Taxation (Business Taxation and Remedial Matters) Act 2007

Reprint
as at 6 October 2009

Taxation (Business Taxation and Remedial Matters) Act 2007

Public Act2007 No 109
Date of assent19 December 2007

Note

Changes authorised by section 17C of the Acts and Regulations Publication Act 1989 have been made in this eprint.

A general outline of these changes is set out in the notes at the end of this eprint, together with other explanatory material about this eprint.


Contents

Estate and Gift Duties Act 1968

Goods and Services Tax Act 1985

Income Tax Act 1994

Taxation Review Authorities Act 1994

Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006

Customs and Excise Act 1996

Health (Drinking Water) Amendment Act 2007

Housing Restructuring and Tenancy Matters Act 1992

Privacy Act 1993

Rates Rebate Act 1973

Social Security Act 1964

Goods and Services Tax (Grants and Subsidies) Order 1992

6 

Health Entitlement Cards Regulations 1993

Income Tax (Withholding Payments) Regulations 1979

Social Security (Temporary Additional Support) Regulations 2005

Student Allowances Regulations 1998

Amendments to Income Tax Act 2007


The Parliament of New Zealand enacts as follows:

1 Title
  • This Act is the Taxation (Business Taxation and Remedial Matters) Act 2007.

2 Commencement

Part 1
Amendments to Income Tax Act 2004

3 Income Tax Act 2004
  • Sections 4 to 186 amend the Income Tax Act 2004.

4 Withholding liabilities
  • (1) After section BE 1(5), the following is inserted:

    Retirement scheme contributions
    • (5B) A person who makes a retirement scheme contribution to a retirement savings scheme must pay retirement scheme contribution withholding tax under the RSCWT rules.

    (2) In section BE 1, in the list of defined terms, retirement savings scheme, retirement scheme contribution, retirement scheme contribution withholding tax, and RSCWT rules are inserted.

5 Section CB 4B replaced
  • Section CB 4B is replaced by the following:

    CB 4B Disposal of certain shares by portfolio investment entity or New Zealand Superannuation Fund after declaration of dividend
    • When this section applies

      (1) This section applies to a portfolio investment entity or the New Zealand Superannuation Fund (the entity) if—

      • (a) the entity disposes of a share in a company; and

      • (b) section CX 44C (Proceeds from disposal of certain shares by portfolio investment entities or New Zealand Superannuation Fund) applies to the disposal; and

      • (c) 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 derives an amount of income that is the greater of zero and the amount calculated using the formula (declaration shares - distribution shares) x distribution.

      Definition of items in formula

      (3) The items in the formula are defined in subsections (4) to (6).

      Declaration shares

      (4) Declaration shares is the number of shares in the company held by the entity when the dividend is declared.

      Distribution shares

      (5) Distribution shares is the number of shares in the company for which the entity derives the dividend.

      Distribution

      (6) Distribution is the amount for a share of—

      • (a) the dividend that is not fully imputed as that term is defined in section NG 2(3) (Application of NRWT rules), if the share is issued by a company that has an imputation credit account; or

      • (b) the dividend, if paragraph (a) does not apply.

      Defined in this Act: amount, company, dividend, imputation credit account, income, portfolio investment entity, share, .

6 New section CB 5A inserted
  • (1) Before section CB 5, the following is inserted:

    CB 5A Land partially sold or sold with other land
    • Sections CB 5 to CB 21 apply to amounts derived from the disposal of land if the land—

      • (a) is part of the land to which the relevant section applies:

      • (b) is the whole of the land to which the relevant section applies:

      • (c) is disposed of together with other land.

      Defined in this Act: amount, dispose, land, .

    (2) Subsection (1) applies for the 2005–06 and later income years.

7 Disposal: amount from major development or division and not already in income
  • (1) Section CB 11(2) is replaced by the following:

    Exclusions
    • (2) Subsection (1) is overridden by the exclusions for residential land in section CB 15, for business premises in section CB 18, for farm land in section CB 19, and for investment land in section CB 21.

    (2) Subsection (1) applies for—

    • (a) a disposal of land occurring on or after the date on which this Act receives the Royal assent:

    • (b) a person and a disposal of land occurring before the date on which this Act receives the Royal assent, if the person—

      • (i) is the person disposing of the land; and

      • (ii) takes a tax position relating to the disposal in a return for the income year of the disposal; and

      • (iii) in taking the tax position, relies on the law that would apply if subsection (1) applied for the disposal; and

      • (iv) provides the return to the Commissioner by the due date for the return.

8 Residential exclusion from sections CB 10 and CB 11
  • In section CB 15(1), in the words before paragraph (a), Section CB 10 does is replaced by Sections CB 10 and CB 11 do.

9 Business exclusion from section CB 10
  • (1) In the heading to section CB 18, section CB 10 is replaced by sections CB 10 and CB 11.

    (2) In section CB 18, in the words before paragraph (a), Section CB 10 does is replaced by Sections CB 10 and CB 11 do.

    (3) Subsection (2) applies for—

    • (a) a disposal of land occurring on or after the date on which this Act receives the Royal assent:

    • (b) a person and a disposal of land occurring before the date on which this Act receives the Royal assent, if the person—

      • (i) is the person disposing of the land; and

      • (ii) takes a tax position relating to the disposal in a return for the income year of the disposal; and

      • (iii) in taking the tax position, relies on the law that would apply if subsection (2) applied for the disposal; and

      • (iv) provides the return to the Commissioner by the due date for the return.

10 Investment exclusion from section CB 10
  • (1) In the heading to section CB 21, section CB 10 is replaced by sections CB 10 and CB 11.

    (2) In section CB 21, in the words before paragraph (a), Section CB 10 does is replaced by Sections CB 10 and CB 11 do.

    (3) Subsection (2) applies for—

    • (a) a disposal of land occurring on or after the date on which this Act receives the Royal assent:

    • (b) a person and a disposal of land occurring before the date on which this Act receives the Royal assent, if the person—

      • (i) is the person disposing of the land; and

      • (ii) takes a tax position relating to the disposal in a return for the income year of the disposal; and

      • (iii) in taking the tax position, relies on the law that would apply if subsection (2) applied for the disposal; and

      • (iv) provides the return to the Commissioner by the due date for the return.

11 Foreign investment fund income
  • Section CD 26(b) is replaced by the following:

    • (b) the person calculates their 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; and

    • (c) if the calculation referred to in paragraph (b) is under the fair dividend rate method,—

      • (i) the FIF is not a grey list company:

      • (ii) the person does not hold a direct income interest of 10% or more in the FIF at the beginning of the income year of the period.

12 Determination of amount of credit in certain cases
  • In section CD 32(26)(b), dividend: is replaced by dividend (section MZ 18 (Fully credited: modifying the actual ratio) modifies this paragraph):.

13 When does a person have attributed repatriation from a CFC?
  • (1) In section CD 34(1)(b), EX 16 is replaced by EX 17.

    (2) Subsection (1) applies for the 2005–06 and later income years.

14 New heading and section CE 12 inserted
  • After section CE 11, the following is added:

    Tax credits

    CE 12 Tax credits under section LD 1B added to provider's income
    • When this section applies

      (1) This section applies when a person is allowed under section LD 1B (Tax deductions from certain accident compensation payments: credit allowed to provider) a credit against the person's income tax liability in an income year.

      Income

      (2) An amount equal to the credit is income of the person in the income year, if the amount is not income under any other provision.

      Defined in this Act: income, income year, payment, .

15 Benefits, pensions, compensation, and government grants
  • (1) In section CF 1(2), in the definition of accident compensation payment (paragraph (f)), of that Act is replaced by of that Act:, and the following is added:

    • (g) a personal service rehabilitation payment for a claimant under the Injury Prevention, Rehabilitation, and Compensation Act 2001.

    (2) In section CF 1, in the list of defined terms, personal service rehabilitation payment is inserted.

16 When FIF income arises
  • (1) In section CQ 5(1),—

    • (a) in paragraph (d), in the words before subparagraph (i), any time during the income year is replaced by any time in the year:

    • (b) in paragraph (db), in the words before subparagraph (i), , at any time in the year, is inserted after the person holds:

    • (c) in paragraph (f), , EX 48 (Top-up FIF income: deemed rate of return method), or EX 49 (Top-up FIF income: 1 April 1993 uplift interests) is inserted after income or loss).

    (2) After section CQ 5(1), the following is inserted:

    Treatment of deemed transaction under section EX 51, EX 53, or EX 54B
    • (1B) If a person is treated under section EX 51(5) (Consequences of changes in method), EX 53 (Changes in application of FIF exemptions), or EX 54B (FIF rules first applying to interest for income year beginning on or after 1 April 2007) as disposing of or acquiring rights in an income year, the disposal or acquisition is ignored for the purposes of subsection (1)(d) and (db).

17 Exclusions of withdrawals of various kinds
  • Section CS 2(4B) is repealed.

18 Meaning of petroleum miner
  • (1) Section CT 6(1), other than the heading, is replaced by the following:

    • (1) Petroleum miner, for a permit area, means a person who undertakes petroleum mining operations in the permit area.

    (2) In section CT 6(2), in the words before paragraph (a), an activity described in subsection (3) is replaced by petroleum mining operations.

    (3) Section CT 6(3) and (4) are repealed.

    (4) In the list of defined terms in section CT 6,—

    • (a) petroleum mining operations is inserted:

    • (b) removal or restoration operations is omitted.

    (5) Subsections (1) to (4) apply for the 2005–06 and later income years.

19 New section CT 6B inserted
  • (1) After section CT 6, the following is inserted:

    CT 6B Meaning of petroleum mining operations
    • Meaning

      (1) Petroleum mining operations means an activity included in the activities 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, petroleum mining operations, removal or restoration operations, .

    (2) Subsection (1) applies for the 2005–06 and later income years.

20 Proceeds of share disposal by qualified foreign equity investor
  • (1) In section CW 11B(4), in the definition of foreign exempt entity,—

    • (a) paragraph (c) is replaced by the following:

      • (c) under the laws of the territory, or of the part of the territory, is not subject to a tax on income other than as a body that handles income of the members; and:

    • (b) in paragraph (f)(iii), taxation laws is replaced by laws in both places that it occurs:

    • (c) in paragraph (f)(iii), subparagraph (ii) is replaced by subparagraph (ii); and and the following is added:

      • (g) does not have a holder of a direct or indirect interest in the capital of the legal entity who—

        • (i) is a resident of New Zealand; and

        • (ii) holds a total direct or indirect interest of 10% or more in the capital of the legal entity, when treated as holding the interests of any person who is associated with the holder under section OD 8(1).

    (2) In section CW 11B(4), in the definition of foreign exempt partnership,—

    • (a) paragraph (c) is replaced by the following:

      • (c) under the laws of the territory, or of the part of the territory, is not subject to a tax on income other than as a body that handles income of the partners; and:

    • (b) in paragraph (h)(ii), taxation laws is replaced by laws in both places that it occurs:

    • (c) in paragraph (h)(ii), subparagraph (i) is replaced by subparagraph (i); and and the following is added:

      • (i) does not have a holder of a direct or indirect interest in the capital of the unincorporated body who—

        • (i) is a resident of New Zealand; and

        • (ii) holds a total direct or indirect interest of 10% or more in the capital of the unincorporated body, when treated as holding the interests of any person who is associated with the holder under section OD 8(1).

    (3) In section CW 11B(4), in the definition of foreign exempt person,—

    • (a) paragraph (d) is replaced by the following:

      • (d) under the laws of the territory, or of the part of the territory, derives the proceeds from a disposal of shares or options that are held by the person; and:

    • (b) in paragraph (e)(ii), taxation laws is replaced by laws in both places that it occurs:

    • (c) in paragraph (e)(ii), subparagraph (i) is replaced by subparagraph (i); and and the following is added:

      • (f) does not have a holder of a direct or indirect interest in the person who—

        • (i) is a resident of New Zealand; and

        • (ii) holds a total direct or indirect interest of 10% or more in the capital of the person, when treated as holding the interests of any person who is associated with the holder under section OD 8(1).

    (4) Section CW 11B(5)(a) and (b) are replaced by the following:

    • (a) under a double tax agreement between New Zealand and the territory that is in force under the terms of the double tax agreement, if—

      • (i) there is such a double tax agreement; and

      • (ii) the double tax agreement provides for the residency of the person:

    • (b) under the laws of the territory, if paragraph (a) does not apply.

21 New section CW 28B inserted
  • After section CW 28, the following is inserted:

    CW 28B Payment of certain accident compensation payments
    • The amount paid to a person (the claimant) for an income year as a personal service rehabilitation payment for the person under the Injury Prevention, Rehabilitation, and Compensation Act 2001 is exempt income of the claimant if—

      • (a) the claimant pays an amount to another person for providing a key aspect of social rehabilitation referred to in the definition of personal service rehabilitation payment in section OB 1; and

      • (b) the amount paid by the claimant for a key aspect of social rehabilitation for the income year is equal to or more than the amount of personal service rehabilitation payments, after any deduction of tax under this Act, paid to the claimant for the year.

      Defined in this Act: exempt income, income year, payment, personal service rehabilitation payment, .

22 Local authorities
  • Section CW 32(4)(c)(i) is replaced by the following:

    • (i) a council-controlled organisation, other than a council-controlled organisation operating a hospital as a charitable activity on behalf of the local authority:.

23 Charities: non-business income
  • Section CW 34(3), other than the heading, is replaced by the following:

    • (3) This section does not apply to 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.

24 Charities: business income
  • Section CW 35(2), other than the heading, is replaced by the following:

    • (2) This section does not apply to 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.

25 New heading and sections CW 49C and CW 49D inserted
  • (1) After section CW 49B, the following is inserted:

    Income of, and distributions by, certain international funds

    CW 49C Income of certain international funds
    • An amount of income derived by a person is exempt income if the person is—

      • (a) the trustee of the Niue International Trust Fund:

      • (b) the trustee of the Tokelau International Trust Fund.

      Defined in this Act: amount, exempt income, income, Niue International Trust Fund, Tokelau International Trust Fund, trustee,

    CW 49D Distributions by certain international funds
    • An amount of income derived by a person is exempt income 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, .

    (2) Subsection (1) applies for the 2005–06 and later income years.

26 Heading above section CX 42 replaced
  • The heading above section CX 42 is replaced by Contributions to superannuation scheme or retirement savings scheme.

27 New section CX 42B inserted
  • After section CX 42, the following is inserted:

    CX 42B Contributions to retirement savings scheme
    • Excluded income

      (1) A retirement scheme contribution is excluded income of—

      • (a) the person for whose benefit the retirement scheme contribution is provided, to the extent to which the retirement scheme contribution is—

        • (i) money:

        • (ii) an amount of imputation credit or Maori authority credit that is used to meet the liability of the retirement scheme contributor for retirement scheme contribution withholding tax on the retirement scheme contribution:

      • (b) the retirement savings scheme.

      Exclusion

      (2) Subsection (1)(a) does not apply if the person for whose benefit the retirement scheme contribution is provided—

      • (a) supplies to the retirement scheme contributor, or to the retirement savings scheme, a retirement scheme withholding rate that is less than the retirement scheme prescribed rate for the person:

      • (b) includes the retirement scheme contribution in a return of income for the income year in which the retirement scheme contribution is provided:

      • (c) is a non-resident and the retirement scheme contribution is non-resident withholding income.

      Defined in this Act: excluded income, income year, non-resident, non-resident withholding income, retirement savings scheme, retirement scheme contribution, retirement scheme contributor, retirement scheme prescribed rate, retirement scheme withholding rate, return of income, .

28 Proceeds from disposal of certain shares by portfolio investment entities or New Zealand Superannuation Fund
  • (1) In section CX 44C(1), in the words before paragraph (a), portfolio investment entity is replaced by portfolio investment entity or by a life insurer, in relation to that part of the life insurer that is a portfolio investment-linked life fund,.

    (2) Section CX 44C(1)(a)(i) is replaced by the following:

    • (i) resident in Australia and not treated as being resident in a country other than Australia in an agreement between Australia and another country that would be a double tax agreement if the agreement were negotiated between New Zealand and the other country; and.

    (3) In section CX 44C(1)(b), share. is replaced by share; and and the following is added:

    • (c) the entity disposing of the share is not assured, under an arrangement entered with another person when the share is acquired, of having a gain on the disposal.

    (4) In section CX 44C, in the list of defined terms, portfolio investment-linked life fund is inserted.

29 Portfolio investor allocated income and distributions of income by portfolio investment entities
  • (1) Section CX 44D(1) is replaced by the following:

    Portfolio investor allocated income
    • (1) Portfolio investor allocated income derived under section CP 1 (Portfolio investor allocated income) in a portfolio calculation period in an income year by an investor in a portfolio tax rate entity is excluded income of the investor if—

      • (a) the prescribed investor rate for the investor and the portfolio calculation period is more than zero; and

      • (b) the prescribed investor rate for the investor and the portfolio calculation period is not more than the portfolio investor rate for the investor and the portfolio calculation period when the entity calculates in relation to the portfolio investor allocated income—

        • (i) the portfolio entity tax liability of the entity; or

        • (ii) the amount of a payment under section HL 23B (Optional payments of tax by portfolio tax rate entities) that the entity intends to be a final payment of the portfolio entity tax liability of the entity in relation to the portfolio investor allocated income; and

      • (c) for a portfolio tax rate entity making payments of tax under section HL 21 (Payments of tax by portfolio tax rate entity making no election), the portfolio investor allocated income is not allocated to a portfolio allocation period that includes part of a portfolio investor exit period for the investor.

    (2) In section CX 44D(2), distribution by is replaced by distribution or dividend of.

    (3) In section CX 44D(3), in the words before paragraph (a), distribution by is replaced by distribution or dividend of.

    (4) Section CX 44D(3)(a)(i) is replaced by the following:

    • (i) is a natural person or a trustee; and.

30 Cost of revenue account property
  • (1) Section DB 17(3)(a) is replaced by the following:

    • (a) the person is a portfolio investment entity or a life insurer in relation to that part of the life insurer that is a portfolio investment-linked life fund; and.

    (2) In section DB 17, in the list of defined terms, portfolio investment-linked life fund is inserted.

31 Research or development
  • (1) In section DB 26(2), paragraph 5.1 or 5.2 of the reporting standard is replaced by paragraph 68(a) of the reporting standard, applying, for the purposes of that paragraph, paragraphs 54 to 67 of the reporting standard.

    (2) Section DB 26(3) is repealed.

    (3) In section DB 26(4)(a), of paragraph 2.3 of the reporting standard is replaced by it is an amount written off due to its being an immaterial amount for financial reporting purposes.

    (4) Section DB 26(4)(b) is replaced by the following:

    • (b) would be required, if the expenditure were material, to recognise it for financial reporting purposes under paragraph 68(a) of the reporting standard, applying, for the purposes of that paragraph, paragraphs 54 to 67 of the reporting standard.

    (5) Section DB 26(5)(b) is replaced by the following:

    • (b) has written off the expenditure due to its being an immaterial amount for financial reporting purposes; and.

    (6) Subsections (1) to (5) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year.

32 Some definitions
  • (1) Section DB 27(1) is replaced by the following:

    Definitions
    • (1) In this section, and in section DB 26,—

      development is defined in paragraph 8 of the reporting standard

      reporting standard means the New Zealand Equivalent to International Accounting Standard 38, approved by the Accounting Standards Review Board, and as amended from time to time or an equivalent standard issued in its place

      research is defined in paragraph 8 of the reporting standard.

    (2) In section DB 27, in the list of defined terms, Financial Reporting Standard No 13 1995 (Accounting for Research and Development Activities), is omitted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year.

33 Gifts of money by company
  • In section DB 32(3), 5% of is omitted.

34 Certain investors have deduction for portfolio investor allocated loss
  • Section DB 43B(2)(a) is replaced by the following:

    • (a) the portfolio tax rate entity makes payments of tax under section HL 21 (Payments of tax by portfolio tax rate entity making no election) and the investor's income year includes the end of the portfolio tax rate entity's income year:.

35 Sale of business: transferred employment income obligations
  • (1) In section DC 9(2)(a), any part is replaced by the provision made by the seller for a part.

    (2) In section DC 9(2)(b), of the provision is inserted after the amount.

    (3) Section DC 9(3), other than the heading, is replaced by the following:

    • (3) If the seller and the buyer are associated persons at the time of the sale,—

      • (a) the buyer is allowed a deduction for the provision made by the seller for the amount of employment income if the seller would have been allowed a deduction for the amount if the business, or the part of the business, had not been sold; and

      • (b) section EA 4(5) (Deferred payment of employment income) applies.

    Deduction: Buyer's payment exceeding provision
    • (3B) The buyer is allowed a deduction for any part of the amount of employment income that the buyer pays and that exceeds the provision made by the seller for that amount.

    (4) In section DC 9(4)(b), subsection (3) overrides is replaced by subsections (3) and (3B) override.

    (5) Subsections (1) to (4) apply for the 2005–06 and later income years.

36 Heading to subpart DF
  • In the heading to subpart DF, grants is replaced by grants and compensation.

37 New section DF 4 added
  • After section DF 3, the following is added:

    DF 4 Payment by claimant receiving personal service rehabilitation payment
    • When this section applies

      (1) This section applies when a person (the claimant) is paid a personal service rehabilitation payment for the claimant under the Injury Prevention, Rehabilitation, and Compensation Act 2001 for an income year, and the amount of the payment is assessable income.

      Deduction

      (2) The claimant is allowed a deduction for the income year of the amount given by subsection (3).

