribution from the qualifying company to the shareholder, and the distribution is excluded from the definition of dividend.
Associated persons
(3) If the associated person referred to in subsection (1) is associated with more than 1 shareholder in the company, the amount of non-cash dividends is apportioned among the associated shareholders according to their effective interests in the company in the income year.
Allocation of dividend
(4) If section CD 39 (Calculation of amount of dividend when property made available) applies to a dividend derived by a shareholder of a qualifying company, the dividend is treated as having been paid and derived at the end of the quarter in which the amount is calculated.
Link with subpart DA
(5) This section overrides—
- (a) the general permission; and
- (b) the exempt income limitation.
Defined in this Act: amount, associated person, bonus issue, deduction, dividend, effective interest, exempt income, exempt income limitation, general permission, income year, interest, non-cash dividend, pay, qualifying company, share, shareholder, taxable bonus issue,
Compare: 2004 No 35 s HG 9(3)–(5)

DB 10 Interest or expenditure connected to profit-related or substituting debentures

When this section applies
(1) This section applies for the purposes of section FA 2 (Recharacterisation of certain debentures).
No deduction
(2) A company issuing either a profit-related debenture or a substituting debenture is denied a deduction for—
- (a) interest payable under the debenture; or
- (b) expenditure or loss incurred in connection with the debenture; or
- (c) expenditure or loss incurred in borrowing the money secured by or owing under the debenture.
Relationship with sections DB 5 to DB 8
(3) This section overrides sections DB 5 to DB 8.
Link with subpart DA
(4) This section overrides the general permission.
Defined in this Act: debenture, deduction, general permission, interest, pay, profit-related debenture, substituting debenture,
Compare: 2004 No 35 ss FC 1(1), FC 2(2)

DB 10B Interest or expenditure connected to stapled debt security

No deduction
(1) A company that issues a stapled debt security is denied, while section FA 2B(2) (Stapled debt securities) applies to the security, a deduction for—
- (a) interest payable under the security:
- (b) expenditure or loss incurred in connection with the security:
- (c) expenditure or loss incurred in borrowing the money secured by or owing under the security.
Relationship with sections DB 5 to DB 8
(2) This section overrides sections DB 5 to DB 8.
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: deduction, general permission, interest, pay, stapled debt security
Section DB 10B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 72 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Financial arrangements adjustments

DB 11 Negative base price adjustment

Deduction
(1) A person who has a negative base price adjustment under section EW 31(4) (Base price adjustment formula) is allowed a deduction for the expenditure to the extent to which it arises from assessable income, under section CC 3 (Financial arrangements), derived by the person under the financial arrangement in earlier income years.
Link with subpart DA
(2) This section supplements the general permission and overrides all the general limitations.
Defined in this Act: assessable income, deduction, financial arrangement, general limitation, general permission, income year, supplement,
Compare: 2004 No 35 s DB 9

DB 12 Base price adjustment under old financial arrangements rules

Deduction
(1) A person is allowed a deduction for an amount that is a deduction under section EZ 37(6) (Cash basis holder) or EZ 38(3) or (4) (Income and expenditure where financial arrangement redeemed or disposed of).
Link with subpart DA
(2) This section supplements the general permission and overrides all the general limitations.
Defined in this Act: amount, deduction, general limitation, general permission, supplement,
Compare: 2004 No 35 s DB 9B

DB 13 Repayment of debt sold at discount to associate of debtor

Deduction
(1) When section EW 49(5)(b) (Income and deduction when debt sold at discount to associate of debtor) applies, the debtor is allowed a deduction for the amount quantified in that subsection.
Link with subpart DA
(2) This section supplements the general permission and overrides all the general limitations.
Defined in this Act: amount, associated person, deduction, general limitation, general permission, supplement,
Compare: 2004 No 35 s DB 10

