EW 5 What is an excepted financial arrangement?
Meaning

(1)

Excepted financial arrangement means an arrangement described in any of subsections (2) to (25). However,—

(a)

an arrangement described in any of subsections (18) to (20) may cease to be an excepted financial arrangement through the operation of section EW 7:

(b)

an arrangement described in any of subsections (21) to (25) may cease to be an excepted financial arrangement for a party who makes an election under section EW 8.

Annuity

(2)

Each of the following is an excepted financial arrangement to the extent to which it is not life financial reinsurance:

(a)

an annuity for a term contingent on human life:

(b)

an annuity for a term not contingent on human life to which section EY 8(2)(c) (Meaning of life insurance) applies.

Bet

(3)

A bet on any of the following is an excepted financial arrangement:

(a)

a race, as defined in section 5 of the Racing Act 2003:

(b)

a sporting event under a sports betting system administered under Part 6 of the Racing Act 2003:

(c)

gambling, including a New Zealand lottery, as those terms are defined in section 4(1) of the Gambling Act 2003.

Emissions unit

(3B)

An emissions unit is an excepted financial arrangement.

Non-Kyoto greenhouse gas unit

(3C)

A non-Kyoto greenhouse gas unit is an excepted financial arrangement.

Research and development agreement

(3D)

An agreement between a person and another person (the provider) that the provider will provide property or services to the person in consideration for a payment to the provider by a public authority under a research and development growth grant for the benefit of the person is an excepted financial arrangement for the person.

Employment contract

(4)

An employment contract is an excepted financial arrangement.

Farm-out arrangement

(5)

A farm-out arrangement is an excepted financial arrangement.

Group investment fund

(6)

An interest in a group investment fund is an excepted financial arrangement.

Hire purchase: livestock or bloodstock

(7)

A hire purchase agreement for livestock or bloodstock is an excepted financial arrangement.

Insurance contract

(8)

An insurance contract to the extent to which it is not life financial reinsurance is an excepted financial arrangement.

Lease not finance lease

(9)

A lease that is not a finance lease is an excepted financial arrangement.

Loan in New Zealand currency

(10)

A loan to which all the following apply is an excepted financial arrangement for the lender:

(a)

the loan is in New Zealand currency; and

(b)

the loan is interest-free; and

(c)

the loan is repayable on demand.

Partnership or joint venture

(11)

An interest in a partnership or a joint venture is an excepted financial arrangement.

Look-through companies

(11B)

A look-through interest for a look-through company is an excepted financial arrangement.

Share-lending arrangement

(12)

A share-lending arrangement is an excepted financial arrangement.

Share or option

(13)

A share, or an option to acquire or to dispose of shares, is an excepted financial arrangement, if the share is acquired, or the person becomes a party to the option, on or after 20 May 1999. This subsection does not apply to a withdrawable share or to an option to acquire or to dispose of withdrawable shares.

Specified preference share

(14)

A specified preference share to which section FZ 1 (Deduction for dividends paid on certain preference shares) of the Income Tax Act 2004 applies is an excepted financial arrangement.

Superannuation

(15)

A membership of a superannuation scheme is an excepted financial arrangement.

Warranty

(16)

A warranty for goods or services is an excepted financial arrangement.

Certain arrangements to which transitional resident is party

(17)

An arrangement to which a transitional resident is a party is an excepted financial arrangement for the transitional resident if—

(a)

no other party to the arrangement is a New Zealand resident; and

(b)

the arrangement is not for a purpose of a business carried on in New Zealand by a party to the arrangement.

Loan in foreign currency: private or domestic purpose

(18)

A loan to which all the following apply is an excepted financial arrangement for the borrower:

(a)

the loan is in foreign currency; and

(b)

the borrower is a cash basis person; and

(c)

the borrower uses the loan for a private or a domestic purpose.

Option: private or domestic purpose

(19)

An option to acquire or dispose of property, other than an interest in a financial arrangement, is an excepted financial arrangement for a person who becomes a party to the option for a private or a domestic purpose.