      Formula

      (3) The amount of the deduction allowed under subsection (2) is calculated using the following formula:

      .
      Definition of items in formula

      (4) In the formula,—

      • (a) amount paid is the amount paid by the claimant for an income year for a key aspect of social rehabilitation referred to in the definition of personal service rehabilitation payment in section OB 1, to the extent to which the amount is less than the amount of personal service rehabilitation payments, after any deduction of tax under this Act, paid to the claimant for the income year:

      • (b) tax rate is the rate at which tax is deducted under this Act from personal service rehabilitation payments for the income year.

      Link with subpart DA

      (5) This section supplements the general permission and overrides the capital limitation and private limitation for the amount described in subsection (2). The other general limitations still apply.

      Defined in this Act: assessable income, capital limitation, general limitation, general permission, income year, payment, personal service rehabilitation payment, private limitation, .

38 When FIF loss arises
  • (1) In section DN 6(1),—

    • (a) in paragraph (d), in the words before subparagraph (i), any time during the income year is replaced by any time in the year:

    • (b) in paragraph (db), in the words before subparagraph (i), , at any time in the year, is inserted after the person holds.

    (2) After section DN 6(1), the following is inserted:

    Treatment of deemed transaction under section EX 51, EX 53, or EX 54B
    • (1B) If a person is treated under section EX 51(5) (Consequences of changes in method), EX 53 (Changes in application of FIF exemptions), or EX 54B (FIF rules first applying to interest for income year beginning on or after 1 April 2007) as disposing of or acquiring rights in an income year, the disposal or acquisition is ignored for the purposes of subsection (1)(d) and (db).

39 Acquiring film rights
  • (1) In section DS 1(2)(c), expenditure. is replaced by expenditure; or and the following is added:

    • (d) section DS 2B applies to the expenditure.

    (2) In section DS 1(4), except under section DS 2B is inserted after under any other provision of this Act.

40 Film production expenditure
  • (1) Section DS 2(3) and (4) are replaced by the following:

    Exclusion
    • (3) This section does not apply to film production expenditure if—

      • (a) the film is produced mainly for broadcast in New Zealand by a person who operates a television station, a television network, or a cable television system:

      • (b) the film is intended to be shown as an advertisement:

      • (c) section DS 2B applies to the film production expenditure.

    Timing of deduction
    • (4) The deduction is allocated under—

      • (a) section EJ 7 (Film production expenditure for New Zealand films having no large budget screen production grant) or EJ 8 (Film production expenditure for other films having no large budget screen production grant) if the film is not one for which a large budget screen production grant is made; or

      • (b) section EJ 4 (Expenditure incurred in acquiring film rights in feature films) or EJ 5 (Expenditure incurred in acquiring film rights in films other than feature films) if the film is one for which a large budget screen production grant is made.

    (2) In section DS 2(5), except under section DS 2B is inserted after under any other provision of this Act.

    (3) Subsection (1) applies for the 2005–06 and later income years.

41 New section DS 2B inserted
  • (1) After section DS 2, the following is inserted:

    DS 2B Expenditure in acquiring film, or film right, intended for disposal
    • Deduction

      (1) A person is allowed a deduction for film production expenditure or expenditure incurred in acquiring a film right if, when the person incurs the expenditure, the person intends to dispose of the film or film right.

      Timing of deduction

      (2) The deduction is allocated under section EA 2 (Other revenue account property).

      Link with subpart DA

      (3) 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, film, film production expenditure, film right, general limitation, general permission, .

    (2) Subsection (1) applies for the 2005–06 and later income years.

42 Maori authorities: donations
  • (1) In section DV 11(2), 5% of is omitted.

    (2) Subsection (1) applies for the 2008–09 and later income years.

43 Cost
  • (1) In section EB 6(1), , unless subsection (1B) applies is inserted after accounting practice.

    (2) After section EB 6(1), the following is inserted:

    Valuation at cost: agricultural produce
    • (1B) Despite subsection (1), a person who uses NZIAS 41 for their trading stock in their financial statements must—

      • (a) value their closing stock at cost; and

      • (b) include and allocate costs so that the value of their closing stock is not materially different from the value of the closing stock obtained by applying NZIAS 2 ignoring paragraph 20 of NZIAS 2.

    (3) In section EB 6(2), Financial Reporting Standard No 4 (Accounting for Inventories) approved under the Financial Reporting Act 1993 is replaced by NZIAS 2.

    (4) The following is added to section EB 6:

    Definitions
    • (3) In this section, NZIAS 41 means New Zealand Equivalent to International Accounting Standard 41, approved by the Accounting Standards Review Board and as amended from time to time, or an equivalent standard issued in its place.

    (5) In section EB 6, in the list of defined terms, NZIAS 2 and NZIAS 41 are inserted.

    (6) Subsections (1) to (5) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year.

44 Discounted selling price
  • (1) In section EB 9(3)(a), Financial Reporting Standard No 4 (Accounting for Inventories) approved under the Financial Reporting Act 1993 is replaced by NZIAS 2.

    (2) In section EB 9, in the list of defined terms, NZIAS 2 is inserted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year.

45 Valuing closing stock consistently
  • (1) In section EB 12, Financial Reporting Standard No 1 (Disclosure of Accounting Policies) approved under the Financial Reporting Act 1993 is replaced by NZIAS 8.

    (2) In section EB 9, in the list of defined terms, NZIAS 8 is inserted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year.

46 Discounted selling price for low-turnover traders
  • (1) In section EB 19(4)(a), Financial Reporting Standard No 4 (Accounting for Inventories) approved under the Financial Reporting Act 1993 is replaced by NZIAS 2.

    (2) In section EB 9, in the list of defined terms, NZIAS 2 is inserted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year.

47 Valuing closing stock consistently for low-turnover traders
  • (1) In section EB 22(1), Financial Reporting Standard No 1 (Disclosure of Accounting Policies) approved under the Financial Reporting Act 1993 is replaced by NZIAS 8.

    (2) In section EB 22, in the list of defined terms, NZIAS 8 is inserted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year.

48 Reduction: bloodstock not previously used for breeding in New Zealand
  • (1) In the heading to section EC 41, other than as shuttle stallions is added after New Zealand.

    (2) Section EC 41(1)(b) is replaced by the following:

    • (b) before a person (person A) acquired it, was not used for breeding in New Zealand by any other person.

    (3) After section EC 41(1), the following is inserted:

    Further bloodstock to which this section applies
    • (1B) This section also applies to bloodstock that, before person A acquired it, was used by another person for breeding in New Zealand if—

      • (a) the other person transferred the bloodstock to person A under a matrimonial agreement to which section FF 12 (Bloodstock) applies:

      • (b) the other person was a company in the same wholly-owned group as person A at the time person A acquired the bloodstock from the other person:

      • (c) the bloodstock is a stallion that, for each year in which the stallion was used for breeding in New Zealand before being acquired by person A, was—

        • (i) owned by a non-resident; and

        • (ii) removed from New Zealand after the breeding season; and

        • (iii) not subject to a reduction under this section.

    (4) Subsections (2) and (3) apply to bloodstock acquired on or after 1 August 2007.

49 Valuation of excepted financial arrangements
  • (1) In section ED 1(3), Financial Reporting Standard No 1 (Disclosure of Accounting Policies) approved under the Financial Reporting Act 1993 is replaced by NZIAS 8.

    (2) In section ED 1, in the list of defined terms, NZIAS 8 is inserted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year.

50 Special rate or provisional rate
  • In section EE 28, the following is added:

    Exception
    • (4) This section is subject to section FC 81(8) (Adjustment required for certain operating leases entered before 20 June 2007).

51 Meaning of adjusted tax value
  • In section EE 46, the following is added as subsection (2):

    Exception
    • (2) This section is subject to section FC 81(7) (Adjustment required for certain operating leases entered before 20 June 2007).

52 Meaning of annual rate
  • After section EE 52(6), the following is added:

    Exception
    • (7) This section is subject to section FC 81(8) (Adjustment required for certain operating leases entered before 20 June 2007).

53 Allocation of income and deductions by portfolio tax rate entity
  • (1) In the heading to section EG 3, income and deductions is replaced by income, deductions, and credits.

    (2) After section EG 3(2), the following is added:

    Credits
    • (3) A credit received by a portfolio tax rate entity is allocated to the portfolio allocation period under subsection (2) of the income to which the credit relates.

54 Expenditure incurred in acquiring film rights in feature films
  • (1) Section EJ 4(1) is replaced by the following:

    Feature films
    • (1) A deduction for expenditure that a person incurs in acquiring a film right is allocated under this section if the film is a feature film and—

      • (a) the deduction is under section DS 1 (Acquiring film rights):

      • (b) the deduction is under section DS 2 (Film production expenditure) and the film is one for which a large budget screen production grant is made.

    (2) Subsection (1) applies for the 2005–06 and later income years.

55 Expenditure incurred in acquiring film rights in films other than feature films
  • (1) Section EJ 5(1) is replaced by the following:

    Films other than feature films
    • (1) A deduction for expenditure that a person incurs in acquiring a film right is allocated under this section if the film is not a feature film and—

      • (a) the deduction is under section DS 1 (Acquiring film rights):

      • (b) the deduction is under section DS 2 (Film production expenditure) and the film is one for which a large budget screen production grant is made.

    (2) Subsection (1) applies for the 2005–06 and later income years.

56 Film production expenditure for New Zealand films
  • (1) The heading to section EJ 7 is replaced by Film production expenditure for New Zealand films having no large budget screen production grant.

    (2) Section EJ 7(1) is replaced by the following:

    New Zealand films
    • (1) A deduction under section DS 2 (Film production expenditure) for film production expenditure is allocated under this section if—

      • (a) the film is not one for which a large budget screen production grant is made; and

      • (b) the film has a final certificate under section EJ 6.

    (3) Subsections (1) and (2) apply for the 2005–06 and later income years.

57 Film production expenditure for films other than New Zealand films
  • (1) The heading to section EJ 8 is replaced by Film production expenditure for other films having no large budget screen production grant.

    (2) Section EJ 8(1) is replaced by the following:

    Films other than New Zealand films
    • (1) A deduction under section DS 2 (Film production expenditure) for film production expenditure is allocated under this section if—

      • (a) the film is not one for which a large budget screen production grant is made; and

      • (b) the film does not have a final certificate under section EJ 6.

    (3) Subsections (1) and (2) apply for the 2005–06 and later income years.

58 What spreading methods do
  • (1) Before section EW 14(2)(a), the following is inserted:

    • (aa) the IFRS taxpayer method, to which sections EW 15B to EW 15E are relevant; or.

    (2) Section EW 14(2)(e) is repealed.

    (3) In section EW 14, in the list of defined terms, IFRS taxpayer method is inserted.

    (4) Subsections (1) to (3) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

59 What is included when spreading methods used
  • (1) In section EW 15(1)(a), ignoring non-contingent fees; and is replaced by ignoring—, and the following is added:

    • (i) non-contingent fees, if the relevant method is not the IFRS method described in section EW 15C:

    • (ii) non-integral fees, if the relevant method is the IFRS method described in section EW 15C; and.

    (2) In section EW 15(1)(b), ignoring non-contingent fees; and is replaced by ignoring—, and the following is added:

    • (i) non-contingent fees, if the relevant method is not the IFRS method described in section EW 15C:

    • (ii) non-integral fees, if the relevant method is the IFRS method described in section EW 15C; and.

    (3) In section EW 15, in the list of defined terms, non-integral fee is inserted.

    (4) Subsections (1) to (3) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

60 New sections EW 15B to EW 15E inserted
  • (1) After section EW 15, the following is inserted:

    EW 15B IFRS taxpayer method
    • Who this section applies to

      (1) This section applies to a person who is a party to a financial arrangement if the person uses IFRSs to prepare financial statements and to report for financial arrangements.

      IFRS taxpayer method

      (2) The person must use the IFRS taxpayer method, described in this section and in sections EW 15C to EW 15E.

      Compulsory use of some determinations

      (3) The person must use 1 of the following methods for the financial arrangement, if the terms of the relevant method allow,—

      • (a) Determination G5C: Mandatory conversion convertible notes or a determination that succeeds it:

      • (b) Determination G22: Optional conversion convertible notes denominated in New Zealand dollars convertible at the option of the holder:

      • (c) Determination G22A: Optional convertible notes denominated in New Zealand dollars or a determination that succeeds it:

      • (d) Determination G29: Agreements for sale and purchase of property denominated in foreign currency: exchange rate to determine the acquisition price and method for spreading income and expenditure or a determination that succeeds it:

      • (e) an alternative method to 1 of those methods described in paragraphs (a) to (d), if that alternative—

        • (i) has regard to the purposes of the financial arrangements rules under section EW 1(3); and

        • (ii) is for financial arrangements similar to those arrangements to which the methods described in paragraphs (a) to (d) may apply; and

        • (iii) results in the allocation to each income year of amounts that are not materially different from those that would have been allocated using 1 of those methods described in paragraphs (a) to (d).

      Compulsory use of other methods for certain arrangements

      (4) The person must use 1 of the methods in subsection (5) to allocate an amount to an income year for the financial arrangement if—

      • (a) the person is not required under subsection (3) to use a method for the financial arrangement; and

      • (b) the financial arrangement—

        • (i) includes an excepted financial arrangement:

        • (ii) is treated by the person or the issuer of the financial arrangement as an equity instrument in whole or in part under IFRSs:

        • (iii) is an agreement for the sale and purchase of property or services; and

      • (c) the terms of the relevant method allow.

      Methods for arrangements under subsection (4)

      (5) The methods referred to in subsection (4) are—

      • (a) the yield to maturity method:

      • (b) Determination G26: Variable rate financial arrangements or a determination that succeeds it:

      • (c) a determination made by the Commissioner under section 90AC(1)(bb) of the Tax Administration Act 1994:

      • (d) an alternative method to 1 of those methods described in paragraphs (a) to (c), if that alternative—

        • (i) has regard to the purposes of the financial arrangements rules under section EW 1(3); and

        • (ii) is for financial arrangements similar to those arrangements to which the methods described in paragraphs (a) to (c) may apply; and

        • (iii) results in the allocation to each income year of amounts that are not materially different from those that would have been allocated using 1 of those methods described in paragraphs (a) to (c).

      IFRS method and 3 alternatives

      (6) If the person is not required under subsection (3) or (4) to use a method for the financial arrangement, the person must use 1 of the following methods for the financial arrangement:

      • (a) the IFRS method described in section EW 15C:

      • (b) a determination alternative to IFRS described in section EW 15D:

      • (c) the expected value method described in section EW 15E:

      • (d) the equity-free fair value method described in section EW 15E.

      Equity instrument

      (7) In this section, equity instrument has the same meaning as in NZIAS 32.

      Defined in this Act: equity instrument, financial arrangement, financial arrangements rules, financial statements, IFRS, IFRS taxpayer method, income year, NZIAS 32,

    EW 15C IFRS method
    • Who this section applies to

      (1) This section applies to a person and a financial arrangement if—

      • (a) section EW 15B(6) applies; and

      • (b) the person does not use section EW 15D or EW 15E.

      IFRS method

      (2) The person must allocate an amount to an income year for the financial arrangement in accordance with IFRSs, as modified by subsection (3).

      Modification of IFRS method

      (3) When a person applies the IFRS method, the following modifications are made to the method, if relevant:

      • (a) an amount arising from an impaired credit adjustment under IFRSs is not allocated to an income year, if the financial arrangement is a financial asset:

      • (b) an amount arising from the fair value method under IFRSs is allocated to an income year, even though the amount is allocated to equity reserves under IFRSs.

      Impaired credit adjustment

      (4) In this section, impaired credit adjustment means,—

      • (a) for a financial arrangement accounted for using the fair value method, the movement in fair value due to the decline in credit quality of the arrangement:

      • (b) for a financial arrangement not accounted for using the fair value method, credit impairment adjustments made under IFRSs.

      Defined in this Act: amount, Commissioner, fair value method, financial arrangement, impaired credit adjustment, IFRS, income year,

    EW 15D Determination alternatives to IFRS
    • Who this section applies to

      (1) This section applies to a person and a financial arrangement if—

      • (a) section EW 15B(6) applies; and

      • (b) the person chooses in a return of income to use a determination alternative to IFRS for the financial arrangement; and

      • (c) the terms of the relevant method, as modified by subsection (3), allow the person to use it for the financial arrangement; and

      • (d) the financial arrangement is not treated under IFRSs as a hedge of a financial arrangement (financial arrangement A), and—

        • (i) section EW 15C applies or has applied to financial arrangement A; and

        • (ii) the method used for financial arrangement A is or was the fair value method or a method that accounts for gains and losses related to the hedge.

      Determination alternatives to IFRS

      (2) The person must use 1 of the following methods for the financial arrangement, as modified by subsection (3):

      • (a) Determination G9C: Financial arrangements that are denominated in a currency other than New Zealand dollars: an expected value approach or a determination that succeeds it:

      • (b) Determination G14B: Forward contracts for foreign exchange and commodities: an expected value approach or a determination that succeeds it:

      • (c) Determination G27: Swaps or a determination that succeeds it:

      • (d) a determination made by the Commissioner under section 90AC(1)(bb) of the Tax Administration Act 1994:

      • (e) an alternative method to 1 of those described in paragraphs (a) to (d), if that alternative—

        • (i) has regard to the purposes of the financial arrangements rules under section EW 1(3); and

        • (ii) is for financial arrangements similar to those arrangements to which the methods described in paragraphs (a) to (d) may apply; and

        • (iii) results in the allocation to each income year of amounts that are not materially different from those that would have been allocated using 1 of those described in paragraphs (a) to (d).

      Determination alternatives to IFRS: G9C and G14B modified

      (3) When a person applies a determination alternative to IFRS that is Determination G9C or Determination G14B, the following modifications are made to the relevant method:

      • (a) the term forward contract is treated as including a conditional or unconditional agreement to pay or be paid an amount calculated by reference to the price of property or services, without the property being delivered or the services being performed:

      • (b) a requirement that all members of a group of companies to which the person belongs make an election to use the determination alternative is treated as met if—

        • (i) all members of the group of companies make an election on or before the 63rd day after the person enters into the relevant financial arrangement, or they make the election within such further time as the Commissioner may allow; and

        • (ii) the financial arrangement is the first financial arrangement of the group of companies for which Determination G9C or Determination G14B may be used; and

        • (iii) the election is in writing; and

        • (iv) the election is for Determination G9C or Determination G14B.

      Defined in this Act: amount, Commissioner, fair value method, financial arrangement, financial arrangements rules, forward contract, group of companies, IFRS,

    EW 15E Expected value method and equity-free fair value method
    • Who this section applies to

      (1) This section applies to a person and a financial arrangement if—

      • (a) section EW 15B(6) applies; and

      • (b) the financial arrangement is denominated in a currency other than New Zealand dollars or is a derivative instrument; and

      • (c) the financial arrangement is not treated under IFRSs as a hedge of a financial arrangement (financial arrangement A), and—

        • (i) section EW 15C applies or has applied to financial arrangement A; and

        • (ii) the method used for financial arrangement A is or was the fair value method or a method that accounts for gains and losses related to the hedge; and

      • (d) the person is not in the business of dealing in the financial arrangement; and

      • (e) the person has entered into the financial arrangement in the ordinary course of their business; and

      • (f) the person and all members of a group of companies to which the person belongs have chosen to use the expected value method described in subsection (2) or the equity-free fair value method described in subsection (3) by notifying the Commissioner in writing at the time the person must furnish a return of income for the relevant tax year.

      Expected value method

      (2) A person who has chosen under subsection (1)(f) to use the expected value method for the financial arrangement must use a method that—

      • (a) has the features of an expected value approach described in Determination G9C and Determination Gl4B ; and

      • (b) allocates a reasonable amount, having regard to the purposes of the financial arrangements rules under section EW 1(3), for each income year over the financial arrangement's term.

      Equity-free fair value method

      (3) If the person chooses under subsection (1)(f) to use the equity-free IFRS method for the financial arrangement, the person must use a method that is the fair value method under IFRSs. However, an amount allocated to equity reserves under IFRSs must not be allocated to an income year.

      Derivative instrument

      (4) In this section, derivative instrument has the same meaning as in NZIAS 39.

      Defined in this Act: amount, Commissioner, derivative instrument, fair value method, financial arrangement, financial arrangements rules, IFRS, IFRS taxpayer method, income year, NZIAS 39, tax year, .

    (2) Subsection (1) applies for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

61 Yield to maturity method or alternative
  • (1) In section EW 16(1), method is replaced by method, if the person is not required to use the IFRS taxpayer method by section EW 15B.

    (2) In section EW 16(2), method, is replaced by method if the person is not required to use the IFRS taxpayer method by section EW 15B,.

    (3) In section EW 16, in the list of defined terms, IFRS taxpayer method is inserted.

    (4) Subsections (1) to (3) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRS s for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

62 Straight-line method
  • (1) In section EW 17(1)(b), EW 25(1). is replaced by EW 25(1); and, and the following is added:

    • (c) the person is not required to use the IFRS taxpayer method by section EW 15B.

    (2) In section EW 17, in the list of defined terms, IFRS taxpayer method is inserted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

63 Market valuation method
  • (1) In section EW 18(1)(f), way). is replaced by way); and, and the following is added:

    • (g) the person is not required to use the IFRS taxpayer method by section EW 15B.

