HB 1 Look-through companies are transparent
When this section applies

(1)

This section applies for the purposes of this Act, other than the PAYE rules, the FBT rules, the NRWT rules, the RWT rules, the ESCT rules, and the RSCT rules, for a person in their capacity of owner of an effective look-through interest for a look-through company (the LTC), for an income year, if—

(a)

for the LTC, an LTC election described in section HB 13(1) and (2) has been received by the Commissioner under section HB 13(3) and (4) for the income year; and

(b)

the LTC meets the requirements in the definition of look-through company at all times in the income year; and

(c)

the election has not been revoked for the income year by an owner of a look-through interest for the LTC by notice received by the Commissioner before the start of the income year.

When this section applies: Commissioner’s discretion as to revocation

(2)

A revocation notice that is received by the Commissioner after the start of the income year is treated as received before the start of the income year if the Commissioner decides that exceptional circumstances are the sole cause of the lateness.

When this section applies: revocation ignored

(3)

An owner’s revocation notice for the income year is ignored for the purposes of this section and section HB 13(4)(a) if the owner stops having a look-through interest in the LTC and the new owner reverses the revocation notice before the start of the income year by notice to the Commissioner.

Look-through for effective look-through interest

(4)

For a person, unless the context requires otherwise,—

(a)

the person is treated as carrying on an activity carried on by the LTC, and having a status, intention, and purpose of the LTC, and the LTC is treated as not carrying on the activity or having the status, intention, or purpose:

(b)

the person is treated as holding property that the LTC holds, in proportion to the person’s effective look-through interest, and the LTC is treated as not holding the property:

(c)

the person is treated as being party to an arrangement to which the LTC is a party, in proportion to the person’s effective look-through interest, and the LTC is treated as not being a party to the arrangement:

(d)

the person is treated as doing a thing and being entitled to a thing that the LTC does or is entitled to, in proportion to the person’s effective look-through interest, and the LTC is treated as not doing the thing or being entitled to the thing.

Effective look-through interest

(5)

For the purposes of this section, effective look-through interest means for a person and an LTC, treating the LTC as a company for the purposes of this subsection,—

(a)

a person’s average daily look-through interest for the company for the income year, if there is no market value circumstance for the LTC and paragraph (b) does not apply:

(b)

a person’s look-through interest for the relevant time of look-through under subsection (4), if there is no market value circumstance for the LTC, and—

(i)

the assessable income of the LTC, ignoring this subpart, is or will be $3,000,000 or more in a 12-month period including the relevant time of look-through, and the Commissioner has notified the LTC that look-through interests for the relevant time of look-through under subsection (4) must be used under this section:

(ii)

all persons with look-through interests have agreed to use their look-through interests for the relevant time of look-through:

(c)

if there is a market value circumstance for the LTC and paragraph (d) does not apply, the average of the following 2 amounts:

(i)

a person’s average daily look-through interest for the income year:

(ii)

a person’s average daily market value interest for the income year:

(d)

if there is a market value circumstance for the LTC, and the assessable income and notification requirements described in paragraph (b)(i) are met, the average of the following 2 amounts:

(i)

a person’s look-through interest for the time of look-through under subsection (4):

(ii)

a person’s market value interest for the time of look-through under subsection (4).

Elections and methods

(6)

Inland Revenue Act elections and methods relating to an LTC are chosen by the company ignoring subsection (4), and then subsection (4) applies so that the elections and methods are those of an owner of an effective look-through interest for the look-through company.

Defined in this Act: arrangement, assessable income, Commissioner, company, effective look-through interest, ESCT rules, FBT rules, income year, look-through company, look-through interest, market value circumstance, market value interest, notice, notify, NRWT rules, PAYE rules, RSCT rules, RWT rules

Section HB 1: inserted, on 1 April 2011 (applying for income years beginning on or after 1 April 2011, and for the purposes of the Commissioner receiving LTC elections, on and after 21 December 2010), by section 78(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section HB 1(6) heading: inserted (with effect on 1 April 2011), on 2 November 2012, by section 78 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section HB 1(6): inserted (with effect on 1 April 2011), on 2 November 2012, by section 78 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section HB 1 list of defined terms notice: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).

Section HB 1 list of defined terms notify: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).