DB 14 Security payment

When subsection (2) applies
(1) Subsection (2) applies when—
- (a) a person receives a security payment for a loss; and
- (b) no other provision of this Act allows the person a deduction for the loss.
Deduction: loss
(2) The person is allowed a deduction for the loss quantified in section EW 51(2) (Deduction for security payment).
When subsection (4) applies
(3) Subsection (4) applies when—
- (a) a person receives a security payment for a share loss as described in section DB 24; and
- (b) the requirements of section DB 24 are met; and
- (c) no other provision of this Act allows the person a deduction for the loss.
Deduction: share loss
(4) The person is allowed a deduction for the share loss quantified in section EW 51(4).
Link with subpart DA
(5) This section supplements the general permission and overrides all the general limitations.
Defined in this Act: deduction, general limitation, general permission, loss, pay, security payment, supplement,
Compare: 2004 No 35 s DB 11

DB 15 Sureties

When this section applies
(1) This section applies when a surety incurs expenditure or loss under a security arrangement.
No deduction (with exceptions)
(2) Neither the surety nor a person with whom the surety was an associated person over the security arrangement’s term is allowed a deduction for the expenditure or loss to the extent to which the expenditure or loss is due to—
- (a) the actions of the surety or a person with whom the surety was an associated person over the arrangement’s term; or
- (b) the occurrence of an event, if the occurrence could have been influenced by the surety or a person with whom the surety was an associated person over the arrangement’s term; or
- (c) the non-occurrence of an event, if the non-occurrence could have been influenced by the surety or a person with whom the surety was an associated person over the arrangement’s term.
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: associated person, deduction, general permission, loss, security arrangement,
Compare: 2004 No 35 s DB 12

Share-lending arrangements

DB 16 Share-lending collateral under share-lending arrangements

No deduction
(1) A person is denied a deduction for the amount of expenditure incurred as share-lending collateral under a share-lending arrangement.
Link with subpart DA and other subject matter
(2) This section overrides—
- (a) the general permission:
- (b) sections DB 23 to DB 26.
Defined in this Act: amount, deduction, general permission, share-lending arrangement, share-lending collateral,
Compare: 2004 No 35 s DB 12B

DB 17 Replacement payments and imputation credits under share-lending arrangements

A person is allowed a deduction for—
- (a) the amount of expenditure incurred as a replacement payment under a share-lending arrangement:
- (b) the amount of imputation credit attached under sections OB 64 (Replacement payments) and RE 25 (When amount of tax treated as imputation credit) to the replacement payment.
Defined in this Act: amount, deduction, imputation credit, pay, portfolio investment-linked life fund replacement payment, share-lending arrangement,
Compare: 2004 No 35 s DB 12C
Section DB 17 list of defined terms portfolio investment-linked life fund: inserted, on 1 April 2008, by section 337(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Premises or land costs

DB 18 Transaction costs: leases

Deduction
(1) A person is allowed a deduction for expenditure that they incur for the preparation and registration, or the renewal, of a lease of property.
Link with subpart DA
(2) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, lease,
Compare: 2004 No 35 s DB 13

DB 19 Expenses of failed or withdrawn application for resource consent

Deduction
(1) A person who applies for the grant of a resource consent under the Resource Management Act 1991 and is refused the grant or withdraws the application is allowed a deduction for expenditure—
- (a) that the person incurs in relation to the application; and
- (b) that would have been part of the cost of depreciable property, or otherwise a deduction, if the application had been granted; and
- (c) for which the person is not allowed a deduction under another provision.
Timing of deduction
(2) The deduction is allocated to the income year in which the grant is refused or the application is withdrawn.
Link with subpart DA
(3) This section overrides the capital limitation. The general permission and other general limitations still apply.
Defined in this Act: accounting year, capital limitation, deduction, general limitation, general permission, income year,
Compare: 2004 No 35 s DB 13B