    (2) In section EW 18, in the list of defined terms, IFRS taxpayer method is inserted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

64 Choice among first 3 spreading methods
  • (1) In the heading to section EW 19, first 3 is replaced by YTM or alternative, SL, and MV.

    (2) In section EW 19,—

    • (a) A person who is replaced by A person who is not required to use the IFRS taxpayer method and who:

    • (b) in the list of defined terms, IFRS taxpayer method is inserted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

65 Determination method or alternative
  • (1) In section EW 20(1)(b)(ii), do so. is replaced by do so; and, and the following is added:

    • (c) the person is not required to use the IFRS taxpayer method by section EW 15B.

    (2) After section EW 20(2)(b), the following is inserted:

    • (bb) the person is not required to use the IFRS taxpayer method by section EW 15B; and.

    (3) In section EW 20, in the list of defined terms, IFRS taxpayer method is inserted.

    (4) Subsections (1) to (3) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

66 Section EW 21 repealed
  • (1) Section EW 21 is repealed.

    (2) Subsection (1) applies for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

67 Default method
  • (1) In section EW 22(c), , or a financial reporting method is omitted.

    (2) Section EW 22(d) is repealed.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

68 Failure to use method for financial reporting purposes
  • (1) In section EW 23(1) and (2), EW 20(2)(f), and EW 21(e) is replaced by and EW 20(2)(f) in each place where it appears.

    (2) After section EW 23(3), the following is added:

    Relationship with subject matter: transitional rule for IFRS financial reporting
    • (4) This section is modified by section EZ 50 (Transitional rule for IFRS financial reporting method).

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

69 Consistency of use of spreading method
  • (1) After section EW 24(2), the following is inserted:

    IFRS taxpayer method
    • (2B) Section EW 25B sets out a particular consistency requirement for the IFRS taxpayer method.

    (2) In section EW 24, in the list of defined terms, IFRS taxpayer method is inserted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

70 New section EW 25B inserted
  • (1) After section EW 25, the following is inserted:

    EW 25B Consistency of use of specific individual methods under IFRS taxpayer method
    • Consistency for financial arrangement

      (1) A person using a specific individual method under 1 of the 4 methods described in section EW 15B(6) must use that specific individual method for—

      • (a) the remaining term of the financial arrangement, until section EW 29 requires them to calculate a base price adjustment for the arrangement; and

      • (b) other financial arrangements that are the same as, or similar to, the financial arrangement, unless different accounting treatments under IFRSs are used for those financial arrangements.

      Exception: change allowed

      (2) Subsection (1)(a) does not apply, and a change in specific individual method under the IFRS taxpayer method is allowed, if—

      • (a) the person may use the new specific individual method under the IFRS taxpayer method; and

      • (b) the accounting treatment for the relevant financial arrangement under IFRSs is changed for the purposes of financial reporting in the same income year as the change in specific individual method.

      Change allowed: spreading method adjustment

      (3) When a person changes their specific individual method under subsection (2), sections EW 26(3), (4), and EW 27 are treated as applying as if the person's change in specific individual method were their change in spreading method under section EW 26(2).

      Exception: no spreading method adjustment for change from fair value method

      (4) Despite subsection (3) of this section, sections EW 26(3), (4), and EW 27 are not treated as applying as described, if the old specific individual method changed from is the fair value method under the IFRS method described in section EW 15C. Instead, section EW 29(13) applies.

      Defined in this Act: fair value method, financial arrangement, IFRS, IFRS taxpayer method, income year, .

    (2) Subsection (1) applies for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

71 Change of spreading method
  • (1) In section EW 26, the following is added:

    Exception: fair value method
    • (6) Despite subsection (3), that subsection, subsection (4), and section EW 27 do not apply to the extent to which the person's spreading method change involves, for a financial arrangement, a change from the fair value method under the IFRS method described in section EW 15C. Instead, section EW 29(13) applies.

    Sound commercial reason
    • (7) In this section, sound commercial reason includes—

      • (a) starting to use or ceasing to use IFRSs to prepare financial statements:

      • (b) starting to use, for the first time, the IFRS taxpayer method for a financial arrangement.

    (2) In section EW 26, in the list of defined terms, fair value method, financial statements, IFRS, and sound commercial reason are inserted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

72 When calculation of base price adjustment required
  • (1) After section EW 29(12), the following is added:

    Change from fair value method under IFRS method
    • (13) A party to a financial arrangement who, for the financial arrangement, changes from the fair value method under the IFRS method described in section EW 15C to any other method must calculate a base price adjustment as at the date of the change.

    (2) In section EW 29, in the list of defined terms, fair value method is inserted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

73 Base price adjustment formula
  • (1) In section EW 31(7), ignoring contingent fees. is replaced by ignoring—, and the following is added:

    • (i) non-contingent fees, if the relevant method is not the IFRS method described in section EW 15C:

    • (ii) non-integral fees, if the relevant method is the IFRS method described in section EW 15C.

    (2) In section EW 31, in the list of defined terms, non-integral fee is inserted.

    (3) Subsections (1) and (2) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

74 New heading and new section EW 48B inserted
  • (1) After section EW 48, the following is inserted:

    Consideration when change from fair value method under IFRS method

    EW 48B Consideration when change from fair value method under IFRS method
    • Who this section applies to

      (1) This section applies to a party to a financial arrangement who, for the financial arrangement,—

      • (a) changes from the fair value method under the IFRS method described in section EW 15C to any other method; and

      • (b) must calculate a base price adjustment as at the date of the change, as provided by section EW 29(13).

      (2) A person is treated as having been paid, on the date of the change, an amount of consideration equal to the financial arrangement's market value on that date.

      Defined in this Act: amount, consideration, fair value method, financial arrangement, .

    (2) Subsection (1) applies for—

    • (a) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or

    • (b) the first income year for which a person adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that first year; or

    • (c) the 2008–09 and later income years, if a person's 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of financial reporting before 1 January 2007.

75 Meaning of CFC
  • In section EX 1(1B), 1 of the tests is replaced by a test.

76 Options and similar rights in certain cases
  • (1) In section EX 11(3)(b), under sections EX 14 to EX 17 is inserted after 10%.

    (2) Subsection (1) applies for the 2005–06 and later income years.

77 Associates and 10% threshold
  • (1) Section EX 15(1), other than the heading, is replaced by the following:

    • (1) For the purpose of applying the 10% threshold in section EX 14, a person's income interest in a CFC is increased by each income interest in the CFC, for the relevant accounting period, of a person associated with the person.

    (2) Subsection (1) applies for the 2005–06 and later income years.

78 Branch equivalent income or loss: calculation rules
  • In section EX 21(30), FC 8I is replaced by FC 8H.

79 CFC rules exemption
  • (1) In section EX 32(b), , under sections EX 14 to EX 17 is inserted after falls.

    (2) Subsection (1) applies for the 2005–06 and later income years.

80 Exemptions: direct income interests in FIF in grey list country
  • (1) In section EX 33(3)(c), the words before subparagraph (i) are replaced by the following:

    • (c) the person has held shares in the company at all times after a time when—.

    (2) Section EX 33(3)(d)(i) is replaced by the following:

    • (i) carried on a business in New Zealand; and.

    (3) Section EX 33(3)(g)(i) and (ii) are replaced by the following:

    • (i) incurs in the year expenditure, other than interest, equal to or more than the lesser of $1,000,000 and 25% of the total expenditure, other than interest, incurred by the company in the year:

    • (ii) at all times in the year, engages a number of fulltime employees or contractors equal to or more than the lesser of 10 and 25% of the total number engaged by the company.

    (4) Section EX 33(4)(c) is replaced by the following:

    • (c) the person has held shares in the grey list company at all times after a time when the shares were not listed on a recognised exchange; and.

    (5) Section EX 33(4)(d) is replaced by the following:

    • (d) at all times in the year, the grey list company holds more than 50% of the voting interests in a company (the resident company) that, for 12 months or more, has—

      • (i) carried on a business in New Zealand; and

      • (ii) had in New Zealand more than 50% of the resident company's assets and employees; and.

    (6) Section EX 33(4)(f)(i) and (ii) are replaced by the following:

    • (i) incurs in the year expenditure, other than interest, equal to or more than the lesser of $1,000,000 and 25% of the total expenditure, other than interest, incurred by the company in the year:

    • (ii) at all times in the year, engages a number of fulltime employees or contractors equal to or more than the lesser of 10 and 25% of the total number engaged by the company.

    (7) After section EX 33(4), the following is inserted:

    Shares acquired under venture investment agreement
    • (4B) A person's rights in a FIF that is a grey list company at a time in an income year are not an attributing interest at the time if the person first acquires a share or option to buy a share in the company—

      • (a) under a venture investment agreement; and

      • (b) at the same time and on the same terms as an acquisition of an interest in the FIF by the Venture Investment Fund or a company owned by the Venture Investment Fund.

    (8) Section EX 33(5)(f) is replaced by the following:

    • (f) the share purchase agreement includes a restriction on the disposal of the shares; and.

    (9) In section EX 33, in the list of defined terms, non-resident is inserted.

81 Exemptions limited by income years: shares in certain grey list companies
  • (1) Section EX 33B(1), other than the heading, is replaced by the following:

    • (1) A person's rights in a FIF are not an attributing interest in an income year beginning before 1 April 2012 if—

      • (a) the rights are shares (the shares) in a grey list company (the company); and

      • (b) on 17 May 2006, the company—

        • (i) is not an entity described in schedule 4, part B (Foreign investment funds); and

        • (ii) has more than 20 000 shareholders who have addresses in New Zealand on the company's share register in New Zealand; and

        • (iii) has shareholders referred to in subparagraph (ii) who between them hold shares in the company carrying voting interests of more than 50%; and

        • (iv) is liable to income tax in a country listed in the grey list; and

        • (v) has assets of which more than 50% in total value are shares in other companies carrying voting interests of more than 50%; and

      • (c) on 17 May 2006, the shares—

        • (i) are listed on a recognised exchange in New Zealand; and

        • (ii) are listed on a recognised exchange in a grey list country; and

      • (d) in the period of 30 days beginning from 18 December 2006, the company gives to the Commissioner the notice required by paragraph (b), as that paragraph read before being substituted by section 81 of the Taxation (Business Taxation and Remedial Matters) Act 2007.

    (2) Section EX 33B(2), other than the heading, is replaced by the following:

    • (2) A person's rights in a FIF are not an attributing interest in an income year beginning before 1 April 2009 if—

      • (a) the rights are shares (the shares) in a grey list company (the company); and

      • (b) on 17 May 2006, the company—

        • (i) is not an entity described in schedule 4, part B; and

        • (ii) has shareholders of which more than 40% have addresses in New Zealand on the company's share register in New Zealand; and

        • (iii) has shareholders referred to in subparagraph (ii) who between them hold shares in the company carrying voting interests of more than 50%; and

        • (iv) is liable to income tax in a country listed in the grey list; and

        • (v) has assets of which 50% or more in total value are shares in other companies each of which is resident in New Zealand; and

        • (vi) has assets of which 90% or more in total value are shares in other companies each of which is resident in Australia or New Zealand and is listed on a recognised exchange in Australia or New Zealand; and

      • (c) on 17 May 2006, the shares—

        • (i) are listed on a recognised exchange in New Zealand; and

        • (ii) are listed on a recognised exchange in a grey list country; and

      • (d) in the period of 30 days beginning from 18 December 2006, the company gives to the Commissioner the notice required by paragraph (b), as that paragraph read before being substituted by section 81 of the Taxation (Business Taxation and Remedial Matters) Act 2007; and

      • (e) at all times in the year, the company—

        • (i) has assets of which 50% or more in total value are shares in other companies each of which is resident in New Zealand; and

        • (ii) has assets of which 90% or more in total value are shares in other companies each of which is resident in Australia or New Zealand and is listed on a recognised exchange in Australia or New Zealand.

82 Exemption: shares in listed Australian company
  • (1) Section EX 33C, other than the heading and list of defined terms, is replaced by the following:

    Exemption
    • (1) A person's rights in a FIF in an income year are not an attributing interest if—

      • (a) the rights are a share; and

      • (b) the share is not a share that may not, or ordinarily may not, be disposed of unless together with rights in another company; and

      • (c) the FIF is a company that meets the requirements of subsection (2).

    Australian listed company on approved index
    • (2) The company must—

      • (a) at all times in the income year when the person holds a right in the company, be resident in Australia; and

      • (b) at all times in the income year when the person holds a right in the company, not be treated as resident in a country other than Australia under and for the purposes of an agreement that—

        • (i) is between Australia and the other country; and

        • (ii) would be a double tax agreement if negotiated between New Zealand and the other country; and

      • (c) have shares included in an index that is an approved index under the ASX Market Rules, made under Chapter 7 of the Corporations Act 2001 (Aust),—

        • (i) at the beginning of the income year, if subparagraph (ii) does not apply; or

        • (ii) when the person acquires the shares, if the person does not own shares in the company earlier in the income year; and

      • (d) at all times in the income year when the person holds a right in the company, not be an entity described in schedule 4, part B (Foreign investment funds); and

      • (e) at all times in the income year when the person holds a right in the company, be required under the Income Tax Assessment Act 1997 (Aust) and Income Tax Assessment Act 1936 (Aust) to maintain a franking account.

    (2) In section EX 33C, in the list of defined terms, direct income interest, income, and income tax are omitted.

83 Exemption: units in certain Australian unit trusts
  • (1) Section EX 33D(1)(c) to (e) are replaced by the following:

    • (c) at all times in the year when the person holds a right in the FIF, the unit trust is resident in Australia; and

    • (d) at all times in the year when the unit trust makes a distribution to investors, there is an RWT proxy under section NF 2AA (Election to be RWT proxy) for the unit trust and payments by the unit trust to the person; and

    • (e) the unit trust meets the requirements of—

      • (i) subsection (2) relating to the assets of the unit trust that are shares (the held shares) being held by the unit trust at the end of the trust's accounting year (the trust's year) ending in the person's income year and having then a market value greater than or equal to the cost of the share for the unit trust:

      • (ii) subsection (4) relating to the distributions by the unit trust during the trust's year.

    (2) Section EX 33D(2) to (4) are replaced by the following:

    Requirements for unit trust's assets that are shares
    • (2) A unit trust meets the requirements of this subsection if the total market value of the held shares exceeds the total cost of the held shares by an amount that is less than or equal to 3 times the amount calculated using the formula—

      disposal proceeds - share costs.

    Definition of items in formula
    • (3) In the formula in subsection (2),—

      • (a) disposal proceeds is the total proceeds derived by the unit trust during the year from disposals of shares during the year:

      • (b) share costs is the total cost of the shares involved in the disposals referred to in paragraph (a).

    Requirements for unit trust's distributions
    • (4) A unit trust meets the requirements of this subsection if the total amount of distributions by the unit trust during the trust's year is equal to or more than the amount calculated using the formula—

      .
    Definition of items in formula
    • (5) In the formula in subsection (4),—

      • (a) closing is the amount by which, at the end of the trust's year, the market value of the unit trust's assets exceeds the market value of the unit trust's liabilities:

      • (b) opening is the amount by which, at the beginning of the trust's year, the market value of the unit trust's assets exceeds the market value of the unit trust's liabilities:

      • (c) contributions is the total amount of contributions by investors to the unit trust during the trust's year.

    Currency of amounts in subsections (2) to (5)
    • (6) In subsections (2) to (5), all amounts are expressed in the currency used in the unit trust's financial accounts.

    (3) In section EX 33D, in the list of defined terms, accounting year is inserted.

84 Limits on choice of calculation methods
  • (1) Section EX 40(6)(b) is replaced by the following:

    • (b) the attributing interest does not meet the requirements of subsection (8)(a):.

    (2) Section EX 40(6)(d) is replaced by the following:

    • (d) the person is the trustee of a trust that—

      • (i) has no gifting senior who is not a natural person or deceased person; and

      • (ii) at all times in the income year, would be a qualifying trust for a distribution made at the time; and

      • (iii) is mainly for the benefit of an organisation or trust with income that is exempt income under section CW 34 or CW 35 (which relate to the income of charities) or, at all times in the income year, mainly for the benefit of a natural person for whom the gifting settlors of the trust have natural love and affection or had natural love and affection when alive; and

      • (iv) is not a superannuation scheme.

    (3) Section EX 40(8)(a) is replaced by the following:

    • (a) the attributing interest is—

      • (i) of a type that the Commissioner has determined under section 91AAO of the Tax Administration Act 1994 to be an interest for which the fair dividend rate method may be used:

      • (ii) not of a type that is listed in subsection (9); and.

    (4) Section EX 40(9) is replaced by the following:

    Fair dividend rate method: interests for which method not applicable
    • (9) An attributing interest of a person (the investor) for which the Commissioner has not made a determination referred to in subsection (8)(a)(i) does not meet the requirements of subsection (8) if the interest is—

      • (a) of a type that the Commissioner has determined under section 91AAO of the Tax Administration Act 1994 to be an interest for which the fair dividend rate method may not be used:

      • (b) a fixed rate share under section LF 2(3) (Granting of underlying foreign tax credit):

      • (c) a non-participating redeemable share:

      • (d) an interest in a non-resident having assets of which 80% or more by value consist of financial arrangements denominated in New Zealand dollars:

      • (e) a share that involves an obligation—

        • (i) of another person to provide to the investor an amount exceeding the issue price of the share; and

        • (ii) that is direct to the investor or indirect through an arrangement; and

        • (iii) that is non-contingent or subject to a contingency that is sufficiently remote to be immaterial.

    Meaning of gifting settlor
    • (9B) A gifting settlor, for a trust (the relevant trust), is a person who is—

      • (a) a settlor, under section HH 1(1) (Interpretation) or paragraph (a)(i) of the definition of the term, of—

        • (i) the relevant trust:

        • (ii) a trust with a trustee who settles property on the relevant trust, directly or through the trustees of other trusts; and

      • (b) not the trustee of a trust.

85 Use of particular calculation methods required
  • In section EX 40B, in the words before paragraph (a), section EX 40(8)(a) is replaced by section EX 40(8)(a)(ii).

86 Default calculation method
  • Section EX 41(2)(b)(ii) and (iii) are replaced by the following:

    • (ii) the comparative value method, if subparagraph (i) does not apply and it is practical to use the comparative value method; or

    • (iii) the deemed rate of return method, if subparagraph (i) does not apply and it is not practical to use the comparative value method.

87 Comparative value method
  • (1) In section EX 44(4), tax that the person is allowed as a credit under section is replaced by amount that the person is allowed as a credit under section LB 2 (Credit of tax for imputation credit) or.

    (2) Section EX 44(6B)(b) is replaced by the following:

    • (b) that meets the requirements of section EX 40(8)(a).

88 Fair dividend rate method
  • (1) Section EX 44B(2), other than the heading, is replaced by the following:

    • (2) For a person who is not a unit valuer, the FIF income or loss for an income year from the attributing interests in FIFs for which the person uses the fair dividend rate method is the amount calculated for the income year using the method in—

      • (a) section EX 44C, if paragraph (b) does not apply; or

      • (b) section EX 44D, if the person—

        • (i) determines the market value of the attributing interest for each period of a day in the income year; and

        • (ii) chooses that this paragraph apply.

    (2) After section EX 44B(4), the following is added:

    Treatment of attributing interests subject to returning share transfer
    • (5) If an attributing interest in a BF is an original share subject to a returning share transfer, for the purposes of a person using the fair dividend rate method to calculate FIF income or loss, the attributing interest is treated as being held by the share supplier.

89 Fair dividend rate method: usual method
  • (1) In section EX 44C(4)(b), year. is replaced by year; and and the following is added:

    • (c) that are not, at the beginning of the income year, included in a direct income interest of 10% or more in a grey list company.

    (2) Section EX 44C(5)(b)(ii) is replaced by the following:

    • (ii) the amount (the quick sale gains) determined under subsection (10B).

    (3) In section EX 44C(10)(b), incurs during the income year in acquiring or increasing is replaced by incurs in acquiring or increasing during the income year.

    (4) After section EX 44C(10), the following is inserted:

    Quick sale gains
    • (10B) The quick sale gains is the greater of zero and the total for the income year of amounts calculated, for each attributing interest that is both acquired and disposed of in the income year, using the formula—

      return - (interest x average cost).

    Definition of items in formula
    • (10C) In the formula,—

      • (a) return is the total amount derived by the person from holding or disposing of the interest:

      • (b) interest is the amount of the interest that is both acquired and disposed of in the income year:

      • (c) average cost is the total amount of expenditure that the person incurs during the income year in acquiring or increasing the attributing interest in the FIF divided by the total for the income year of the increase in the interest for each acquisition or increase.

    (5) In section EX 44C(11), in the words before paragraph (a), or is incurred on is replaced by or is derived from or incurred on

    (6) In section EX 44C(11)(a), incurred is replaced by derived or incurred.

    (7) After section EX 44C(12), the following is added:

    Treatment of deemed transaction under section EX 51 or EX 54B
    • (13) If a person is treated under section EX 51(5) or EX 54B as disposing of or acquiring a share in an income year, the disposal or acquisition is ignored for the purposes of subsection (5).

90 Fair dividend rate method: method for entities that value investors' units
  • (1) In the heading to section EX 44D, entities that value investors' units is replaced by unit valuers and persons valuing interests daily.

    (2) Section EX 44D(1) is replaced by the following:

    FIF income
    • (1) If this section applies to an entity or person (the entity) who calculates FIF income from attributing interests in FIFs under the fair dividend rate method, the FIF income of the entity from the interests is the total of the amounts calculated using the formula in subsection (2) for each period (the unit valuation period) of the income year for which the entity determines the value of the attributing interests or of investors' interests in the entity.

