GB 29 Attribution rule: calculation
Amount attributed

(1)

A working person is treated as deriving income in an income year equal to the least of the following amounts:

(a)

the associated entity’s net income for the corresponding tax year, calculated as if their only income were derived from personal services:

(b)

the associated entity’s net income for the corresponding tax year:

(c)

if and to the extent to which the associated entity is a company or a trust that has a loss balance to be carried forward under section IA 4 (Using loss balances carried forward to tax year) arising from a business or a trading activity of supplying personal services, the associated entity’s net income for the corresponding tax year after subtracting the loss balance carried forward from an earlier corresponding tax year.

Calculation for trustee or partnership

(2)

For the purposes of calculating the associated entity’s net income for the corresponding tax year in the application of subsection (1),—

(a)

if the associated entity is a trustee of a trust, the trustees are treated as not having made a distribution of beneficiary income out of the year’s income:

(b)

if the associated entity is a partnership, the associated entity is treated as a taxpayer and section HG 2 (Partnerships are transparent) does not apply:

(c)

if the associated entity is a look-through company, the associated entity is treated as a taxpayer and section HB 1 (Look-through companies are transparent) does not apply.

Salary paid or fringe benefits treated as deductions

(3)

For the purposes of calculating the associated entity’s net income for the corresponding tax year in the application of subsection (1),—

(a)

the associated entity is allowed a deduction for employment income paid to the working person during the income year:

(b)

the associated entity is allowed a deduction for the taxable value of a fringe benefit provided or granted by the associated entity to the working person during the income year, and for the fringe benefit tax payable on the fringe benefit.

Reduction of attributable income for distributions

(4)

For the purposes of calculating the associated entity’s net income for the corresponding tax year in the application of subsection (1), the amount of net income of the associated entity for the corresponding tax year is reduced by—

(a)

in the case of a trustee of a trust, the amount of beneficiary income derived by the working person from the trust in the income year:

(b)

in the case of a partnership, the share of profits allocated by the partnership to the working person:

(c)

in the case of a company, a dividend paid—

(i)

by the associated entity to the working person during the income year or before the end of 6 months after the end of the income year; and

(ii)

from income derived in the income year.

Attribution reduced by market value of administrative services

(5)

If the associated entity is a partnership that receives administrative services from another person related to their income from personal services and has not paid for the administrative services, the amount to be attributed to the working person is reduced by the market value of the administrative services provided by the other person.

Reduction of beneficiary income when rule results in trust having tax loss

(6)

If the associated entity is a trustee and the amount attributable would cause the associated entity to have a tax loss for the corresponding tax year, for the purposes of this Act,—

(a)

beneficiary income from the trust for the income year must be reduced to the extent to which the associated entity’s taxable income for the corresponding tax year is zero; and

(b)

the reduction in beneficiary income must be divided among the beneficiaries other than the working person—

(i)

according to proportions determined by the trust’s trustees:

(ii)

if the trustees do not make the determination, according to the proportion that each beneficiary’s beneficiary income bears to the total beneficiary income from the trust for the income year.

Attribution to more than 1 working person

(7)

If the amount attributable is to be attributed to more than 1 working person, the share attributed to each working person must reflect the respective value of the services personally performed by each working person.

Defined in this Act: beneficiary income, company, deduction, dividend, fringe benefit, fringe benefit tax, income, income year, look-through company, net income, taxpayer, tax loss, tax year, trustee

Compare: 2004 No 35 s GC 14D

Section GB 29(1)(c): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section GB 29(2)(b): amended, on 1 April 2011 (applying for income years beginning on or after 1 April 2011), by section 69(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section GB 29(2)(b): amended, on 1 April 2008, by section 16(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).

Section GB 29(2)(c): added, on 1 April 2011 (applying for income years beginning on or after 1 April 2011), by section 69(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section GB 29 list of defined terms look-through company: inserted, on 1 April 2011, by section 69(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).