DB 20 Destruction of temporary building

Deduction
(1) A person is allowed a deduction for a loss that they incur through the destruction of a temporary building.
Link with subpart DA
(2) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, loss, supplement, temporary building,
Compare: 2004 No 35 s DB 14

DB 21 Amounts paid for non-compliance with covenant for repair

When this section applies
(1) This section applies when—
- (a) a person who is a lessee of land uses it to derive income; and
- (b) the lease contains a covenant requiring the lessee to maintain the land or to make repairs to improvements on the land; and
- (c) the lessee does not comply with the covenant; and
- (d) the lessee is, consequently, liable to pay an amount to the lessor; and
- (e) either—
  - (i) the lessee, during the term of the lease or after it ends, pays the amount to the lessor; or
  - (ii) the lessor recovers the amount from the lessee during the term of the lease or after it ends.
Deduction
(2) The lessee is allowed a deduction for the amount paid to the extent to which it relates to maintenance or repairs and to the extent to which the lessee would have been allowed a deduction for the expenditure had the lessee incurred it during the term of the lease.
Timing of deduction
(3) The deduction is allocated to the income year in which the lessee pays the amount or the lessor recovers the amount.
Relationship with section EJ 11
(4) This section is overridden by section EJ 11 (Amount paid by lessee for non-compliance with covenant for repair).
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income, income year, lease, pay, repairs, supplement, term of the lease,
Compare: 2004 No 35 s DB 15

DB 22 Amounts paid for non-compliance and change in use

When this section applies
(1) This section applies when—
- (a) a person who is a lessor receives an amount for non-compliance with a covenant for repair that is assessable income under section CC 2 (Non-compliance with covenant for repair); and
- (b) in the income year in which the lessor receives the amount or in any of the following 4 income years,—
  - (i) the lessor does not use the land to which the amount relates to derive assessable income, but continues to own the land; and
  - (ii) the lessor incurs expenditure in maintaining the land or in making repairs to improvements on the land, including painting and general maintenance; and
  - (iii) the lessor would have been allowed a deduction if the land had been used for the purpose of deriving assessable income; and
  - (iv) in the absence of section DB 46, no other provision of this Act would allow the lessor a deduction for the expenditure.
Deduction
(2) The lessor is allowed a deduction for the expenditure.
Amount of deduction
(3) The amount of the deduction is the lesser of—
- (a) the amount of the expenditure; and
- (b) the part of the amount that is assessable income derived by the lessor in the income year in which the expenditure is incurred through the operation of—
  - (i) section CC 2; or
  - (ii) section EI 5 (Amount paid to lessor for non-compliance with covenant for repair); or
  - (iii) section EI 6 (Amount paid for non-compliance: when lessor ceases to own land).
Link with subpart DA
(4) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, assessable income, deduction, general limitation, general permission, income year, own, supplement,
Compare: 2004 No 35 s DB 16

Revenue account property

DB 23 Cost of revenue account property

Deduction
(1) A person is allowed a deduction for expenditure that they incur as the cost of revenue account property.
Portfolio investment entities
(2) Despite subsection (1), a person is denied a deduction for expenditure incurred as the cost of revenue account property if—
- (a) [Repealed]
- (b) section CX 55 (Proceeds from disposal of investment shares) applies to income derived by the person from the disposal of the revenue account property.
Link with subpart DA
(3) Subsection (1) overrides the capital limitation but the general permission must still be satisfied. Subsection (2) overrides the general permission. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, revenue account property,
Compare: 2004 No 35 s DB 17
Section DB 23(2)(a): repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 73(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section DB 23(2)(a): substituted, on 1 April 2008, by section 337(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section DB 23(2)(b): amended, on 1 April 2010 (applying for the 2010–11 and later income years), by section 73(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section DB 23 list of defined terms portfolio investment entity: repealed (with effect on 1 April 2008), on 6 October 2009, by section 73(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