    (3) In section EX 44D(4)(b), period. is replaced by period; and and the following is added:

    • (c) that are not, at the beginning of the income year, included in a direct income interest of 10% or more in a grey list company.

    (4) Section EX 44D(7)(c)(ii) is replaced by the following:

    • (ii) the amount (the quick sale gains) determined under subsection (12B).

    (5) In section EX 44D(12)(b), incurs during the unit valuation period in acquiring or increasing is replaced by incurs in acquiring or increasing during the unit valuation period.

    (6) After section EX 44D(12), the following is inserted:

    Quick sale gains
    • (12B) The quick sale gains is the greater of zero and the total for the unit valuation period of amounts calculated, for each attributing interest that is both acquired and disposed of in the unit valuation period, using the formula—

      return - (interest x average cost).

    Definition of items in formula
    • (12C) In the formula—

      • (a) return is the total amount derived by the entity from holding or disposing of the interest:

      • (b) interest is the amount of the interest:

      • (c) average cost is the total amount of expenditure that the entity incurs during the unit valuation period in acquiring or increasing the attributing interest in the FIF divided by the total for the unit valuation period of the increase in the interest for each acquisition or increase.

    (7) In section EX 44D(13), in the words before paragraph (a), or is incurred on is replaced by or is derived from or incurred on.

    (8) In section EX 44D(13)(a), incurred is replaced by derived or incurred.

    (9) After section EX 44D(14), the following is added:

    Treatment of deemed transaction under section EX 54B
    • (15) If a person is treated under section EX 54B as disposing of or acquiring a share in an income year, the disposal or acquisition is ignored for the purposes of subsection (7).

91 Fair dividend rate method and cost method: calculating items in formulas for periods affected by share reorganisations
  • In section EX 44E(4), incurs during the affected period in acquiring or increasing is replaced by incurs in acquiring or increasing during the affected period.

92 Cost method
  • (1) After section EX 45B(4)(a), the following is inserted:

    • (ab) the amount that is shown as the net asset value of the interest in audited financial statements of the person for the relevant income year made available to the general public, if—

      • (i) paragraph (a) does not apply; and

      • (ii) the FIF makes available to the general public audited financial statements for its accounting year ending in the relevant income year; and

      • (iii) the person chooses that this paragraph apply; or

    • (ac) the amount of the cost of the interest, if—

      • (i) paragraphs (a) and (ab) do not apply; and

      • (ii) the person acquires the interest in the 2005–06 or 2006–07 income year; or.

    (2) In section EX 45B(4)(b), in the words before subparagraph (i), paragraphs (a), (ab), and (ac) do not apply and is inserted after if.

    (3) In section EX 45B(4)(b)(i), for which the person has FIF income or loss is inserted after attributing interest.

    (4) In section EX 45B(4)(c), paragraphs (a), (ab), (ac), and (b) do not apply and is inserted after if.

    (5) In section EX 45B(4)(d), paragraphs (a), (ab), (ac), and (b) do not apply and is inserted after if.

    (6) In section EX 45B(4)(e), paragraphs (a), (ab), (ac), and (b) do not apply and is inserted after if.

    (7) In section EX 45B(6)(b), incurs during the relevant income year in acquiring or increasing is replaced by incurs in acquiring or increasing during the relevant income year.

    (8) In section EX 45B(6)(c), section EX 44C is replaced by section EX 44E.

    (9) In section EX 45B(11)(b), section EX 44C is replaced by section EX 44E.

    (10) In section EX 45B(12)(b), incurs during the income year before the relevant income year in acquiring or increasing is replaced by incurs in acquiring or increasing during the income year before the relevant income year.

    (11) In section EX 45B(12)(c), section EX 44C is replaced by section EX 44E.

93 Codes: comparative value method, deemed rate of return method, fair dividend rate method, and cost method
  • Section EX 47(1)(c) is replaced by the following:

    • (c) the fair dividend rate method, if—

      • (i) the FIF is not a grey list company:

      • (ii) the person does not hold a direct income interest of 10% or more in the FIF at the beginning of the income year of the period:.

94 Limits on changes of method
  • (1) In section EX 50(1), subsections (2) to (7) is replaced by subsections (2) to (8).

    (2) Section EX 50(8)(a) to (d) are replaced by the following:

    • (a) has no gifting settlor who is not a natural person or deceased person; and

    • (b) at all times in the income year, would be a qualifying trust for a distribution made at the time; and

    • (c) is mainly for the benefit of—

      • (i) an organisation or trust with income that is exempt income under section CW 34 or CW 35 (which relate to the income of charities):

      • (ii) at all times in the income year, a natural person for whom the gifting settlors of the trust have natural love and affection or had natural love and affection when alive; and

    • (d) is not a superannuation scheme.

95 Consequences of changes in method
  • (1) In section EX 51(4)(c)(ii), year; or is replaced by year.

    (2) After section EX 51(4), the following is added:

    Changes between comparative value method and fair dividend rate method
    • (5) If a person holding an attributing interest in a FIF changes from either of the comparative value method and the fair dividend rate method to the other of the comparative value method and the fair dividend rate method for calculating the FIF income or loss from the interest, the person is treated as having—

      • (a) disposed of the interest to an unrelated person immediately before the start of the first income year to which the new method applies; and

      • (b) reacquired the interest at the start of the income year; and

      • (c) received for the disposal and paid for the reacquisition an amount equal to the market value of the interest at the time of the disposal.

96 FIF rules first applying to interest for income year beginning on or after 1 April 2007
  • (1) Section EX 54B(1) is replaced by the following:

    When this section applies
    • (1) This section applies when a person has rights in a FIF that—

      • (a) for the period ending on a day (the preceding day) are—

        • (i) not an attributing interest:

        • (ii) an attributing interest for which the person does not have FIF income or loss:

        • (iii) rights for which the person is a share supplier in a returning share transfer; and

      • (b) for the period beginning on the day (the application day) following the preceding day are an attributing interest for which the person has FIF income or loss.

    (2) Section EX 54B(2)(b) is replaced by the following:

    • (b) reacquired the interest at the beginning of the application day; and.

    (3) In section EX 54B(3),—

    • (a) in the words before paragraph (a), the disposal and acquisition referred to in subsection (2) is replaced by the disposals in an income year, and related acquisitions, treated as occurring under this section:

    • (b) in paragraph (a)(i), disposal is is replaced by disposals are:

    • (c) in paragraph (a)(ii), disposal is is replaced by disposals are:

    • (d) in paragraph (a)(iii), disposal is is replaced by disposals are:

    • (e) in paragraph (b), disposal is replaced by disposals.

97 Measurement of cost
  • Section EX 56(2) is replaced by the following:

    FIFO cost flow identification
    • (2) If sections EX 44C(12) and EX 44D(14) do not apply and it is not possible to specifically identify the cost of the interest because of multiple acquisitions or dispositions or both by the person, the first-in-first-out (the FIFO) method of identifying cost flows is applied.

98 Policyholder income formula
  • (1) Section EY 42(1) is replaced by the following:

    Formula
    • (1) The policyholder income formula is—

      .

    (2) After section EY 42(5), the following is inserted:

    FDR adjustment
    • (5B) FDR adjustment is the amount given by section EY 42B to the extent to which it applies.

    PIE adjustment
    • (5C) PIE adjustment is the amount given by section EY 42C to the extent to which it applies.

    (3) Subsections (1) and (2) apply to a life insurer,—

    • (a) for the 2008–09 and later income years, unless they make an election under paragraph (b) or (c); or

    • (b) on and after 1 October 2007, if they make an election under this paragraph, stating the relevant date in a notice received by the Commissioner before 1 April 2008; or

    • (c) for an income year beginning on or after 1 April 2007, if they make an election under this paragraph, stating the relevant date in a notice received by the Commissioner before 1 April 2008.

99 New sections EY 42B and EY 42C inserted
  • (1) After section EY 42, the following is inserted:

    EY 42B Policyholder income formula: FDR adjustment
    • When this section applies

      (1) This section applies for the purposes of section EY 42(5B) to property that supports only actuarial reserves to the extent to which—

      • (a) the property is an attributing interest in a FIF held by the life insurer, or by a portfolio tax rate entity that the life insurer has directly or indirectly invested in; and

      • (b) the life insurer or the portfolio tax rate entity uses the fair dividend rate method for the property; and

      • (c) section EY 42C does not apply to the property.

      When has life insurer indirectly invested in portfolio tax rate entity?

      (2) For the purposes of subsection (1), a life insurer is treated as indirectly investing in a portfolio tax rate entity (PTRE A) when a portfolio tax rate entity has invested in PTRE A and the investment may be traced back through an unbroken chain of investments in portfolio tax rate entities to a direct investment by the life insurer in a portfolio tax rate entity.

      FDR adjustment

      (3) In using the policyholder income formula, the life insurer may calculate the item FDR adjustment

      • (a) using the formula in subsection (5); or

      • (b) by calculating, using any reasonable method for the information available to the life insurer, the amount credited to actuarial reserves in relation to the property, but excluding amounts which are related to FIF income under the fair dividend rate method.

      Consistency requirement

      (4) A life insurer, in using the policyholder income formula, must calculate the item FDR adjustment by always applying whichever of subsection (3)(a) or (b) they first apply.

      Formula

      (5) The formula described in subsection (3)(a) for the calculation of the item FDR adjustment is—

      0.6 x (FIF result - FDR income).

      Definition of items in formula

      (6) The items in the formula are defined in subsections (7) and (8).

      FIF result

      (7) FIF result is the life insurer's gains and losses for the income year, for the property, calculated using accepted accounting practice.

      FDR income

      (8) FDR income is the amount for the income year of the life insurer's income related to FIF income under the fair dividend rate method for the property, calculated using any reasonable method for the information available to the life insurer.

      Defined in this Act: amount, attributing interest, fair dividend rate method, FIF, FIF income, FIF loss, income, portfolio investment entity, portfolio investment-linked life fund,

    EY 42C Policyholder income formula: PILF adjustment
    • When this section applies

      (1) This section applies for the purposes of section EY 42(5C) to property that supports only actuarial reserves for a portfolio investment-linked life fund, to the extent to which the property is—

      • (a) an attributing interest in a FIF,—

        • (i) held by the life insurer, or by a portfolio tax rate entity that the life insurer has directly or indirectly invested in; and

        • (ii) for which the life insurer or the portfolio tax rate entity uses the fair dividend rate method for the property:

      • (b) shares described in section CX 44C (Proceeds from disposal of certain shares by portfolio investment entities) held by the life insurer.

      When has life insurer indirectly invested in portfolio tax rate entity?

      (2) For the purposes of subsection (1), a life insurer is treated as indirectly investing in a portfolio tax rate entity (PTRE A) when a portfolio tax rate entity has invested in PTRE A and the investment may be traced back through an unbroken chain of investments in portfolio tax rate entities to a direct investment by the life insurer in a portfolio tax rate entity.

      PIE adjustment

      (3) In using the policyholder income formula, the life insurer may calculate the item PILF adjustment

      • (a) using the formula in subsection (5); or

      • (b) by calculating, using any reasonable method for the information available to the life insurer, the amount credited to actuarial reserves in relation to the property, but excluding amounts that are—

        • (i) related to FIF income under the fair dividend rate method:

        • (ii) dividends or distributions for shares described subsection (1)(b), other than distributions from a portfolio tax rate entity to which section CX 44D(2) (Portfolio investor allocated income and distributions of income by portfolio tax rate entities) applies.

      Consistency requirement

      (4) A life insurer, in using the policyholder income formula, must calculate the item PILF adjustment by always applying whichever of subsection (3)(a) or (b) they first apply.

      Formula

      (5) The formula described in subsection (3)(a) for the calculation of the item PILF adjustment is—

      0.9 x (FIF result - FDR income) + 0.9 x excluded shares.

      Definition of items in formula

      (6) The items in the formula are defined in subsections (7) to (9).

      FIF result

      (7) FIF result is the life insurer's gains and losses for the income year, for the property described in subsection (1)(a), calculated using accepted accounting practice.

      FDR income

      (8) FDR income is the amount for the income year of the life insurer's income related to FIF income under the fair dividend rate method for the property described in subsection (1)(a), calculated using any reasonable method for the information available to the life insurer.

      Excluded shares

      (9) Excluded shares is the total for the life insurer, for shares described in subsection (1)(b), of—

      • (a) the positive amount of income excluded by section CX 44C(2):

      • (b) the negative amount of a deduction not allowed by section DB 17(3)(b) (Cost of revenue account property):

      • (c) the gains and losses for the shares, calculated using accepted accounting practice, but excluding—

        • (i) amounts already accounted for under paragraph (a) or (b) of this subsection, or under subsection (7):

        • (ii) dividends and distributions for the shares, other than distributions from a portfolio tax rate entity to which section CX 44D(2) applies.

      Defined in this Act: amount, attributing interest, deduction, dividend, excluded income, fair dividend rate method, FIF, FIF income, FIF loss, income, portfolio investment-linked life fund, portfolio tax rate entity, share, .

    (2) Subsection (1) applies to a life insurer for the 2008–09 and later income years, unless they make an election under subsection (3) or they choose that subsection (1) does not apply to them by furnishing a return of income for the 2008–09 tax year that ignores subsection (1).

    (3) Subsection (1) applies—

    • (a) on and after 1 October 2007, if the life insurer makes an election under this paragraph, stating the relevant date in a notice received by the Commissioner before 1 April 2008; or

    • (b) for an income year beginning on or after 1 April 2007, if the life insurer makes an election under this paragraph, stating the relevant date in a notice received by the Commissioner before 1 April 2008.

100 New section EZ 50 inserted
  • After section EZ 49, the following is added:

    EZ 50 Transitional rule for IFRS financial reporting method
    • When this section applies

      (1) This section applies for a financial arrangement when—

      • (a) a person starts to use a spreading method for that financial arrangement before the person adopts IFRSs for the purposes of financial reporting; and

      • (b) that spreading method does not comply with whichever is relevant of sections EW 16(2)(d), EW 18(f), and EW 20(2)(f) because the person adopts IFRSs for the purposes of financial reporting; and

      • (c) the person is not required by section EW 15B to use the IFRS taxpayer method; and

      • (d) the income year is the 2007–08 income year or an earlier income year.

      Transitional rule

      (2) For the financial arrangement, the person is treated as complying with whichever is relevant of sections EW 16(2)(d), EW 18(f), and EW 20(2)(f).

      Defined in this Act: financial arrangement, IFRS, IFRS taxpayer method, income year, .

101 Sections FC 8H and FC 8I replaced
  • (1) Sections FC 8H and FC 8I are replaced by the following:

    FC 8H Adjustment required if lease becomes finance lease
    • (1) A lessor and a lessee must make an adjustment under this section if—

      • (a) the lease is a consecutive or a successive lease—

        • (i) that is deemed to be 1 lease under the definition of lease; and

        • (ii) with a term of the lease that the lessor and lessee do not contemplate, at the start of the term, will be more than 75% of the personal property lease asset's estimated useful life; and

        • (iii) with a term of the lease that is more than 75% of the asset's estimated useful life:

      • (b) the lease is an operating lease that becomes a finance lease under paragraph (c) of the definition of finance lease.

      (2) The lessor and lessee must each—

      • (a) calculate an adjustment for the lease; and

      • (b) include the adjustment in a return of income for the tax year corresponding to the income year in which the lease becomes a finance lease.

      (3) The amount of the adjustment is calculated in relation to the period described in subsection (5) using the formula—

      finance income - finance expenditure - unadjusted income + unadjusted expenditure.

      (4) In the formula—

      • (a) finance income is the income that the lessor or lessee would have derived under the lease if the lease were a finance lease for the period:

      • (b) finance expenditure is the expenditure that the lessor or lessee would have incurred under the lease if the lease were a finance lease for the period:

      • (c) unadjusted income is the income that the lessor or lessee derived under the lease:

      • (d) unadjusted expenditure is the expenditure that the lessor or lessee incurred under the lease.

      (5) The period begins with the start of the term of the lease and ends with the end of the income year in which the lease becomes a finance lease.

      (6) If the adjustment is positive, the amount is income of the lessor or lessee in the income year in which the lease becomes a finance lease.

      (7) If the adjustment is negative, the amount is expenditure incurred by the lessor or lessee in the income year in which the lease becomes a finance lease.

    FC 8I Adjustment required for certain operating leases entered before 20 June 2007
    • (1) A lessor must make an adjustment under this section if the lease is an operating lease—

      • (a) entered before 20 June 2007; and

      • (b) that is or is part of an arrangement meeting on 20 June 2007 the requirements of paragraph (c)(i) to (iii) of the definition of finance lease; and

      • (c) with a term of the lease ending after the end of the income year including 20 June 2007; and

      • (d) that does not meet the requirements of section FC 8H(1)(a) before the end of the income year after the income year including 20 June 2007.

      (2) The lessor must—

      • (a) calculate an adjustment for the lease asset; and

      • (b) include the adjustment in a return of income for the tax year corresponding to the income year after the income year including 20 June 2007.

      (3) The amount of the adjustment is calculated using the formula—

      .

      (4) In the formula, total depreciation losses is the total amount of deductions for depreciation losses for the lease asset allowed to the lessor in the period described in subsection (5).

      (5) The period begins with the start of the term of the lease and ends with the end of the income year including 20 June 2007.

      (6) The adjustment is income under the lease of the lessor in the income year after the income year including 20 June 2007.

      (7) The adjusted tax value of the lease asset at the beginning of the income year after the income year including 20 June 2007 is the total of the adjustment and the adjusted tax value that the lease asset would have in the absence of this section.

      (8) For an income year beginning after 20 June 2007 in which the lease is an operating lease, the depreciation loss allowed for the lease asset other than under section EE 41(2) is five-sixths of the depreciation loss that would be allowed for the lease asset in the absence of this subsection.

    (2) Subsection (1) applies for leases entered on or after 20 May 1999 and for income years including 20 June 2007 and later income years.

102 Variations in control or income interests in foreign companies
  • (1) In section GC 9(4)(c), under sections EX 14 to EX 17 is inserted after company.

    (2) Subsection (1) applies for the 2005–06 and later income years.

103 New section GC 14EB inserted
  • After section GC 14E, the following is inserted:

    GC 14EB Treatment of dividends as if from qualifying company
    • When this section applies

      (1) This section applies to a company (an attribution company) that must attribute an amount to person C under section GC 14D, when the attribution company pays a dividend (the dividend) and the company—

      • (a) has chosen to apply this section before paying the dividend; and

      • (b) has not revoked the choice described in paragraph (a) when it pays the dividend; and

      • (c) is not a qualifying company; and

      • (d) has no net income for the tax year in which it pays the dividend that is not net income attributed under section GC 14D, ignoring interest income that is merely incidental to its business.

      Treatment of dividends as if from qualifying company

      (2) For the attribution company and the dividend, section HG 13 is treated as applying as if the attribution company was a qualifying company, and the dividend was a dividend paid by that qualifying company.

      Defined in this Act: attribution company, business, company, dividend, income, interest, qualifying company, net income, .

104 Tax credits for family support and family plus
  • (1) The heading before section GC 28 is replaced by Tax credits for families.

    (2) In section GC 28, the heading is replaced by Tax credits for families.

105 Dividends from qualifying company
  • (1) In section HG 13(3)(a), section ME 8(1) is replaced by section ME 8(1) (section MZ 19 modifies this paragraph).

    (2) In section HG 13(4)(a), subsection (3) is replaced by subsection (3). Section MZ 19 modifies this paragraph.

106 Scheme of subpart
  • (1) Section HL 2(2) is replaced by the following:

    Election to be type of portfolio investment entity
    • (2) An entity may choose under section HL 11 to be a portfolio investment entity that is a—

      • (a) portfolio tax rate entity if the entity is—

        • (i) a company, superannuation fund, or group investment fund; and

        • (ii) eligible under section HL 3(1) to make an election; or

      • (b) portfolio listed company if the entity is—

        • (i) a company listed on a recognised exchange in New Zealand; and

        • (ii) eligible under section HL 3(3) to make an election; or

      • (c) portfolio defined benefit fund if the entity is—

        • (i) a defined benefit fund; and

        • (ii) eligible under section HL 3(5) to make an election; or

      • (d) portfolio investment-linked life fund if the entity is—

        • (i) a separate identifiable fund, forming part of a life insurer, holding investments subject to life insurance policies under which benefits are directly linked to the value of the investments held in the fund; and

        • (ii) eligible under section HL 3(7) to make an election.

    (2) In section HL 2(7)(c)(ii), period. is replaced by period: and the following is added:

    • (d) the amount of fees paid to the entity by the investor on the day:

    • (e) the amount of rebates of fees credited to the investor by the entity on the day:

    • (f) the amount of expenditure, for the income year ending with the day, transferred under subpart DV to the entity by the investor.

107 Section HL 3 replaced
  • Section HL 3 is replaced by the following:

    HL 3 Eligibility requirements for entities
    • Eligibility requirements for entity electing to be portfolio tax rate entity

      (1) An entity that is choosing under section HL 11 to be a portfolio investment entity and portfolio tax rate entity must meet the eligibility requirements described in subsections (9), (10), and (11).

      Eligibility requirements for portfolio tax rate entity

      (2) A portfolio tax rate entity must meet—

      • (a) the eligibility requirements described in subsections (9), (10), and (11); and

      • (b) the further eligibility requirements described in sections HL 5C, HL 6, HL 7, HL 9, and HL 10.

