HB 4 General provisions relating to disposals
Relationship between disposal under this section, disposal safe harbours, and subpart FB

(1)

This section overrides sections HB 5 to HB 9. This section does not apply, and sections HB 5 to HB 9 do not apply, for disposals of owners’ interests under transactions to which subpart FB (Transfers of relationship property) applies or is treated as applying.

Election for specified livestock disposed of to new owner

(2)

Section HB 10 applies for an entering owner if the entering owner furnishes a return of income that applies the section.

Permanent cessation

(3)

A person is treated as disposing of all of their owner’s interests for a look-through company to a single third party for a payment equal to the interests’ market value, if the look-through company ceases to exist as an entity through liquidation, court order, or otherwise.

Capital reduction

(4)

A person is treated as disposing of all of their owner’s interests for a look-through company to a single third party for a payment equal to the interests’ market value to the extent to which an owner’s capital is reduced by a cancellation or a buy-back by the look-through company that is not pro rata for all owners.

Receipt upon permanent cessation

(5)

Anything received by an owner in relation to permanent cessation or capital reduction, as described in subsection (3) or (4), is ignored.

Cessation due to revocation or otherwise

(6)

A person is treated as disposing of all of their owner’s interests for a look-through company to a single third party for a payment equal to the interests’ market value, if the look-through company ceases to be a look-through company because of a revocation or otherwise, but excluding cessation as described in subsection (3). The company is treated as acquiring all of the person’s interests immediately after the cessation, from the third party, for a payment equal to the interests’ market value, and for the purposes of section CB 15 (Transactions between associated persons), the person disposing of, and the company acquiring, the interests are treated as associated persons.

Market value of debts owed

(7)

In this section the market value of an owner’s interest in a financial arrangement as debtor must take into account the amount of any adjustment for credit impairment.

Defined in this Act: associated person, dispose, financial arrangement, look-through company, owner’s interests, pay, return of income

Section HB 4: 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 4(7) heading: inserted, on 1 April 2017, by section 130(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section HB 4(7): inserted, on 1 April 2017, by section 130(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section HB 4 list of defined terms financial arrangement: inserted, on 1 April 2017, by section 130(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).