DB 24 Share losses

When this section applies
(1) This section applies when—
- (a) a company (company A) acquires a share in another company (company B); and
- (b) the share declines in value; and
- (c) because of the decline in value, company A incurs a loss (the share loss), whether on a disposal of the share or a valuation of it under subpart ED (Valuation of excepted financial arrangements) or in any other way; and
- (d) company B—
  - (i) itself uses the amount subscribed for the share; or
  - (ii) uses it to fund directly or indirectly another company (company C); and
- (e) company B or company C has a tax loss, in the calculation of which the amount used is taken into account; and
- (f) company A, or a company that is part of the same group of companies as company A at any time in the income year in which company B or company C has the tax loss, offsets an amount for the tax loss under section IC 1 (Company A making tax loss available to company B); and
- (g) the offset is in a tax year before the tax year that corresponds to the income year in which company A incurs the share loss.
No deduction (with exception)
(2) Company A is denied a deduction for the share loss, except to the extent to which the share loss, as adjusted under subsection (3), is more than the amount offset under section IC 1, as adjusted under subsection (4).
Other denied deductions added
(3) When subsection (2) applies, the share loss is adjusted by adding every loss to which all the following apply:
- (a) company A incurs it as a result of the share’s decline in value or the decline in value of another share if the use of the amount subscribed for the other share is taken into account in calculating the tax loss; and
- (b) company A incurs it in an income year before the income year referred to in subsection (1)(g); and
- (c) company A has been denied a deduction for it by the operation of subsection (2).
Other offsets added
(4) The amount offset under section IC 1 includes every amount that company A, or a company that is part of the same group of companies as company A at any time in the income year in which company A has the tax loss, has offset for the tax loss under that section in a tax year before the tax year that corresponds to the income year in which the share loss is incurred.
Link with subpart DA
(5) This section overrides the general permission.
Defined in this Act: amount, company, deduction, general permission, group of companies, income year, loss, share, tax loss, tax year,
Compare: 2004 No 35 s DB 18

DB 25 Cancellation of shares held as revenue account property

When this section applies
(1) This section applies for the purposes of section FA 4(3)(b) (Recharacterisation of shareholder’s base: company repurchasing share).
No deduction
(2) A shareholder is denied a deduction for the amount added to the cost of their remaining shares of the same class as that of the share cancelled, unless the share is trading stock of the shareholder.
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: deduction, general permission, interest, profit-related debenture, substituting debenture,
Compare: 2004 No 35 s FC 4(f)(iv)

DB 26 Amount from profit-making undertaking or scheme and not already in income

When this section applies
(1) This section applies when a person derives income under section CB 3 (Profit-making undertaking or scheme) that is not their income under any other provision of this Act.
Deduction
(2) The person is allowed a deduction for the value of the property, as determined under subsection (3).
Determining amount of deduction
(3) For the purpose of determining the amount of the deduction, the person is treated as—
- (a) having disposed of the property to an unrelated third party immediately before the start of the undertaking or scheme; and
- (b) having reacquired the property immediately after the start of the undertaking or scheme at the market value of the property at the time.
Link with subpart DA
(4) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, income, supplement,
Compare: 2004 No 35 s DB 19

DB 27 Amount from major development or division and not already in income

When this section applies
(1) This section applies when a person derives income under section CB 13 (Disposal: amount from major development or division and not already in income) that is not their income under any other provision of this Act.
Deduction
(2) The person is allowed a deduction for the value of the land, as determined under subsection (3).
Determining amount of deduction
(3) For the purpose of determining the amount of the deduction, the person is treated as—
- (a) having disposed of the land to an unrelated third party immediately before the start of the undertaking or scheme; and
- (b) having reacquired it immediately after the start of the undertaking or scheme at the market value of the land at the time.
Link with subpart DA
(4) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, income, land, supplement,
Compare: 2004 No 35 s DB 20