      Eligibility requirements for entity electing to be portfolio listed company

      (3) An entity that is choosing under section HL 11 to be a portfolio investment entity and portfolio listed company must meet the eligibility requirements described in subsections (9), (10), and (11).

      Eligibility requirements for portfolio listed company

      (4) A portfolio listed company must meet—

      • (a) the eligibility requirements described in subsections (9), (10), and (11); and

      • (b) the further eligibility requirements described in sections HL 5C, HL 6, HL 8, HL 9, and HL 10.

      Eligibility requirements for entity electing to be portfolio defined benefit fund

      (5) An entity that is choosing under section HL 11 to be a portfolio investment entity and portfolio defined benefit fund must meet the eligibility requirements described in subsections (9), (10), and (11).

      Eligibility requirements for portfolio defined benefit fund

      (6) A portfolio defined benefit fund must meet—

      • (a) the eligibility requirements described in subsections (9), (10), and (11); and

      • (b) the further eligibility requirements described in sections HL 6, HL 9, and HL 10.

      Eligibility requirements for separate identifiable fund electing to be portfolio investment-linked life fund

      (7) An entity that is choosing under section HL 11 to be a portfolio investment entity and portfolio investment-linked life fund must meet the eligibility requirements described in subsections (10) and (11).

      Eligibility requirements for portfolio investment-linked life fund

      (8) A portfolio investment-linked life fund must meet—

      • (a) the eligibility requirements described in subsections (10) and (11); and

      • (b) the further eligibility requirements described in sections HL 6, HL 9, and HL 10.

      Business requirement

      (9) The business requirement is that the entity must not carry on a business of life insurance.

      Residence requirement

      (10) The residence requirement is that the entity must be—

      • (a) resident in New Zealand; and

      • (b) not treated under a double tax agreement as not being resident in New Zealand.

      Entity history requirement

      (11) The entity history requirement is that the entity must not, before the day on which the election to be a portfolio investment entity is to be effective, have ceased to be a portfolio investment entity under section HL 14(1), unless the cessation occurred more than 5 years before the day on which the election is effective.

      Defined in this Act: company, double tax agreement, group investment fund, life insurance, portfolio defined benefit fund, portfolio investment entity, portfolio investment-linked life fund, portfolio listed company, portfolio tax rate entity, resident in New Zealand, superannuation fund, .

108 Effect of failure to meet eligibility requirements for entities
  • (1) In section HL 4(2)(a), the words before subparagraph (i) are replaced by the following:

    • (a) a portfolio investor class of the entity fails to meet a requirement under section HL 6 or HL 9, or the entity fails to meet a requirement under section HL 10, on the last day of a quarter—.

    (2) In section HL 4(2)(b), the words before subparagraph (i) are replaced by the following:

    • (b) the failure referred to in paragraph (a)—.

109 New sections HL 5B and HL 5C inserted
  • After section HL 5, the following is inserted:

    HL 5B Meaning of investor and portfolio investor class
    • Investor

      (1) An investor, in relation to a portfolio investment entity or foreign investment vehicle (the entity), means,—

      • (a) if the entity is a company and paragraph (d) does not apply, a shareholder in the company:

      • (b) if the entity is not a company and paragraphs (c) and (d) do not apply, a person who is entitled to a proportion of the funds available for distribution by the entity—

        • (i) by reason of the rules of the entity or the terms of the trust under which the entity is established; and

        • (ii) as if the entity were a company and the person were a shareholder in the company:

      • (c) if the entity is a portfolio investment-linked life fund and paragraph (d) does not apply, a person whose benefits under the relevant life insurance policy are directly linked to the value of investments held in the portfolio investment-linked life fund:

      • (d) for a share, entitlement, or life insurance policy held through a portfolio investor proxy by a person, the portfolio investor proxy.

      Portfolio investor class

      (2) A portfolio investor class for a portfolio investment entity means a group of 1 or more investors in the entity with each investor having an entitlement to a distribution by the entity of proceeds from portfolio entity investments such that—

      • (a) the portfolio entity investments are the same for all the investors in the group; and

      • (b) each investor's interest in a portfolio entity investment represents a proportion (the investment proportion) of the value of the investor's entitlement; and

      • (c) the investment proportion for each investor and each portfolio entity investment differs from the average value of the investment proportion, for the investors in the group and the portfolio entity investment, by less than 2.5% of that average value except if subsection (3) applies.

      Exception to requirement of subsection (2)(c)

      (3) The investment proportion for an investor in a group referred to in subsection (2) and a portfolio entity investment may differ by 2.5% or more from the average value for the group and the investment if—

      • (a) the portfolio entity investment is an arrangement under which the entity is assured of receiving, from investments, sufficient proceeds for the entity to repay each investor in the group an amount contributed to the entity; and

      • (b) the excess in difference between the investment proportion for the investor and the average value for the group arises from differences between the portfolio investor rates of members of the group.

      Defined in this Act: investor, portfolio entity investment, portfolio investment entity, portfolio investor class, portfolio investor interest,

    HL 5C Income interest requirement
    • Application

      (1) This section applies to a portfolio investment entity that is not a portfolio investment-linked life fund.

      Requirement

      (2) The income interest requirement is that all portfolio investor interests in the entity that give rights in relation to proceeds from a portfolio entity investment give the rights in relation to all the proceeds from the investment that are not category B income.

      Defined in this Act: category B income, portfolio entity investment, portfolio investment entity, portfolio investment-linked life fund, portfolio investor interest, .

110 Investor membership requirement
  • (1) Before section HL 6(1), the following is inserted:

    General investor membership requirement
    • (1A) The investor membership requirement for an entity that is not a company listed on a recognised exchange in New Zealand and does not meet the requirements of subsection (3) is that each portfolio investor class of the entity must meet the requirements of subsection (1).

    (2) In section HL 6(1),—

    • (a) the heading is replaced by Investor membership requirement for portfolio investor class:

    • (b) the words before paragraph (a) are replaced by The investor membership requirement for a portfolio investor class is that the class must include—:

    • (c) in paragraph (j)(iii), entity. is replaced by entity: and the following is added:

    • (k) Auckland Regional Holdings.

    (3) In section HL 6(3), the words before paragraph (a) are replaced by There is no investor membership requirement for a portfolio investor class, of an entity other than a company listed on a recognised exchange in New Zealand, that,—.

    (4) In section HL 6(3)(c), 1956. is replaced by 1956: and the following is added:

    • (d) is a superannuation fund that—

      • (i) existed before 17 May 2006; and

      • (ii) on or after 17 May 2006, if treated as a unit trust, would have met the requirements of 1 or more of paragraphs (a) and (c) to (e) of the definition of qualifying unit trust; and

      • (iii) has no investor, other than the fund's manager or trustee, that can control the investment decisions relating to that class.

111 Further eligibility requirements relating to investments
  • Section HL 7(3), other than the heading, is replaced by the following:

    • (3) An adjustment reflecting the effect of the investor's portfolio investor rate must be made to—

      • (a) the investor's portfolio investor interest in the portfolio investor class or another portfolio investor class—

        • (i) before the end of the second month after the portfolio calculation period, if the entity has made an election under section HL 21; or

        • (ii) before the end of the third month after the end of the income year, if the entity has made an election under section HL 22; or

        • (iii) before the end of the second month after the end of the tax year, if the entity has made an election under section HL 23:

      • (b) the amount of each distribution to the investor as a member of the portfolio investor class or another portfolio investor class:

      • (c) the amount of each payment required from the investor as a member of the portfolio investor class towards satisfying the entity's portfolio entity tax liability.

112 Investor interest size requirement
  • (1) In section HL 9(2), the words before paragraph (a) are replaced by There is no investor interest size requirement for an investor in a portfolio investor class that,—.

    (2) In section HL 9(2)(c), 1956. is replaced by 1956: and the following is added:

    • (d) is a superannuation fund that—

      • (i) existed before 17 May 2006; and

      • (ii) on or after 17 May 2006, if treated as a unit trust, would have met the requirements of 1 or more paragraphs (a) and (c) to (e) of the definition of qualifying unit trust; and

      • (iii) has no investor, other than the fund's manager or trustee, that can control the investment decisions relating to that class.

    (3) In section HL 9(4)(j), subsection (5). is replaced by subsection (5): and the following is added:

    • (k) Auckland Regional Holdings.

113 Further eligibility requirements relating to investments
  • (1) In section HL 10(1), the words before paragraph (a) are replaced by The investment type requirement is that 90% or more by value of the entity's assets must be—.

    (2) In section HL 10(2)—

    • (a) after paragraph (b)(i), the following is inserted:

    • (ib) replacement payments::

    • (b) paragraph (b)(iii) is replaced by the following:

    • (iii) income under a lease of land::

    • (c) in paragraph (b)(iv), referred to in subsection (1)(a) to (d) is inserted after property.

    (3) In section HL 10(4), the words before paragraph (a) are replaced by The requirements of subsection (3)(a) and (b) do not apply to an investment consisting of shares in—.

114 Election to become portfolio investment entity and cancellation of election
  • (1) After section HL 11(2), the following is added:

    Exception to when election effective: certain elections relating to portfolio investment-linked life funds
    • (2B) Despite subsection (2), an election received by the Commissioner is effective on 1 October 2007, if—

      • (a) the election is in relation to an electing entity choosing to be a portfolio investment-linked life fund; and

      • (b) the date of receipt is before 1 April 2008; and

      • (c) 1 October 2007 is nominated in the notice.

    (2) In section HL 11, in the list of defined terms, portfolio investment-linked life fund is inserted.

115 Unlisted company may choose to become portfolio listed company
  • Section HL 11B(1)(a) is replaced by the following:

    • (a) has 100 shareholders; and.

116 Becoming portfolio investment entity
  • (1) In section HL 12(3)(a), the words before subparagraph (i) are replaced by—

    • (a) transferring to another person all shares held by the entity, or for which the entity is a share supplier in a returning share transfer, that—.

    (2) After section HL 12(4), the following is added:

    Refund of dividend withholding payments made before election
    • (5) If a dividend withholding payment account company becomes a portfolio investment entity on a day in an imputation year other than the end of the imputation year, the balance of the company's dividend withholding payment account at the end of the imputation year for the purposes of section NH 4(5)(f) (Refund for overpayment and to company in loss) is equal to the balance of the company's dividend withholding payment account immediately before the company becomes a portfolio investment entity.

117 Tax consequences from transition
  • Section HL 13(1) is replaced by the following:

    When subsection (1B) applies
    • (1) Subsection (1B) applies when an entity chooses to become a portfolio investment entity in an income year and has an increased liability for provisional tax for the income year because of the election.

    No penalty or interest arising from transition
    • (1B) The entity is not liable to pay any penalty or interest for which the entity would otherwise be liable for an inaccuracy, arising from the increased liability for provisional tax, in—

      • (a) an estimate of provisional tax made before the entity chooses to become a portfolio investment entity:

      • (b) a payment of provisional tax due before the end of the 2-month period beginning after the entity becomes a portfolio investment entity.

118 Treatment of income from interest if no investor entitled or investor has conditional entitlement
  • Section HL 16(2)(e) is replaced by the following:

    • (e) for an entity that exists on 17 May 2006, the vesting period does not exceed the longest vesting period allowed by the entity on 17 May 2006 for an interest created on that date; and

    • (f) for an entity that does not exist on 17 May 2006,—

      • (i) the portfolio investor interest is transferred to the entity by a superannuation scheme that exists on 17 May 2006 and without significant change to the portfolio investor interest; or

      • (ii) the vesting period does not exceed 5 years, if subparagraph (i) does not apply.

119 Credits received by portfolio tax rate entity or portfolio investor proxy
  • (1) In section HL 20(4), fees is replaced by expenses.

    (2) Section HL 20(11) is replaced by the following:

    Expenses
    • (11) Expenses is the total amount for the day in the portfolio allocation period of—

      • (a) fees for ongoing management and administration services paid from or charged to the account of the investor as a member of the portfolio investor class:

      • (b) expenditure of the investor transferred under subpart DV to the entity.

120 Payments of tax by portfolio tax rate entity making no election
  • (1) After section HL 21(2), the following is inserted:

    Income tax liability
    • (2B) The income tax liability of the entity for a tax year is equal to the total portfolio entity tax liability of the entity for the portfolio calculation periods in the tax year.

    (2) In section HL 21(3)(a), for the tax year is inserted after income tax.

121 Payments of tax by portfolio tax rate entity choosing to make payments when investor leaves
  • (1) After section HL 23(1), the following is inserted:

    Income tax liability
    • (1B) The income tax liability of the entity for a tax year is equal to the total portfolio entity tax liability of the entity for the portfolio calculation periods in the tax year.

    (2) In section HL 23(2)(a), for the tax year is inserted after income tax.

    (3) Section HL 23(2)(b) is replaced by the following:

    • (b) by the day that is—

      • (i) the end of the month beginning from the end of the month in which the portfolio investor exit period ends, if subparagraph (ii) does not apply; or

      • (ii) the 15 January following the end of the portfolio investor exit period, if the portfolio investor exit period ends in November.

122 Optional payments of tax by portfolio tax rate entities
  • (1) In section HL 23B(1), investor's portfolio investor interest in the entity is replaced by portfolio investor interest for which the investor is a member of a portfolio investor class of the entity.

    (2) Section HL 23B(3) is replaced by the following:

    Time of optional payment
    • (3) A payment under this section must be made by—

      • (a) the end of the month beginning from the end of the month in which the portfolio calculation period ends, if paragraph (b) does not apply; or

      • (b) the 15 January following the end of the portfolio calculation period, if the portfolio calculation period ends in November.

123 Portfolio investor allocated income and portfolio investor allocated loss
  • (1) In section HL 24(5), fees is replaced by expenses.

    (2) Section HL 24(6)(e) is replaced by the following:

    • (e) expenses is the total amount for the day in the portfolio allocation period of—

      • (i) fees for ongoing management and administration services paid from or charged to the account of the investor as a member of the portfolio investor class:

      • (ii) expenditure of the investor transferred under subpart DV to the entity:.

124 Treatment of portfolio investor allocated loss for zero-rated portfolio investors and investors with portfolio investor exit period
  • (1) In section HL 25(2), income year corresponding to the tax year is replaced by income year including the end of the portfolio tax rate entity's income year.

    (2) In the list of defined terms in section HL 25,—

    • (a) portfolio allocation period and portfolio investor allocated income are omitted:

    • (b) income tax and portfolio tax rate entity are inserted.

125 Credits received by portfolio tax rate entity or portfolio investor proxy
  • (1) Section HL 27(6) is replaced by the following:

    Application of subsections (7) to (11)
    • (6) For an investor in a portfolio tax rate entity who is allocated under subsection (3) credits for a portfolio calculation period in an income year of the entity,—

      • (a) subsections (7) and (8) apply to the credits, and the credits are allocated to the income year in which the entity's income year ends, if—

        • (i) the investor is a zero-rated portfolio investor:

        • (ii) the investor is not a zero-rated portfolio investor and the entity makes payments of tax under section HL 21 and the portfolio calculation period includes part of a portfolio investor exit period:

      • (b) subsections (10) and (11) apply to the credits if paragraph (a) does not apply.

    (2) Section HL 27(7) is replaced by the following:

    Zero-rated portfolio investors and certain investors having portfolio investor exit period: credit
    • (7) The investor is treated as receiving for the allocated credits, for the tax year corresponding to the investor's income year,—

      • (a) a credit against income tax payable by the investor of the amount given by subsection (8) if—

        • (i) the credits are under subpart LC (Foreign tax); and

        • (ii) the investor is not a portfolio tax rate entity or portfolio investor proxy; or

      • (b) the allocated amount of each type of credit if—

        • (i) the credits are not under subpart LC:

        • (ii) the investor is a portfolio tax rate entity or portfolio investor proxy.

    (3) In section HL 27(8), in the heading, portfolio investment entities is replaced by portfolio tax rate entities, portfolio investor proxies.

    (4) Section HL 27(9) is repealed.

    (5) In section HL 27(10B)(a)(ii), section HL 22 or HL 23 is replaced by section HL 23.

    (6) Section HL 27(10B)(b) is replaced by the following:

    • (b) the investor as a member of—

      • (i) the portfolio investor class:

      • (ii) another portfolio investor class, if the entity chooses such a use for the credit.

    (7) In section HL 27(11)(a)(ii),—

    • (a) in subsection (10B)(b) is replaced by in subsection (10C)(b):

    • (b) by subsection (10B) is replaced by by subsection (10C).

126 Portfolio investor proxies
  • In section HL 31(3)(d), or the payments required from the investor, is inserted after distributions to the investor,.

127 Companies included in group of companies
  • After section IG 1(2), the following is inserted:

    • (2B) For the purposes of this Act, in relation to any 2 or more companies of which 1 is a portfolio tax rate entity, the companies are treated as being a group of companies for an income year or other period if—

      • (a) a portfolio tax rate entity owns 100% of the voting interests in the other companies; and

      • (b) each company that is not a portfolio tax rate entity is a portfolio land company.

128 Net loss offset between group companies
  • (1) In section IG 2(9), Section IE 1(4) applies is replaced by Sections CG 2 and DB 38 apply.

    (2) Subsection (1) applies for the 2005–06 and later income years.

129 Rebate in respect of gifts of money
  • (1) Section KC 5(1)(be) is replaced by the following:

    • (be) Childfund New Zealand Limited:.

    (2) In section KC 5(1)(cu), Trust. is replaced by Trust: and the following is added:

    • (cv) Hamlin Charitable Fistula Hospitals Trust:

    • (cw) Hope Foundation Development Trust:

    • (cx) Hope International Charitable Trust:

    • (cy) Limbs 4 All Charitable Trust:

    • (cz) New Zealand Disaster Assistance Response Team Trust:

    • (da) Operation Restore Hope Charitable Trust:

    • (db) The World Swim for Malaria Foundation (New Zealand).

    (3) Subsection (2) applies for the 2007–08 and later tax years.

130 New section KC 6 inserted
  • (1) After section KC 5, the following is inserted:

    KC 6 Rebate in respect of redundancy payment
    • (1) A person who derives a redundancy payment relating to a loss of employment is allowed as a rebate of income tax relating to the loss of employment the smaller of—

      • (a) $3,600:

      • (b) a sum equal to 6 cents for every complete dollar of the total amount derived by the person of redundancy payments, each of which—

        • (i) relates to the loss of employment; and

        • (ii) is not a payment referred to in subsection (3).

      (2) The Commissioner must not make a refund under this section before the person makes an application complying with section 41B of the Tax Administration Act 1994.

      (3) A rebate is not allowed for a redundancy payment—

      • (a) relating to retirement from employment:

      • (b) relating to loss of seasonal employment if the loss arises from the normal seasonal work cycle:

      • (c) relating to a contract of employment for a fixed term or for the duration of a project:

      • (d) relating to employment for a period following notice of termination of employment:

      • (e) paid to a director of a company by the company or by a person associated with the company under section OD 8(3):

      • (f) paid to a person by another person associated with the person under section OD 8(3):

      • (g) paid by a person to an employee who has been paid a redundancy payment by another person associated with the person under section OD 8(3).

    (2) Subsection (1) applies for redundancy payments paid on or after 1 December 2006.

131 Amendments to subpart KD made in schedule 1
  • (1) The amendments to subpart KD specified in schedule 1 are made in the manner shown in that schedule.

    (2) Subsection (1) applies for the 2007–08 and later income years.

132 Determination of net income
  • (1) In section KD 1(1)(e)(viii), and (c) is inserted after section CX 44D(1)(b).

    (2) After section KD 1(1)(e)(viii), the following is added:

    • (ix) any amount of retirement scheme contribution that is not excluded income of the person and would be excluded income of the person in the absence of section CX 42B(2); and.

    (3) After section KD 1(1)(h), the following is inserted:

    • (hb) where the person receives a distribution from a retirement savings scheme of a retirement scheme contribution, the distribution is treated as assessable income derived by the person in the income year of the distribution if retirement scheme contribution withholding tax has been deducted from the contribution and, at the time of the distribution, the person is—

      • (i) not eligible to receive New Zealand superannuation; and

      • (ii) eligible to receive a retirement scheme contribution from a retirement scheme contributor; and.

133 Calculation of subpart KD credit
  • (1) In section KD 2(6), as the provision applies for income years corresponding to the 2006–07 and subsequent tax years, in paragraph (b) of the definition of full year abatement, spouse is replaced by spouse, civil union partner, or de facto partner.

    (2) Subsection (1) applies for the income year corresponding to the 2006–07 and later tax years.

134 Determination of amount of credit in certain cases
  • In section LB 1(1),—

    • (a) in paragraph (c), so calculated is replaced by so calculated (section MZ 15 (Determination of credit: modifying maximum ratios) modifies this paragraph):

    • (b) in paragraph (d), so calculated is replaced by so calculated (section MZ 15 modifies this paragraph):

    • (c) in paragraph (e), subsection (5) is replaced by subsection (5) (section MZ 15 modifies this paragraph).

135 Credit of tax for imputation credit
  • (1) In section LB 2(2), income year is replaced by income year (section MZ 16 (Credit of tax for imputation credits and dividend withholding payment credits: modifying amount) modifies this subsection).

    (2) After section LB 2(7), the following is inserted:

    • (8) An amount is treated as if it were assessable income for the purpose of determining a taxpayer's entitlement to a credit under this section if the amount would but for section EX 47 be assessable income of the taxpayer from an interest in an attributing interest in a foreign investment fund.