Private or domestic agreement for the sale and purchase of property or services

(20)

An agreement for the sale and purchase of property or services entered into by a person, or a specified option granted to or by a person, is an excepted financial arrangement for the person if,—

(a)

first,—

(i)

the agreement is entered into by the person for a private or a domestic purpose; or

(ii)

the option is granted to or by the person for a private or a domestic purpose; and

(b)

second, the subject matter of the agreement or option is—

(i)

real property whose purchase price is less than $1,000,000; or

(ii)

any other property whose purchase price is less than $400,000; or

(iii)

services whose purchase price is less than $400,000; and

(c)

third,—

(i)

the agreement requires settlement of the property, or performance of the services, to take place on or before the 365th day after the date on which the agreement is entered into; or

(ii)

the option requires settlement of the property, or performance of the services, if an agreement is entered into as a result of the exercise of the option, to take place on or before the 365th day after the date on which the option is granted.

Agreement for the sale and purchase of property or services

(21)

An agreement for the sale and purchase of property or services is an excepted financial arrangement, except for a party who makes an election under section EW 8, if—

(a)

all a party’s sales or purchases under the agreement are prepaid; and

(b)

for all the party’s agreements under which all sales and purchases are prepaid, the total value of prepayments, on every day in an income year, is $50,000 or less.

Short-term agreement for sale and purchase

(22)

A short-term agreement for sale and purchase is an excepted financial arrangement, except for a party who makes an election under section EW 8.

Short-term option

(23)

A short-term option is an excepted financial arrangement, except for a party who makes an election under section EW 8.

Travellers’ cheques

(24)

Travellers’ cheques are excepted financial arrangements, except for a party who makes an election under section EW 8.

Variable principal debt instrument

(25)

A variable principal debt instrument is an excepted financial arrangement, except for a party who makes an election under section EW 8, if the total value on every day in an income year of all variable principal debt instruments to which a person is a party is $50,000 or less.

Defined in this Act: agreement for the sale and purchase of property or services, arrangement, bloodstock, cash basis person, emissions unit, excepted financial arrangement, farm-out arrangement, finance lease, group investment fund, hire purchase agreement, income year, insurance contract, lease, life financial reinsurance, look-through company, look-through interest, New Zealand, New Zealand resident, non-Kyoto greenhouse gas unit, non-resident, pay, property, public authority, share, share-lending arrangement, short-term agreement for sale and purchase, short-term option, superannuation scheme, transitional resident, variable principal debt instrument, withdrawable share

Compare: 2004 No 35 s EW 5

Section EW 5(2): amended, on 1 July 2010, by section 132(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 5(3B) heading: substituted (with effect on 1 January 2009), on 6 October 2009, by section 132(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 5(3B): substituted (with effect on 1 January 2009), on 6 October 2009, by section 132(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 5(3C) heading: inserted (with effect on 1 January 2009), on 6 October 2009, by section 132(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 5(3C): inserted (with effect on 1 January 2009), on 6 October 2009, by section 132(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 5(3D) heading: inserted (with effect on 1 October 2010), on 21 December 2010, by section 56(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section EW 5(3D): inserted (with effect on 1 October 2010), on 21 December 2010, by section 56(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section EW 5(3D): amended, on 30 March 2017, by section 70 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section EW 5(8): amended, on 1 July 2010, by section 132(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 5(11B) heading: inserted, on 1 April 2011 (applying for income years beginning on or after 1 April 2011), by section 56(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section EW 5(11B): inserted, on 1 April 2011 (applying for income years beginning on or after 1 April 2011), by section 56(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section EW 5 list of defined terms emissions unit: inserted (with effect on 1 January 2009), on 6 October 2009, by section 132(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 5 list of defined terms ETS unit: repealed (with effect on 1 January 2009), on 6 October 2009, by section 132(4)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 5 list of defined terms life financial reinsurance: inserted, on 1 July 2010, by section 132(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 5 list of defined terms look-through company: inserted, on 1 April 2011, by section 56(4) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section EW 5 list of defined terms look-through interest: inserted, on 1 April 2011, by section 56(4) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section EW 5 list of defined terms non-Kyoto greenhouse gas unit: inserted (with effect on 1 January 2009), on 6 October 2009, by section 132(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 5 list of defined terms public authority: inserted (with effect on 1 October 2010), on 21 December 2010, by section 56(3) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).