DB 28 Amount from land affected by change and not already in income

When this section applies
(1) This section applies when a person derives income under section CB 14 (Disposal: amount from land affected by change and not already in income) that is not their income under any other provision of this Act.
Deduction
(2) The person is allowed—
- (a) a deduction allowed under any other provision of this Act; and
- (b) a deduction to the extent described in subsection (3).
Calculation of deduction
(3) The maximum amount of the deduction is the greater of $1,000 and an amount calculated using the formula in subsection (4). However, the amount must not be more than the profit obtained from the disposal of the land.
Formula
(4) The formula is—
percentage of profit × years.
Definition of items in formula
(5) In the formula,—
- (a) percentage of profit is 10% of the profit on the disposal of the land:
- (b) years is the number, up to and including 10, of consecutive years between the date on which the person acquired the land and the date on which they disposed of it, with the first year starting on the date on which the person acquired the land.
Meaning of profit
(6) In this section, profit means the excess of the amount derived over the cost of the land.
Link with subpart DA
(7) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, income, land, profit, supplement, year,
Compare: 2004 No 35 s DB 21

DB 29 Apportionment when land acquired with other property

If a person derives income under sections CB 6 to CB 14 (which relate to the disposal of land) from the disposal of land, and the land is acquired together with other property, the cost of acquisition must be apportioned between the land and the other property.
Defined in this Act: income, land, property,
Compare: 2004 No 35 s FB 4A

DB 30 Cost of non-specified mineral

When this section applies
(1) This section applies when—
- (a) an amount of cost of a mineral is treated by a person under generally accepted accounting practice as a cost of the mineral for the person and reported accordingly for financial reporting purposes; and
- (b) the mineral is not a specified mineral; and
- (c) no other provision of this Act allows the person a deduction for the amount; and
- (d) an amount derived by the person from disposing of the mineral would be income of the person under section CB 29 (Disposal of minerals).
Deduction
(2) The person is allowed a deduction for the amount.
Timing of deduction: trading stock
(3) If the amount is a cost of trading stock, the deduction is allocated to the income year in which the mineral first becomes trading stock of the person.
Timing of deduction: not trading stock
(4) If the amount is not a cost of trading stock, the deduction is allocated by section EA 2 (Other revenue account property).
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, dispose, general limitation, general permission, generally accepted accounting practice, income, income year, mineral, specified mineral, trading stock,
Compare: 2004 No 35 s DB 22

Bad debts

DB 31 Bad debts

No deduction (with exception)
(1) A person is denied a deduction in an income year for a bad debt, except to the extent to which—
- (a) the debt is written off as bad in the income year; and
- (b) in the case of the bad debts described in subsections (2) to (5), the requirements of the relevant subsection are met.
Deduction: financial arrangement debt: amount of income
(2) A person who derives assessable income from a financial arrangement to which the financial arrangements rules apply is allowed a deduction for an amount owing under the financial arrangement, but only to the extent to which—
- (a) the amount is a bad debt and the requirement of subsection (1)(a) is met; and
- (b) the amount is attributable to the income; and
- (c) subsection (5) does not limit the deduction.
Deduction: financial arrangement debt: dealers in arrangements
(3) A person is allowed a deduction for an amount owing under a financial arrangement to which the financial arrangements rules apply, but only to the extent to which—
- (a) the amount is a bad debt and the requirement of subsection (1)(a) is met; and
- (b) the person carries on a business for the purpose of deriving assessable income that includes dealing in or holding financial arrangements that are the same as, or similar to, the financial arrangement; and
- (c) the person is not associated with the person owing the amount written off; and
- (d) subsection (5) does not limit the deduction.
Deduction: financial arrangement debt: dealers in property or services sold
(4) A person is allowed a deduction for an amount owing under a financial arrangement to which the financial arrangements rules apply, but only to the extent to which—
- (a) the amount is a bad debt and the requirement of subsection (1)(a) is met; and
- (b) the financial arrangement is an agreement for the sale and purchase of property or services; and
- (c) the person carries on a business of dealing in the property or services that are the subject of the agreement; and
- (d) the person carries on the business for the purpose of deriving assessable income; and
- (e) subsection (5) does not limit the deduction.
Deduction: bad debt representing loss already offset
(5) A person is allowed a deduction for a bad debt only to the extent to which it is more than the total of the amounts offset under section IC 1 (Company A making tax loss available to company B) that are described in paragraphs (e) and (f) if—
- (a) the person writing off the amount of debt is a company (company A); and
- (b) the debt is owed to it by another company (company B); and
- (c) company B—
  - (i) itself uses the amount giving rise to the debt; or
  - (ii) uses it to fund directly or indirectly another company (company C) that uses the amount; and
- (d) company B or company C has a tax loss, in the calculation of which the amount used is taken into account; and
- (e) company A, or a company that is part of the same group of companies as company A at any time in the income year in which company B or company C has the tax loss, offsets an amount for the tax loss under section IC 1; and
- (f) the offset is in a tax year before the tax year that corresponds to the income year in which company A writes off the amount of debt, but not before the 1993–94 tax year.
Link with subpart DA
(6) The link between this section and subpart DA (General rules) is as follows:
- (a) subsection (1) overrides the general permission; and
- (b) for subsections (2) to (5),—
  - (i) they supplement the general permission, to the extent to which they allow a deduction that is denied under the general permission; and
  - (ii) they override the general permission, to the extent to which they deny a deduction that is allowed under the general permission; and
  - (iii) the other general limitations still apply.
Defined in this Act:

opening outstanding claims reserve − closing outstanding claims reserve.

New Zealand Legislation

List of access keys

Quick search

My recent searches

Income Tax Act 2007

Income Tax Act 2007

Note

Contents

A 1 Title

A 2 Commencement

1 April 2008

Charitable entities

Act effective for 2008–09 income year and later

Part APurpose and interpretation

AA 1 Purpose of Act

AA 2 Interpretation

Aids to interpretation

Defined terms

AA 3 Definitions

Role of Part Y

Role of Interpretation Act

AA 4 Crown bound

Part BCore provisions

Flowchart B1—Outline of Part

Subpart BA—Purpose

BA 1 Purpose

Subpart BB—Income tax and resulting obligations

BB 1 Imposition of income tax

BB 2 Main obligations

Income tax liability

Non-filing taxpayer

Provisional tax

Withholding liabilities

Other obligations

BB 3 Overriding effect of certain matters

Tax avoidance arrangements: subpart BG

Double tax agreements: subpart BH

Subpart BC—Calculating and satisfying income tax liabilities

Flowchart B2—Calculating and satisfying income tax liabilities

BC 1 Non-filing and filing taxpayers

Non-filing taxpayer

Filing taxpayer

Filing taxpayer with schedular income

BC 2 Annual gross income

BC 3 Annual total deduction

BC 4 Net income and net loss

Income more than deductions

Income equal to deductions

Deductions more than income

Treatment of net loss

BC 5 Taxable income

BC 6 Income tax liability of filing taxpayer

Flowchart B3—Calculating income tax liability

Calculation of amount

When liability zero or negative

BC 7 Income tax liability of person with schedular income

Modified income tax liability

Schedular income tax liability

Multiple schedular income

Income tax liability of multi-rate PIEs

BC 8 Satisfaction of income tax liability

Flowchart B4—Satisfying income tax liability

Use of tax credits

Ordering rule

Terminal tax

Remaining credits

Subpart BD—Income, deductions, and timing

BD 1 Income, exempt income, excluded income, nonresidents' foreign-sourced income, and assessable income

Amounts of income

Exempt income

Excluded income

Non-residents' foreign-sourced income

Assessable income

BD 2 Deductions

BD 3 Allocation of income to particular income years

Application

General rule

Interpretation of derive

Income credited in account

Role of Part E

Part A
Purpose and interpretation

Part B
Core provisions

Part C
Income