136 New section LB 3 inserted
  • After section LB 2, the following is inserted:

    LB 3 Credit of retirement scheme contribution withholding tax for imputation credit
    • (1) If a retirement scheme contributor attaches an imputation credit to a retirement scheme contribution for a person in an income year, the retirement scheme contributor is entitled to a credit of retirement scheme contribution withholding tax equal to the lesser of the following amounts:

      • (a) the amount of the imputation credit:

      • (b) the liability of the retirement scheme contributor for retirement scheme contribution withholding tax on the retirement scheme contribution.

      (2) If the amount of the imputation credit exceeds the liability of the retirement scheme contributor for retirement scheme contribution withholding tax on the retirement scheme contribution,—

      • (a) the amount of the excess is treated as an imputation credit attached to a distribution from the retirement scheme contributor to the person; and

      • (b) the person responsible for withholding the retirement scheme contribution withholding tax must, within 30 days of the contribution, give a notice to the person showing the amount of the excess credit.

137 New sections LD 1B and LD 1C inserted
  • After section LD 1, the following is inserted:

    LD 1B Tax deductions from certain accident compensation payments: credit allowed to provider
    • (1) This section applies if—

      • (a) a claimant under the Injury Prevention, Rehabilitation, and Compensation Act 2001—

        • (i) is paid a personal service rehabilitation payment for the claimant for a period, for a key aspect of social rehabilitation referred to in the definition of personal service rehabilitation payment in section OB 1 (the key aspect of social rehabilitation); and

        • (ii) pays another person for providing a key aspect of social rehabilitation to the claimant for a period; or

      • (b) the Accident Compensation Corporation pays another person a personal service rehabilitation payment for the claimant for a period, for providing a key aspect of social rehabilitation to the claimant for the period.

      (2) The person (the provider) is allowed a credit against the provider's income tax liability for the tax year corresponding to the provider's income year that includes the period.

      (3) The amount of the credit allowed under subsection (2) is calculated using the following formula:

      .

      (4) In the formula,—

      • (a) amount received is the amount paid to the provider for providing a key aspect of social rehabilitation to the claimant for the period, to the extent to which the amount is equal to or less than the amount of the personal service rehabilitation payment for a key aspect of social rehabilitation for the claimant for the period, after any deduction of tax under this Act:

      • (b) tax rate is the rate at which tax is deducted from a personal service rehabilitation payment for a key aspect of social rehabilitation for the period.

    LD 1C Tax deductions from certain accident compensation payments: credit allowed to claimant
    • (1) This section applies if—

      • (a) a claimant under the Injury Prevention, Rehabilitation, and Compensation Act 2001 is paid a personal service rehabilitation payment for the claimant for a period, for a key aspect of social rehabilitation referred to in the definition of personal service rehabilitation payment in section OB 1 (the key aspect of social rehabilitation); and

      • (b) the claimant pays another person (the provider) for providing a key aspect of social rehabilitation to the claimant for the period; and

      • (c) the amount paid to the provider is less than the amount of personal service rehabilitation payment for the claimant for the period, after any deduction of tax under this Act.

      (2) The tax credits under section LD 1(2) for the tax deductions relating to the amount are limited to the amount calculated using the following formula:

      .

      (3) In the formula,—

      • (a) total tax deductions is the total of deductions of tax for the personal service rehabilitation payment paid to the claimant for the period:

      • (b) amount paid is the amount paid to the provider, described in subsections (1)(b) and (c):

      • (c) tax rate is the rate at which tax is deducted from the personal service rehabilitation payment paid to the claimant for the period.

138 New section LD 4 inserted
  • After section LD 3A, the following is inserted:

    LD 4 Credit of retirement scheme contribution withholding tax for Maori authority credit
    • (1) If a retirement scheme contributor attaches a Maori authority credit to a retirement scheme contribution for a person in an income year, the retirement scheme contributor is entitled to a credit of retirement scheme contribution withholding tax equal to the lesser of the following amounts:

      • (a) the amount of the Maori authority credit:

      • (b) the liability of the retirement scheme contributor for retirement scheme contribution withholding tax on the retirement scheme contribution.

      (2) If the amount of the Maori authority credit exceeds the liability of the retirement scheme contributor for retirement scheme contribution withholding tax on the retirement scheme contribution,—

      • (a) the amount of the excess is treated as a Maori authority credit attached to a taxable Maori authority distribution from the retirement scheme contributor to the person; and

      • (b) the person responsible for withholding the retirement scheme contribution withholding tax must within 30 days of the contribution give a notice to the person showing the amount of the excess credit.

139 Credit of tax for dividend withholding payment credit in hands of shareholder
  • In section LD 8(1)(a), in assessable income is replaced by in assessable income (section MZ 16 (Credit of tax for imputation credits and dividend withholding payment credits: modifying amount) modifies this paragraph).

140 New section LD 12 added
  • After section LD 11, the following is added:

    LD 12 Credit for retirement scheme contribution withholding tax if retirement scheme contribution not excluded income
    • (1) This section applies for a taxpayer and a tax year if the taxpayer—

      • (a) derives income as a retirement scheme contribution for a period in the corresponding income year; and

      • (b) the retirement scheme contributor pays an amount of retirement scheme contribution withholding tax under subpart NEB in relation to the retirement scheme contribution; and

      • (c) the income is not excluded income of the taxpayer under section CX 42B.

      (2) If the taxpayer is a New Zealand resident, the taxpayer is entitled to a credit of tax against the taxpayer's income tax liability for the tax year equal to the amount paid as retirement scheme contribution withholding tax.

      (3) If the taxpayer is a non-resident and subsection (4) does not apply, the taxpayer is entitled to a credit of tax against the taxpayer's income tax liability for the tax year equal to any amount by which the amount paid as retirement scheme contribution withholding tax exceeds the amount treated under section NG 16 as being non-resident withholding tax paid in relation to the retirement scheme contribution.

      (4) If the taxpayer is a non-resident and the retirement scheme contribution is a taxable Maori authority distribution, the taxpayer is entitled to a credit of tax against the taxpayer's income tax liability for the tax year equal to the amount paid as retirement scheme contribution withholding tax in relation to the retirement scheme contribution.

      (5) For the purposes of section BC 10(2)(a) and (b), if a taxpayer has surplus credits from a tax credit under this section for the tax year, the Commissioner must—

      • (a) first, use the tax credit to satisfy the taxpayer's income tax liability for a tax year before the tax year:

      • (b) second, use the tax credit to satisfy the taxpayer's income tax liability for a tax year after the tax year, applying this paragraph to tax years in numerical order:

      • (c) third, use the tax credit to pay the taxpayer's provisional tax for a tax year after the tax year, applying this paragraph to tax years in numerical order:

      • (d) fourth, use the tax credit to pay an amount that is payable by the taxpayer under an Inland Revenue Act:

      • (e) fifth, treat the tax credit as tax paid in excess and refundable or transferable to the extent that section MD 1 and Part 10B of the Tax Administration Act 1994 apply.

141 Credits in respect of dividends to non-resident investors
  • The following is added to section LE 2:

    • (13) Section MZ 17 (Credits for non-resident investors) modifies subsections (2), (9) and (10).

142 Special rules for holding companies
  • In section LE 3(6), in item T, income year is replaced by income year (section MZ 17 (Credits for non-resident investors) modifies this item).

143 Estimation method
  • (1) Section MB 6(5), except the heading, is replaced by the following:

    • (5) If, under section MB 17(5), a taxpayer changes the way they determine the amount of provisional tax after the date of an instalment, they must estimate their residual income tax for their corresponding income year, and must pay provisional tax on whichever of the following relevant instalment dates for the income year occur after 30 days from their last ratio instalment date—

      • (a) C and F for changes to a 6-monthly GST taxable period:

      • (b) B, D, and F for other changes.

    (2) Subsection (1) applies for provisional tax payments for the 2008–09 and later tax years.

144 GST ratio method
  • (1) After section MB 7(3), the following is inserted:

    When subsection (3C) applies instead of subsection (3)
    • (3B) Subsection (3C) applies instead of subsection (3) if,—

      • (a) for the year before the preceding year referred to in subsection (3),—

        • (i) an assessment of a base amount has not been made and the absence of assessment is due to an extension of time to file the return for that year or a period in that year:

        • (ii) an assessment of a base amount is the subject of a dispute or challenge under the Tax Administration Act 1994:

        • (iii) the year is a transitional year; and

      • (b) for the year that is 2 years before the preceding year referred to in subsection (3),—

        • (i) the base amounts have been assessed; and

        • (ii) no assessment of a base amount is the subject of a dispute or challenge under the Tax Administration Act 1994; and

        • (iii) the year is not a transitional year.

    Amounts based on tax year 2 years before preceding tax year
    • (3C) The GST ratio under this subsection is the percentage based on the assessments of the base amounts for the year that is 2 years before the preceding year referred to in subsection (3).

    (2) After section MB 7(7), the following is inserted:

    When subsection (7C) applies instead of subsection (7)
    • (7B) Subsection (7C) applies instead of subsection (7) if,—

      • (a) for the year before the transitional year referred to in subsection (7),—

        • (i) an assessment of a base amount has not been made and the absence of assessment is due to an extension of time to file the return for that year or a period in that year:

        • (ii) an assessment of a base amount is the subject of a dispute or challenge under the Tax Administration Act 1994:

        • (iii) the year is a transitional year; and

      • (b) for the year that is 2 years before the transitional year referred to in subsection (7),—

        • (i) the base amounts have been assessed; and

        • (ii) no assessment of a base amount is the subject of a dispute or challenge under the Tax Administration Act 1994; and

        • (iii) the year is not a transitional year.

    GST ratio based on tax year 2 years before transitional tax year
    • (7C) The GST ratio under this subsection is the percentage based on the assessments of the base amounts for the year that is 2 years before the transitional year referred to in subsection (7).

    (3) Subsections (1) and (2) apply for provisional tax payments for the 2008–09 and later income years.

145 Provisional tax payable in instalments
  • (1) In section MB 8(6), section MB 6 or MB 9, as applicable is replaced by section MB 9.

    (2) In section MB 8(8), the words before paragraph (a) are replaced by the following:

    • (8) A new provisional taxpayer who starts a taxable activity in a tax year is liable to pay interest calculated under section 120KC of the Tax Administration Act 1994 as if the person were liable to pay provisional tax for the tax year—.

    (3) Section MB 8(8)(b)(ii), is replaced by the following:

    • (ii) if they pay GST on a 6-monthly basis and start a taxable activity at some time in the period that starts at the beginning of the corresponding income year and ends 30 days before the date of instalment C:.

    (4) Subsections (1), (2), and (3) apply for provisional tax payments for the 2008–09 and later income years.

146 Calculating amount of instalment under standard and estimation methods
  • (1) In section MB 9(1)(b), MB 8(2) and (4) is replaced by MB 8(2), (4), (6), and (7).

    (2) Subsection (1) applies for provisional tax payments for the 2008–09 and later income years.

147 Who may use GST ratio?
  • (1) In section MB 15(2),—

    • (a) in the words before the paragraphs, preceding tax year is replaced by preceding tax year and corresponding income year:

    • (b) in paragraph (b), whole tax year is replaced by whole income year.

    (2) In section MB 15(8)(a), in writing is replaced by in writing or by telephone.

    (3) In section MB 15(11), the tax year immediately before is replaced by a tax year earlier than.

    (4) Subsections (1), (2), and (3) apply for provisional tax payments for the 2008–09 and later income years.

148 Changing determination method
  • (1) In section MB 17(2), Subsection (3) or (4) is replaced by Subsection (4) or (5).

    (2) In section MB 17(4), (5), as if the election to use the GST ratio had not been made is replaced by (5). They are treated as never electing to use the GST ratio method and, for the purposes of section 120KE(5) of the Tax Administration Act 1994, as never changing the way they determine an amount of provisional tax under this section.

    (3) Subsections (1) and (2) apply for provisional tax payments for the 2008–09 and later income years.

149 Disposal of assets
  • (1) In section MB 18(2),—

    • (a) the words income year. The adjustment must be made to both are replaced by income year by subtracting the value, including GST, of the relevant asset from; and

    • (b) paragraphs (a) and (b) are replaced by the following:

      • (a) the total taxable supplies for a taxable period for the purposes of the formula in section MB 10(1), in proportion to the output tax which is attributed under section 20(4) of that Act to that taxable period for the supply of the asset:

      • (b) the base amount of total taxable supplies for the corresponding income year under section MB 7(2), in proportion to the output tax which is attributed under section 20(4) of that Act to a taxable period in that income year for the supply of the asset.

    (2) Subsection (1) applies for provisional tax payments for the 2008–09 and later income years.

150 Paying provisional tax in transitional years
  • (1) In section MB 20,—

    • (a) subsection (2)(a) and (b) are replaced by the following:

      • (a) the 28th day of the months given by schedule 13, part B, if paragraphs (b) and (c) do not apply:

      • (b) the 15th day of January, when the month given by schedule 13, part B is December and the year is a transitional year:

      • (c) the 7th day of May, when the month given by schedule 13, part B is April and the year is a transitional year.:

    • (b) in subsection (3)(b), month. is replaced by month; or and the following is added:

      • (c) the 7th day of May, when March is the final month and the year is a transitional year.

    (2) Subsection (1) applies for provisional tax payments for the 2008–09 and later income years.

151 Consequences of change in balance date
  • (1) Section MB 24(5) is replaced by the following:

    Adjustment to liability
    • (5) The taxpayer must—

      • (a) adjust their provisional tax liability for the part period of 1 month before the start of the new income year; and

      • (b) pay the instalment of provisional tax for the part period, as their final taxable period, by—

        • (i) the day that is 28 days after the end of the part period, if subparagraphs (ii) and (iii) do not apply; or

        • (ii) 15 January, if the part period is November; or

        • (iii) 7 May, if the part period is March.

    (2) Subsection (1) applies for provisional tax payments for the 2008–09 and later income years.

152 Registering for GST or cancelling registration
  • (1) Section MB 25(5) is replaced by the following:

    Date of cancellation
    • (5) For the purposes of subsection (4) and the provisional tax rules, the date of the cancellation is the later of—

      • (a) the date on which the cancellation of GST registration is notified:

      • (b) the date on which the taxpayer ceases under section 52 of the Goods and Services Act 1985 to be liable to be registered.

    (2) Subsection (1) applies for provisional tax payments for the 2008–09 and later income years.

153 Refund of excess tax
  • (1) In section MD 1(4)(a), family support and family plus is replaced by tax credits for families.

    (2) Subsection (1) applies for the 2007–08 and later income years.

154 Companies required to maintain imputation credit account
  • In section ME 1(2)(i), section 24 is replaced by section 266.

155 Companies electing to maintain imputation credit account
  • (1) Section ME 1A(1) is replaced by the following:

    • (1) A company that is not required under section ME 1 to establish and maintain an imputation credit account is eligible under this section to have an imputation credit account if the company is—

      • (a) resident in Australia; and

      • (b) not a company referred to in section ME 1(2)(c) to (k); and

      • (c) not treated as being resident in a country other than Australia under and for the purposes of an agreement that—

        • (i) is between Australia and the other country; and

        • (ii) would be a double tax agreement if negotiated between New Zealand and the other country.

    (2) Subsection (1) applies for the 2005–06 and later income years.

156 Credits arising to imputation credit account
  • (1) After section ME 4(1)(ad), the following is added:

    • (ae) the amount of any qualifying company election tax paid by the company for the imputation year:.

    (2) After section ME 4(2)(ad), the following is inserted:

    • (ae) in the case of a credit referred to in subsection (1)(ae), on the date the qualifying company election tax is paid:.

157 Allocation rules for imputation credits
  • (1) In section ME 8(1), item a, that is concurrent with the imputation year is omitted.

    (2) After section ME 8(6), the following is added:

    • (7) Sections MZ 13 and MZ 14 modify this section.

158 Further tax payable where end of year debit balance or when company ceases to be imputation credit account company
  • Section ME 9(4) is replaced by the following:

    • (4) A company must pay any further income tax to which it is liable under subsection (3)—

      • (a) not later than the last day on which the company is still an imputation credit account company, if paragraph (b) does not apply; or

      • (b) by the end of the imputation year in which the company ceases to be an imputation credit account company, if the company ceases to be an imputation credit account company because it becomes a portfolio investment entity.

159 Amount of imputation credit to be attached to cash distribution
  • The following is added to section ME 31:

    • (3) Section MZ 20 modifies subsection (1).

160 Notional distribution deemed to be dividend
  • The following is added to section ME 33:

    • (4) Section MZ 20 modifies subsection (1).

161 Amount of imputation credit to be attached to cash distribution
  • The following is added to section ME 36:

    • (3) Section MZ 20 modifies subsection (1).

162 Notional distribution deemed to be dividend or taxable Maori authority distribution
  • The following is added to section ME 38:

    • (3) Section MZ 20 modifies subsection (1).

163 Branch equivalent tax account of company
  • The following is added to section MF 3:

    • (3) Section MZ 21 modifies this section.

164 Credits and debits arising to branch equivalent tax account of company
  • The following is added to section MF 4:

    • (7) Section MZ 21 modifies the amounts of credits, debits, and balances arising under this section.

165 Use of credit to reduce dividend withholding payment, or use of debit to satisfy income tax liability
  • (1) After section MF 5(5), the following is inserted:

    • (5B) An election made for a company (the first company) by the first company or any other company under section MF 5(4) for an income year is invalid to the extent to which the total of all those elections and any other elections for the first company under section MF 10(4) for the year is greater than an amount calculated for the first company for the year using the formula in section MF 4(1)(a) (but treating item e as zero).

    • (5C) An amount of election that is invalid under subsection (5B)—

      • (a) is not recorded as a credit in the branch equivalent tax account of the company that makes the election:

      • (b) is not an amount of debit balance for which the election is made:

      • (c) does not relate to the election.

    (2) Subsection (1) applies for a person for the 2005–06 and later income years, unless the person has, for the relevant income year, taken a tax position in a return of income furnished to the Commissioner before 17 May 2007 that ignores the existence of subsection (1).

    (3) If subsection (1) does not apply to a person for an income year because of subsection (2), the person may treat subsection (1) as not existing.

166 Debits and credits arising to group branch equivalent tax account
  • The following is added to section MF 8:

    • (7) Section MZ 21 modifies this section.

167 Use of consolidated group credit to reduce dividend withholding payment, or use of group or individual debit to satisfy income tax liability
  • (1) After section MF 10(4), the following is inserted:

    • (4B) An election made for a consolidated group under section MF 10(3) by any company described in section MF 10(3)(a) to (c) for an income year is invalid to the extent to which the total of all those elections is greater than an amount calculated for the consolidated group for the year using the formula in section MF 8(2)(a) (but treating item e as zero).

    • (4C) An election made for a company (the first company) by any consolidated group under section MF 10(4) for an income year is invalid to the extent to which the total of all those elections and any other elections for the first company under section MF 5(4) for the year is greater than an amount calculated for the first company for the year using the formula in section MF 4(1)(a) (but treating item e as zero).

    • (4D) An amount of election that is invalid under subsections (4B) or (4C)—

      • (a) is not recorded as a credit in the branch equivalent tax account of the company or consolidated group, as the case may be, that makes the election:

      • (b) is not an amount of debit balance for which the election is made:

      • (c) does not relate to the election.

    (2) Subsection (1) applies for a person for the 2005–06 and later income years, unless the person has, for the relevant income year, taken a tax position in a return of income furnished to the Commissioner before 17 May 2007 that ignores the existence of subsection (1).

    (3) If subsection (1) does not apply to a person for an income year because of subsection (2), the person may treat subsection (1) as not existing.

168 Allocation rules for dividend withholding payment credits
  • (1) In section MG 8(1), item a, that is concurrent with the imputation year is omitted.

    (2) After section MG 8(8), the following is added:

    • (9) Sections MZ 13 and MZ 14 modify this section.

169 Dividend with both imputation credit and dividend withholding payment credit attached
  • (1) In section MG 10(1), item a, that is concurrent with the imputation year is omitted.

    (2) After section MG 10(2), the following is added:

    • (3) Section MZ 13 modifies this section.

170 Conduit tax relief account
  • The following is added to section MI 3:

    • (3) Section MZ 22 modifies this section.

171 Credits arising to conduit tax relief account
  • The following is added to section MI 4:

    • (3) Section MZ 22 modifies this section.

172 Debits arising to conduit tax relief account
  • The following is added to section MI 5:

    • (8) Section MZ 22 modifies this section.

173 Consolidated group conduit tax relief account
  • The following is added to section MI 15:

    • (2) Section MZ 22 modifies this section.

174 Credits arising to group conduit tax relief account
  • The following is added to section MI 17:

    • (3) Section MZ 22 modifies this section.

175 Debits arising to group conduit tax relief account
  • The following is added to section MI 18:

    • (5) Section MZ 22 modifies this section.

176 Private use of motor vehicle: when schedular value not used
  • (1) In section ND 1U(1), clause 6 is replaced by clause 5.

    (2) In section ND 1U(2), in the words before paragraph (a), clause 2 is replaced by clause 4.

    (3) In section ND 1U(3), clause 2 is replaced by clause 4.

    (4) Subsections (1) to (3) apply for a person's liability for fringe benefit tax for a period beginning on or after 1 April 2006.

177 Private use of motor vehicle: when schedular value used
  • (1) In section ND 1V(1), clause 6 is replaced by clause 5.

    (2) Subsection (1) applies for a person's liability for fringe benefit tax for a period beginning on or after 1 April 2006.

178 New subpart NEB inserted
  • After subpart NEA, the following is inserted:

    Subpart NEBRetirement scheme contribution withholding tax

    NEB 1 Retirement scheme contribution withholding tax imposed
    • Retirement scheme contribution subject to withholding tax

      (1) A retirement scheme contribution made for a person to a retirement savings scheme is subject to retirement scheme contribution withholding tax at the retirement scheme withholding rate for the person.

      Amount of retirement scheme contribution

      (2) For the purposes of the RSCWT rules, unless the context otherwise requires, the amount of a retirement scheme contribution is the total of—

      • (a) the amount received as the retirement scheme contribution by the retirement savings scheme and not deducted under section NEB 2 on behalf of the retirement scheme contributor; and

      • (b) the amount of retirement scheme contribution withholding tax payable under the RSCWT rules on the retirement scheme contribution.

      Defined in this Act: retirement savings scheme, retirement scheme contribution, retirement scheme contribution withholding tax, retirement scheme withholding rate, RSCWT rules,

    NEB 2 Retirement scheme contribution withholding tax to be deducted
    • Responsibility of retirement scheme contributor to deduct

      (1) A retirement scheme contributor who pays to a retirement savings scheme an amount that represents a retirement scheme contribution for a person must, at the time of the payment, deduct from the amount an amount of retirement scheme contribution withholding tax determined under section NEB 1.

      Appointment of retirement savings scheme as agent

      (2) A retirement scheme contributor who pays a retirement scheme contribution to a retirement savings scheme may appoint the retirement savings scheme as agent to make the deduction required by subsection (1).

      Defined in this Act: retirement savings scheme, retirement scheme contribution, retirement scheme contribution withholding tax, retirement scheme contributor,

    NEB 3 Payment and notice of deductions
    • Payment and notice

      (1) A retirement scheme contributor or retirement savings scheme who deducts retirement scheme contribution withholding tax from a retirement scheme contribution must, not later than the 20th of the month following the month in which the deduction is made,—

      • (a) pay the amount of the deduction to the Commissioner; and

      • (b) give to the Commissioner, in a notice in a form acceptable to the Commissioner, a figure for the amount of retirement scheme contribution withholding tax being paid for the month of the deduction other than by the use of imputation credits and Maori authority credits.

      Amalgamating company

      (2) If an amalgamating company ceases to exist on an amalgamation, subsection (1) applies from the time of the amalgamation as if retirement scheme contribution withholding tax deductions payable by the amalgamating company in the year preceding the year in which the amalgamation takes place were payable by the amalgamated company.

      Defined in this Act: Commissioner, imputation credit, Maori authority credit, notice, retirement savings scheme, retirement scheme contribution, retirement scheme contribution withholding tax, retirement scheme contributor, tax file number,

    NEB 4 Failure to deduct
    • Debt owing to Commissioner

      (1) If a retirement scheme contributor or retirement savings scheme fails to deduct retirement scheme contribution withholding tax from a retirement scheme contribution for a person as required by section NEB 1, an amount calculated using the formula in subsection (2) is a debt—

      • (a) payable to the Commissioner by the retirement scheme contributor; and

      • (b) becoming due and payable on the 20th of the month following the month in which the retirement scheme contribution was made.

      Formula for amount of debt

      (2) The amount of the debt is calculated using the formula—

      .
      Definition of items in formula

      (3) The items in the formula are defined in subsections (4) to (6).

      Tax rate

      (4) Tax rate is the retirement scheme withholding rate for the person.

      Contribution to scheme

      (5) Contribution to scheme is the amount of the retirement scheme contribution received by the retirement savings scheme, excluding the amount of retirement scheme contribution withholding tax.

      Tax already paid

      (6) Tax already paid is any amount of retirement scheme contribution withholding tax for the contribution that has already been paid.

      Defined in this Act: Commissioner, retirement savings scheme, retirement scheme contribution, retirement scheme contribution withholding tax, retirement scheme contributor, retirement scheme withholding rate,

    NEB 5 Retirement savings schemes
    • Eligibility to be retirement savings scheme

      (1) An entity is eligible to be a retirement savings scheme for a person if—

      • (a) the entity is a portfolio investment entity; and

      • (b) under the rules (the distribution rules) governing the distribution by the entity of funds in which the person has an interest, the availability of distributions to the person is restricted before the person reaches an age of retirement specified in the rules; and

      • (c) under the distribution rules, the person is not permitted to make a withdrawal before the age of retirement other than a withdrawal—

        • (i) for the repayment of a student loan as defined in the Students Loan Scheme Act 1992:

        • (ii) for the payment of fees and expenses relating to tertiary education:

        • (iii) for the purchase of housing, if the person does not own a home:

        • (iv) that the person would be permitted to make if the scheme were a KiwiSaver scheme under the KiwiSaver Act 2006:

        • (v) in circumstances specified in the rules as approved under paragraph (e); and

      • (d) under the distribution rules, the entity may require the person to provide information for the purpose of ensuring that the requirements relating to a withdrawal are met; and

      • (e) the Commissioner approves the distribution rules as being fair and reasonable.

      Retirement savings scheme for person

      (2) An entity is a retirement savings scheme for a person for an income year if, in the income year,—

      • (a) the entity is eligible to be a retirement savings scheme for the person under subsection (1); and

      • (b) the entity holds funds from a retirement scheme contribution for the person.

      Defined in this Act: Commissioner, income year, portfolio investment entity, retirement savings scheme, retirement scheme contribution, retirement-scheme contributor,

    NEB 6 Retirement scheme contributors
    • Eligibility to be retirement scheme contributor

      (1) An entity is eligible to be a retirement scheme contributor for a person if—

      • (a) the entity is—

        • (i) the trustee of a widely-held trust that is a unit trust:

        • (ii) a company other than a close company:

        • (iii) a Maori authority; and

      • (b) the person is a unit holder, shareholder, or member, of the entity.

      Retirement scheme contributor for person

      (2) An entity is a retirement scheme contributor for a person for an income year if,—

      • (a) in the income year, the entity is eligible to be a retirement scheme contributor under subsection (1); and

      • (b) in or before the income year, the entity makes a payment intended to be a retirement scheme contribution for the person.

      Defined in this Act: close company, company, income year, Maori authority, retirement savings scheme, retirement scheme contribution, retirement scheme contributor, shareholder, trustee, unit holder, unit trust, widely-held trust,

    NEB 7 Application of other provisions to retirement scheme contribution withholding tax
    • Section GC 20 and sections 170(2), 171, and 172 of the Tax Administration Act 1994

      (1) For the purposes of the RSCWT rules, section GC 20 (Agreements not to make resident withholding tax deductions to be void) and sections 170(2), 171, and 172 of the Tax Administration Act 1994, as far as they are applicable and with any necessary modifications, apply as if—

      • (a) a reference to a resident withholding tax deduction were a reference to a deduction of retirement scheme contribution withholding tax:

      • (b) a reference to the RWT rules were a reference to the RSCWT rules.

      Other provisions, except for RSCWT rules

      (2) The provisions of this Act and of the Tax Administration Act 1994 other than the provisions affected by subsection (1), as far as they are applicable and with any necessary modifications, apply as if retirement scheme contribution withholding tax were income tax levied under section BB 1 (Imposition of income tax).

      Relationship with other RSCWT rules

      (3) Subsections (1) and (2) are subject to the other RSCWT rules.

      Defined in this Act: income tax, resident withholding tax deduction, retirement scheme contribution withholding tax, RSCWT rules, RWT rules,

179 Application of RWT rules
  • (1) After section NF 1(2)(b)(x), the following is added:

    • (xi) dividends that are excluded income by virtue of the application of section CX 42B or would be excluded income under that section in the absence of section CX 42B(2)(a) and (b):.

    (2) After section NF 1(2)(b)(xi), the following is added:

    • (xii) dividends that are not non-cash dividends and that—

      • (A) have an imputation ratio, dividend withholding payment ratio, or combined imputation and dividend ratio, of 30/70 or greater; and

      • (B) are paid by a unit trust or a group investment fund, and the unit trust, the group investment fund, or an RWT proxy for them, has not deducted resident withholding tax from any previous dividend.

    (3) Section NF 1(2)(c) is replaced by the following:

    • (c) taxable Maori authority distributions not being retirement scheme contributions:.

180 Resident withholding tax deductions from dividends deemed to be dividend withholding payment credits
  • (1) In section NF 8(1), LB 1 is replaced by LB 1, excluding subsection (1)(d) and (e),.

    (2) Subsection (1) applies—

    • (a) for the 2008–09 and later income years, unless paragraph (b) applies:

    • (b) on and after 1 April 2008 for a portfolio tax rate entity that does not choose to be subject to section HL 22.

181 New section NG 16B inserted
  • After section NG 16A, the following is inserted:

    NG 16B Person withholding amount as retirement scheme contribution withholding tax when liable for non-resident withholding tax
    • (1) This section applies for a retirement scheme contributor who—

      • (a) makes a retirement scheme contribution for a non-resident; and

      • (b) pays to the Commissioner an amount as retirement scheme contribution withholding tax relating to the retirement scheme contribution.

      (2) The retirement scheme contributor is treated as having withheld from the retirement scheme contribution and paid to the Commissioner an amount of non-resident withholding tax equal to the lesser of—

      • (i) the amount paid as retirement scheme contribution withholding tax in relation to the retirement scheme contribution:

      • (ii) the non-resident withholding tax payable in relation to the retirement scheme contribution.

      (3) Section LD 12 applies to any balance of the amount paid as retirement scheme contribution withholding tax.

182 Definitions
  • (1) This section amends section OB 1.

    (2) In the definition of allowable rebates, paragraph (a) is replaced by the following:

    • (a) means the total of the rebates and credits of tax that a person is allowed in a tax year under Part K (Rebates), excluding rebates or credits allowed under—

      • (i) section KC 4 (Rebate in certain cases for housekeeper):

      • (ii) section KC 5 (Rebate in respect of gifts of money):

      • (iii) subpart KI (Rebates for portfolio tax rate entities):

      • (iv) subpart KJ (KiwiSaver scheme and complying superannuation fund tax credits); and.

    (3) In the definition of applicable basic tax rate, in paragraph (b), (Basic rates of income tax and specified superannuation contribution withholding tax) is omitted.

    (4) After the definition of attributing interest, the following is inserted:

    attribution company means a company described as an attribution company in section GC 14EB(1) (Treatment of dividends as if from qualifying company).

    (5) In the definition of child, in paragraph (b), Tax credits for family support and family plus is replaced by Tax credits for families.

    (6) In the definition of child, in paragraph (b)(iii), family tax credit is replaced by minimum family tax credit.

    (7) In the definition of civil union partner, Tax credits for family support and family plus is replaced by Tax credits for families.

    (8) In the definition of elected period, Tax credits for family support and family plus is replaced by Tax credits for families.

    (9) In the definition of eligible period, in paragraph (f), ring-fenced family support recipient is replaced by ring-fenced family tax credit recipient.

    (10) In the definition of employment, in paragraph (d), Tax credits for family support and family plus is replaced by Tax credits for families.

    (11) In the definition of employment, in paragraph (e), family tax credit is replaced by minimum family tax credit in both places that it occurs.

    (12) After the definition of environmental restoration account, the following is inserted:

    equity instrument is defined in section EW 15B (IFRS taxpayer method) for the purposes of that section.

    (13) After the definition of fair dividend rate method, the following is inserted:

    fair value method means a method of calculating income or expenditure for an income year that takes into account movements in fair value as determined under IFRSs.

    (14) The definition of family plus is repealed.

    (15) In the definition of family support credit, family support credit is replaced by family tax credit.

    (16) The definition of family tax credit existing before this Act is repealed.

    (17) In paragraph (b) of the definition of finance lease, life) is replaced by life): and the following is added:

    • (c) the person enters on or after 20 June 2007 and is, or is part of, an arrangement that, when the person enters the lease or when a change in the terms of the arrangement changes the allocation or size of the risks and rewards incidental to ownership of the lease asset,—

      • (i) involves use of the asset outside New Zealand for all or most of the term of the lease; and

      • (ii) involves income of any person who is not the lessor, arising from the use of the asset by any person, that is exempt income, or excluded income, or non-residents' foreign-sourced income; and

      • (iii) is a finance lease under NZIAS 17 for the lessor, or for a company that is in the same group of companies as the lessor and derives assessable income from the arrangement, or is an arrangement under which persons who do not include the lessor bear substantially all the risks and rewards incidental to ownership of the lease asset, determined as at the time the person enters the lease and taking into account later changes to the arrangement.

    (18) The definition of Financial Reporting Standard No 13 1995 (Accounting for Research and Development Activities) is repealed.

    (19) In the definition of financial statements, livestock)), is replaced by livestock)), subpart EW (Financial arrangements rules),.

    (20) After the definition of gift, the following is inserted:

    gifting settlor is defined in section EX 40(10) (Limits on choice of calculation methods).

    (21) In the definition of group of companies, section IG 1(2) is replaced by section IG 1(2) and (2B).

    (22) After the definition of identical share, the following is inserted:

    IFRS means a New Zealand Equivalent to International Financial Reporting Standard, approved by the Accounting Standards Review Board, and as amended from time to time or an equivalent standard issued in its place

    IFRS taxpayer method means the methods described in sections EW 15B to EW 15E (which relate to the IFRS method and alternative methods)

    impaired credit adjustment is defined in section EW 15C(4) (IFRS method) for the purposes of that section.

    (23) In the definition of investor, paragraphs (b) and (c) are replaced by the following:

    • (b) for a portfolio investment entity is defined in section HL 5B (Meaning of investor and portfolio investor class).

    (24) The definition of in-work payment is replaced by the following:

    in-work tax credit means the component of the subpart KD credit given by section KD 2AAA (In-work tax credit).

    (25) In the definition of land, paragraph (a)(i) is repealed.

    (26) In paragraph (d) of the definition of lease, FC 8I is replaced by FC 8H.

    (27) After the definition of minibus, the following is inserted:

    minimum family tax credit means a credit allowed by section KD 3 (Calculation of minimum family tax credit).

    (28) After the definition of nil period, the following is inserted:

    Niue International Trust Fund means the trust governed by the Deed concerning the Niue International Trust Fund dated 25 October 2006 and signed by Her Majesty the Queen in right of New Zealand and the Governments of Niue and Australia.

    (29) After the definition of non-filing taxpayer, the following is inserted:

    non-integral fee means a fee or transaction cost that, for the purposes of financial reporting under IFRSs, is not an integral part of the effective interest rate of a financial arrangement.

    (30) After the definition of NRWT rules, the following is inserted:

    NZIAS 2 means New Zealand Equivalent to International Accounting Standard 2, approved by the Accounting Standards Review Board and as amended from time to time, or an equivalent standard issued in its place

    NZIAS 8 means New Zealand Equivalent to International Accounting Standard 8, approved by the Accounting Standards Review Board and as amended from time to time, or an equivalent standard issued in its place

    NZIAS 17 means New Zealand Equivalent to International Accounting Standard 17, approved by the Accounting Standards Review Board and as amended from time to time, or an equivalent standard issued in its place

    NZIAS 32 means New Zealand Equivalent to International Accounting Standard 32, approved by the Accounting Standards Review Board and as amended from time to time, or an equivalent standard issued in its place

    NZIAS 39 means New Zealand Equivalent to International Accounting Standard 39, approved by the Accounting Standards Review Board and as amended from time to time, or an equivalent standard issued in its place

    NZIAS 41 is defined in section EB 6(3) (Cost) for the purposes of that section.

    (31) After the definition of offshore permit area, the following is inserted:

    old company tax rate means a 33% basic rate that applied before the 2008–09 income year.

    (32) After the definition of personal property lease payment, the following is inserted:

    personal service rehabilitation payment, for a person, means an amount paid for the benefit of the person—

    • (a) under section 81(3) of the Injury Prevention, Rehabilitation, and Compensation Act 2001; and

    • (b) by the Accident Compensation Corporation or an employer that is an accredited employer as defined in section 181 of that Act; and

    • (c) in providing to the person a key aspect of social rehabilitation referred to in—

      • (i) section 81(1)(b), (c), (e), or (g) (relating to attendant care, child care, home help, and training for independence) of that Act:

      • (ii) section 81(1)(h) (relating to transport for independence) of that Act to the extent given by paragraph (a)(i) of the definition of transport for independence in schedule 1, clause 12 of that Act.

    (33) The definition of petroleum mining operations is replaced by the following:

    petroleum mining operations is defined in section CT 6B (Meaning of petroleum mining operations).

    (34) In the definition of portfolio entity investment, a portfolio investment entity is replaced by an entity.

    (35) In the definition of portfolio investment entity, in paragraph (c), fund is replaced by fund:, and the following is added:

    • (d) portfolio investment-linked life fund.

    (36) After the definition of portfolio investment entity, the following is inserted:

    portfolio investment-linked life fund means a separate identifiable fund, forming part of a life insurer, that—

    • (a) holds investments subject to life insurance policies under which benefits are directly linked to the value of the investments held in the fund; and

    • (b) has become a portfolio investment entity under section HL 12 (Becoming portfolio investment entity); and

    • (c) has not ceased to be a portfolio investment entity under section HL 14 (Ceasing to be portfolio investment entity).

    (37) The definition of portfolio investor class is replaced by the following:

    portfolio investor class is defined in section HL 5B (Meaning of investor and portfolio investor class).

    (38) In the definition of portfolio investor exit period, paragraph (b)(ii) is replaced by the following:

    • (ii) ending on a day in the tax year on which the amount of the entity's portfolio tax liability under section HL 20, reduced by any tax credits allocated to the investor, for the investor for the period equals or exceeds the value of the investor's portfolio investor interest.

    (39) The definition of portfolio investor rate is replaced by the following:

    portfolio investor rate, at a time for an investor in a portfolio tax rate entity and for a portfolio allocation period, means—

    • (a) 33%, if paragraphs (b) and (c) do not apply; or

    • (b) the rate, if paragraph (c) does not apply, that the investor notifies—

      • (i) to the entity as the prescribed investor rate for the investor and the period; and

      • (ii) in the latest notice before the time; or

    • (c) 0%, if—

      • (i) the entity makes payments of tax under section HL 21 (Payments of tax by portfolio tax rate entity making no election); and

      • (ii) the portfolio investor rate at the time for the investor for the portfolio calculation period would, in the absence of this paragraph, be more than 0%; and

      • (iii) the portfolio calculation period includes part of a portfolio investor exit period for the investor.

    (40) In the definition of portfolio land company, in paragraph (b),—

    • (a) in the words before subparagraph (i), 80% is replaced by 80% or more:

    • (b) in subparagraph (ii), of the company is replaced by of the company; and and the following is added:

      • (c) meets the requirements of section HL 10(2) (Further eligibility requirements relating to investments) for the tax year.

    (41) In the definition of portfolio listed company, in paragraph (d), entity) is replaced by entity); and, and the following is added:

    • (e) is not a portfolio investment-linked life fund.

    (42) In the definition of portfolio tax rate entity in paragraph (d), fund is replaced by fund; and, and the following is added:

    • (e) is not a portfolio investment-linked life fund.

    (43) In the definition of qualifying person, in paragraphs (a)(iii) and (c), family tax credit is replaced by minimum family tax credit in each place where it appears.

    (44) After the definition of reduced deficit debit, the following is inserted:

    redundancy payment means a source deduction payment paid—

    • (a) to a person whose employment in a position is terminated because the position is superfluous to the requirements of the person's employer; and

    • (b) in compensation for the person's loss of employment.

    (45) In the definition of refundable credit, in paragraph (d), election) is replaced by election); or and the following is added:

    • (e) for a tax credit under section LD 12 (Credit for retirement scheme contribution withholding tax if retirement scheme contribution not excluded income).

    (46) In the definition of refundable rebate, Tax credits for family support and family plus is replaced by Tax credits for families.

    (47) In the definition of resident, Tax credits for family support and family plus is replaced by Tax credits for families.

    (48) In the definition of residual income tax,—

    • (a) in the words before paragraph (a), Tax credits for family support and family plus is replaced by Tax credits for families:

    • (b) after paragraph (j), the following is inserted:

      • (jb) the amount of any tax credit under section LD 12 (Credit for retirement scheme contribution withholding tax if retirement scheme contribution not excluded income) credited against the income tax:.

    (49) After the definition of retained earnings, the following is inserted:

    retirement savings scheme for a person means an entity satisfying the requirements of section NEB 5 (Retirement savings schemes)

    retirement scheme contribution for a person means a contribution that is made—

    • (a) as an amount of—

      • (i) money:

      • (ii) imputation credits:

      • (iii) Maori authority credits; and

    • (b) to an entity that is eligible to be a retirement savings scheme; and

    • (c) by an entity that is eligible to be a retirement scheme contributor; and

    • (d) for the benefit of the person; and

    • (e) because the person is a member of, or has an ownership interest in, the entity that is eligible to be a retirement scheme contributor

    retirement scheme contribution withholding tax means retirement scheme contribution withholding tax payable under the RSCWT rules

    retirement scheme contributor means an entity satisfying the requirements of section NEB 6 (Retirement scheme contributors)

    retirement scheme prescribed rate, for a person and a retirement scheme contribution made for the person at a time in an income year (the contribution year), means—

    • (a) 39%, if none of paragraphs (b) to (d) apply; or

    • (b) 33%, if paragraphs (c) and (d) do not apply and the person has, in either of the 2 income years immediately before the contribution year, taxable income of $60,000 or less; or

    • (c) 19.5%, if paragraph (d) does not apply and—

      • (i) the person has, in either of the 2 income years immediately before the contribution year, taxable income of $38,000 or less:

      • (ii) the person is a non-resident and the retirement scheme contributor is a Maori authority and the distribution is $200 or less:

      • (iii) the person is a non-resident and the retirement scheme contributor is a Maori authority and the person supplies the Maori authority with a notice satisfying section 28C of the Tax Administration Act 1994; or

    • (d) 0%, if the person is a non-resident at the time and the contribution is non-resident withholding income

    retirement scheme withholding rate, for a person and a retirement scheme contribution made for the person at a time in an income year, means,—

    • (a) 39%, if paragraphs (b) and (c) do not apply; or

    • (b) 19.5%, if paragraph (c) does not apply and the person is a non-resident and the retirement scheme contributor is a Maori authority and the distribution is $200 or less; or

    • (c) the rate that the person notifies to the retirement scheme contributor as the retirement scheme prescribed rate for the person and the retirement scheme contribution—

      • (i) before the retirement scheme contribution is made; and

      • (ii) by a notice satisfying section 28C of the Tax Administration Act 1994.

    (50) After the definition of royalty, the following is inserted:

    RSCWT rules means—

    • (a) the following provisions:

      • (i) section CX 42B (Contributions to retirement savings scheme):

      • (ii) section LB 3 (Credit of retirement scheme contribution withholding tax for imputation credit):

      • (iii) section LD 4 (Credit of retirement scheme contribution withholding tax for Maori authority credit):

      • (iv) section LD 12 (Credit for retirement scheme contribution withholding tax if retirement scheme contribution not excluded income):

      • (v) subpart NEB (Retirement scheme contribution withholding tax):

      • (vi) section NF 1(2)(b)(xi) and (c) (Application of RWT rules):

      • (vii) section NG 16B (Person withholding amount as retirement scheme contribution withholding tax when liable for non-resident withholding tax):

    • (b) section 48B and Part 9 of the Tax Administration Act 1994.

    (51) In the definition of separated person, in paragraph (b), Tax credits for family support and family plus is replaced by Tax credits for families.

    (52) After the definition of social assistance suspensory loan, the following is inserted:

    sound commercial reason is defined in section EW 26(7) (Change of spreading method) for the purposes of that section.

    (53) In the definition of specified period, in paragraph (a), Tax credits for family support and family plus is replaced by Tax credits for families.

    (54) In the definition of spouse, Tax credits for family support and family plus is replaced by Tax credits for families.

    (55) After the definition of time of the sale, the following is inserted:

    Tokelau International Trust Fund means the trust governed by the Deed concerning the Tokelau International Trust Fund dated 10 November 2004 and signed by Her Majesty the Queen in right of New Zealand and the Government of Tokelau.

    (56) In the definition of venture investment agreement, for the purposes of that section is omitted.

    (57) Subsection (25) applies for the 2005–06 and later income years.

    (58) Subsections (12), (13), (18), (19), (22), (29), (30), and (52) apply for—

    • (a) the 2007–08 and later income years, unless paragraph (b) applies; or

    • (b) the first income year for which a person adopts IFRS s for the purposes of financial reporting and later income years, if that first income year is before the 2007–08 income year.

    (59) Subsection (17) applies for leases entered on or after 20 May 1999 and for income years including 20 June 2007 and later income years.

    (60) Subsections (5), (6), (7), (8), (9), (10), (11), (14), (15), (16), (24), (27), (43), (46), (47), (48)(a), (51), (53), and (54) apply for the 2007–08 and later income years.

183 Meaning of source deduction payment: shareholder-employees of close companies
  • (1) The heading to section OB 2 is replaced by Meaning of source deduction payment.

    (2) In section OB 2(1), GC 14D is replaced by GC 14D, or a personal services rehabilitation payment for a claimant under the Injury Prevention, Rehabilitation, and Compensation Act 2001.

184 Meaning of income tax
  • (1) In section OB 6(1)(d)(i), retirement scheme contribution withholding tax, is inserted after specified superannuation contribution withholding tax,.

    (2) In section OB 6(3)(o), , 141B, is inserted after sections 31.

185 Further definitions of associated persons
  • (1) In section OD 8(1), DT 2, is omitted.

    (2) In section OD 8(3), in the words before paragraph (a), KC 6, is inserted after HL 9,.

186 Schedule 13—Months for payment of provisional tax and terminal tax
  • (1) In schedule 13, part B, in the first column of the table for GST ratio provisional taxpayers, 7– is replaced by 7–8.

    (2) Subsection (1) applies for provisional tax payments for the 2008–09 and later income years.

Part 2
Amendments to Tax Administration Act 1994

187 Tax Administration Act 1994
  • Sections 188 to 268 amend the Tax Administration Act 1994.

188 Interpretation
  • (1) In section 3(1), after the definition of business, the following is inserted:

    business group amnesty means an amnesty declared by the Commissioner under section 226B.

    (2) In section 3(1), in the definition of incremental late payment penalty, section 139B(2B) is replaced by section 139B(2)(b).

    (3) In section 3(1), in the definition of initial late payment penalty, section 139B(2A) is replaced by section 139B(2)(a).

    (4) In section 3(1), in the definition of response period, paragraphs (c) and (d) are replaced by the following:

    • (c) if the notice is a notice of proposed adjustment that is issued by a disputant and the initiating notice is either a notice of disputable decision issued by the Commissioner or a notice revoking or varying a disputable decision that is not an assessment,—

      • (i) the 4-month period starting on the date of issue of the initiating notice, unless subparagraph (ii) applies; or

      • (ii) the 1-year period starting on the date of issue of the initiating notice, if the notice of proposed adjustment relates solely to a claim for an amount of tax credit under section LH 2 of the Income Tax Act 2007:

    • (d) if the notice is a notice of proposed adjustment not relating solely to a claim for an amount of tax credit under section LH 2 of the Income Tax Act 2007 that is issued by a taxpayer under section 89DA and the initiating notice is a notice of assessment issued by the taxpayer, the 4-month period starting on the date on which the taxpayer's notice of assessment is received at an office of the Department:

    • (e) if the notice is a notice of proposed adjustment relating solely to a claim for an amount of tax credit under section LH 2 of the Income Tax Act 2007 that is issued by a taxpayer under section 89DA and the initiating notice is a notice of assessment issued by the taxpayer,—

      • (i) the 2-year period starting on the date on which the taxpayer's notice of assessment is received at an office of the Department, if the taxpayer is not a member of an internal software development group and not a partner in a partnership to which section 68E applies; or

      • (ii) the period starting on the date on which the taxpayer's notice of assessment is received at an office of the Department and ending on the day that is 2 years after the latest day for any member of the taxpayer's internal software development group or for the taxpayer's partnership to furnish a return of income or joint return of income for the relevant tax year under section 37.

    (5) [Repealed]

    (6) In section 3(1), the definition of tax agent is replaced by the following:

    tax agent means a person who—

    • (a) is eligible under section 34B(2) to be a tax agent; and

    • (b) is listed by the Commissioner as a tax agent—

      • (i) before the date on which the Taxation (Business Taxation and Remedial Matters) Act 2007 receives the Royal assent:

      • (ii) on or after the date on which that Act receives the Royal assent, after the person applies under section 34B to be listed by the Commissioner; and

    • (c) is not later removed by the Commissioner from the list of tax agents.

    (7) [Repealed]

    (8) [Repealed]

    Section 188(5): repealed (with effect from 19 December 2007), on 15 December 2008, by section 28 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

    Section 188(7): repealed (with effect from 19 December 2007), on 15 December 2008, by section 28 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

    Section 188(8): repealed (with effect from 19 December 2007), on 15 December 2008, by section 28 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

189 Keeping of business records
  • (1) In the heading to section 22, business records is replaced by business and other records.

    (2) After section 22(2)(c), the following is inserted:

    • (cb) is a person to whom the RSCT rules apply and who makes a retirement scheme contribution to a retirement savings scheme:.

    (3) After section 22(2)(e), the following is inserted:

    • (eb) has a tax credit under section LH 2 of the Income Tax Act 2007:

    • (ec) is a listed research provider under section LH 15 of that Act:.

    (4) After section 22(2)(kb), the following is inserted:

    • (kc) the amount of the person's tax credit under section LH 2 of the Income Tax Act 2007; and

    • (kd) the person's compliance with section LH 15(1) of that Act, if the person is a listed research provider under section LH 15 of that Act, to show—

      • (i) they meet the start-up requirements and the other continuing requirements; and

      • (ii) the amounts derived and incurred by them in performing the research and development activities on behalf of other persons; and.

    (5) After section 22(2)(l), the following is inserted:

    • (lb) every retirement scheme contribution, and the taxable value of that contribution, made by the person to any retirement savings scheme, those records to include, without limiting the generality of the preceding provisions of this paragraph, details of the recipient of the retirement scheme contribution and the occasion of making it; and.

    (6) In section 22(7)(d)(iii)(C), the trust. is replaced by the trust:, and the following is added:

    • (e) for the purposes of subsection (2)(kc), other documents evidencing research and development activities.

    (7) Subsections (1) to (6) apply for the 2008–09 and later income years.

190 Section 28B repealed
  • Section 28B is repealed.

191 New section 28B inserted
  • After section 28, the following is inserted:

    28B Investor to advise portfolio tax rate entity of investor's tax file number
    • A resident of New Zealand who is an investor in a portfolio tax rate entity must give notice of the person's tax file number to the entity within 1 month of the date of a request from the entity for the tax file number.

192 New section 28C inserted
  • After section 28B, the following is inserted:

    28C Person advising retirement savings scheme of retirement scheme prescribed rate
    • A person who gives a notice that the retirement scheme prescribed rate for the person and an income year is less than 39% must include the person's tax file number in the notice.

193 Shareholder dividend statement to be provided by company
  • (1) After section 29(1)(ia), the following is inserted:

    • (ib) the amount, if any, of the dividend paid to a retirement savings scheme as a retirement scheme contribution for the shareholder:

    • (ic) the name of the retirement savings scheme to which any retirement scheme contribution was paid:

    • (id) the amount, if any, of imputation credit used to satisfy a liability of the company for retirement scheme contribution withholding tax:

    • (ie) the amount, if any, of imputation credit remaining after the company has used an imputation credit in satisfying a liability for retirement scheme contribution withholding tax:.

    (2) In section 29(1)(id), as inserted by subsection (1), retirement scheme contribution withholding tax is replaced by RSCT.

    (3) In section 29(1)(ie), as inserted by subsection (1), retirement scheme contribution withholding tax is replaced by RSCT.

194 Maori authority to give notice of amounts distributed
  • (1) After section 31(1)(e), the following is inserted:

    • (eb) the amount, if any, of the distribution paid to a retirement savings scheme as a retirement scheme contribution for the shareholder:

    • (ec) the name of the retirement savings scheme to which any retirement scheme contribution was paid:

    • (ed) the amount, if any, of Maori authority credit used to satisfy a liability of the company for retirement scheme contribution withholding tax:

    • (ee) the amount, if any, of Maori authority credit remaining after the company has used an imputation credit in satisfying a liability for retirement scheme contribution withholding tax:.

    (2) In section 31(1)(ed), as inserted by subsection (1), retirement scheme contribution withholding tax is replaced by RSCT.

    (3) In section 31(1)(ee), as inserted by subsection (1), retirement scheme contribution withholding tax is replaced by RSCT.

195 Portfolio tax rate entity to give statement to investors and request information
  • Section 31B(2B) and (3) are replaced by the following:

    • (2B) A portfolio tax rate entity must give a notice required by subsection (1) or (2) before the end of the 1-month period beginning after the end of the period to which the notice relates.

    • (3) If subsections (1) and (2) do not apply to an investor in a portfolio tax rate entity, the entity must give to the investor information that the Commissioner considers relevant for each tax year in a notice—

      • (a) by the 30 June after the end of the tax year, if paragraph (b) does not apply; or

      • (b) by the end of the second month following the month in which the corresponding income year for the portfolio tax rate entity ends, if the corresponding income year ends after the tax year.

196 Annual returns of income
  • (1) In the heading to section 33, Annual returns is replaced by Returns.

    (2) In section 33(1), portfolio tax rate entity is replaced by portfolio tax rate entity who makes payments of income tax under section HL 21 or HL 23 of the Income Tax Act 2004.

    (3) In section 33(1), as amended by subsection (2), section HL 21 or HL 23 of the Income Tax Act 2004 is replaced by section HL 22 or HL 24 of the Income Tax Act 2007.

    (4) After section 33(1B), the following is inserted:

    • (1C) A portfolio tax rate entity or portfolio investor proxy who makes payments of income tax under section HL 21 or HL 23 of the Income Tax Act 2004 must furnish to the Commissioner the returns for which the entity is responsible under section 57B.

    (5) In section 33(1C), as inserted by subsection (4), section HL 21 or HL 23 of the Income Tax Act 2004 is replaced by section HL 22 or HL 24 of the Income Tax Act 2007.

197 Annual returns of income not required
  • (1) After section 33A(1)(a)(iiib), the following is inserted:

    • (iiic) a personal service rehabilitation payment for a claimant under the Injury Prevention, Rehabilitation, and Compensation Act 2001; or.

    (2) In section 33A(1)(a)(iv), (iiib) is replaced by (iiic).

    (3) Section 33A(2)(d)(i) is replaced by the following:

    • (i) a schedular payment, if it is not—

      • (A) an amount or proportion of a schedular payment for which the Commissioner has made a determination under section RD 8(3) of the Income Tax Act 2007:

      • (B) income that is a personal service rehabilitation payment for a claimantunder the Injury Prevention, Rehabilitation, and Compensation Act 2001:.

    (4) After section 33A(2)(d), the following is inserted:

    • (db) has an amount of tax credit under section LH 2 of the Income Tax Act 2007; or.

    (5) Subsection (4) applies for the 2008–09 and later income years.

198 New section 33C inserted
  • After section 33B, the following is inserted:

    33C Return not required for certain providers of personal services
    • A natural person who derives income in an income year for providing personal services to a person who is a claimant under the Injury Prevention, Rehabilitation, and Compensation Act 2001 is not required to furnish a return of income for the corresponding tax year if—

      • (a) a personal service rehabilitation payment is made for the claimant and for the personal services; and

      • (b) the taxable income of the person does not exceed $9,500 for the tax year; and

      • (c) tax is withheld at the rate of 15% from the personal service rehabilitation payment; and

      • (d) the person is not required to furnish a return of income under section 33A(1) for the tax year, ignoring for the purposes of that section income from providing personal services for which personal service rehabilitation payments are made.

199 New section 34B inserted
  • After section 34, the following is inserted:

    34B Commissioner to list tax agents
    • (1) The Commissioner must compile and maintain a list of persons who are tax agents.

      (2) A person is eligible to be a tax agent if the person—

      • (a) prepares the returns of income required to be furnished for 10 or more taxpayers; and

      • (b) is 1 of the following:

        • (i) a practitioner carrying on a professional public practice:

        • (ii) a person carrying on a business or occupation in which returns of income are prepared:

        • (iii) the Maori Trustee.

      (3) A person who is not a tax agent and who is eligible to be a tax agent may give a notice (the application) to the Commissioner in a form approved by the Commissioner—

      • (a) stating that the person wishes to be listed as a tax agent; and

      • (b) providing the information required by subsection (11), if the person is not a natural person; and

      • (c) providing any other information required by the Commissioner.

      (4) The Commissioner may request further information from the person (the applicant) making the application and obtain information relating to the applicant from other persons before deciding whether to list the applicant as a tax agent.

      (5) The Commissioner must list the applicant as a tax agent if the Commissioner is satisfied by the available information that—

      • (a) the applicant is entitled to make the application; and

      • (b) listing the applicant as a tax agent would not adversely affect the integrity of the tax system.

      (6) An applicant is listed as a tax agent from the date given in the Commissioner's notice informing the applicant of the Commissioner's decision to list the applicant as a tax agent.

      (7) The Commissioner must refuse to list an applicant as a tax agent if the Commissioner is satisfied that—

      • (a) the applicant is not entitled to make the application:

      • (b) listing the applicant as a tax agent would adversely affect the integrity of the tax system.

      (8) The Commissioner may remove a person from the list of tax agents if the Commissioner is satisfied that—

      • (a) the applicant is not eligible to be a tax agent:

      • (b) continuing to list the applicant as a tax agent would adversely affect the integrity of the tax system.

      (9) Before refusing to put a person on the list of tax agents, or removing a person from the list, the Commissioner must—

      • (a) give notice to the person of the Commissioner's reasons for the proposed decision:

      • (b) consider any arguments against the proposed decision that are provided by the person within the period, beginning from the day of the notice,—

        • (i) of 30 days, unless subparagraph (ii) or (iii) applies; or

        • (ii) allowed by the Commissioner of less than 30 days, if the Commissioner considers such a period is necessary to protect the integrity of the tax system; or

        • (iii) allowed by the Commissioner of more than 30 days, if the Commissioner considers such a period is appropriate in the circumstances.

      (10) A person listed as a tax agent is removed from the list on the date of the Commissioner's notice that informs the person of the Commissioner's decision to remove the person from the list.

      (11) An entity that is not a natural person must provide to the Commissioner the information described in subsection (12) if the entity—

      • (a) makes an application under subsection (3):

      • (b) is a tax agent who—

        • (i) has not made an application under subsection (3) and has not previously provided information to the Commissioner as required by this subsection:

        • (ii) has previously provided information to the Commissioner as required by this subsection and that information is inaccurate.

      (12) The information that subsection (11) requires an entity to provide to the Commissioner consists of the names of the following persons:

      • (a) each person having the duties of tax manager, chief financial officer, chief executive officer, or director, if the entity is a body corporate other than a closely-held company:

      • (b) each shareholder of the entity, if the entity is a closely-held company:

      • (c) each partner in the entity, if the entity is a partnership:

      • (d) each member of the entity, if the entity is an unincorporated body.

      (13) An entity that is a tax agent and is required by subsection (11) to provide information to the Commissioner must provide the information by—

      • (a) the day 12 months after the day on which the Taxation (Business Taxation and Remedial Matters) Act 2007 receives the Royal assent, if the entity has not made an application under subsection (3) and has not previously provided information to the Commissioner as required by subsection (11):

      • (b) the end of the 12-month period beginning from the first day on which the information most recently provided to the Commissioner as required by subsection (11) is inaccurate.

200 Dates by which annual returns to be furnished
  • After section 37(4A), the following is inserted:

    • (4B) If the Commissioner extends under subsection (4) the time for a person listed as a tax agent to furnish a return of income for a taxpayer and the person ceases to be a tax agent before the extension of time would have expired, the Commissioner must extend the taxpayer's time for furnishing the return to a date of 31 March on or after the date that would have applied if the person had continued to be a tax agent.

201 Returns to annual balance date
  • In section 38(1B), section HL 22 of the Income Tax Act 2004 is replaced by section HL 23 of the Income Tax Act 2007.

202 Annual returns by persons who receive subpart KD credit
  • (1) In section 41(3)(b), family tax credit is replaced by minimum family tax credit.

    (2) Subsection (1) applies for the 2007–08 and later income years.

203 New section 41B inserted
  • (1) After section 41A, the following is inserted:

    41B Return by person claiming rebate on redundancy payment
    • (1) A person allowed a rebate under section KC 6 of the Income Tax Act 2004 may apply to the Commissioner for a refund.

      (2) An application under subsection (1) must be made in the manner required by the Commissioner, be signed by the person, and be accompanied by—

      • (a) any information the Commissioner requires, including—

        • (i) the amount of the payment that is a redundancy payment under section KC 6 of the Income Tax Act 2004; and

        • (ii) the name of the payer of the redundancy payment; and

        • (iii) the date on which the redundancy payment was made; and

      • (b) written verification of the details referred to in paragraph (a), in a document signed by the payer of the redundancy payment or other form satisfactory to the Commissioner.

      (3) An application for a refund must be made in the period—

      • (a) beginning after the date of the redundancy payment; and

      • (b) ending with the day that is 4 years after the date of the redundancy payment.

      (4) When the Commissioner has considered an application for a refund, the Commissioner must, by notice, inform the taxpayer of the amount of the rebate allowed under section KC 6 of the Income Tax Act 2004 and of the amount of refund allowed.

      (5) A refund allowed under subsection (1) must be paid as if it were tax paid in excess.

      (6) A refund allowed under subsection (1), to the extent it exceeds the correct amount of refund, is recoverable as an excess credit of tax under section 142D.

      (7) Part 7 does not apply to a refund or an excess refund made under this section.

      (8) Part 9 applies to applications made under this section.

    (2) In section 41B, as inserted by subsection (1), section KC 6 of the Income Tax Act 2004 is replaced by sections ML 1 to ML 3 of the Income Tax Act 2007 in all places in which it occurs.

204 Non-active companies may be excused from filing returns
  • (1) After section 43A(2)(d)(ii), the following is inserted:

    • (iib) give rise to an amount of tax credit under section LH 2 of the Income Tax Act 2007; or.

    (2) Subsection (1) applies for the 2008–09 and later income years.

205 New section 47B inserted
  • After section 47, the following is inserted:

    47B RSCT statements provided by retirement scheme contributor or retirement savings scheme
    • (1) This section applies when a retirement scheme contributor or retirement savings scheme withholds an amount of RSCT from a retirement scheme contribution other than a contribution made by way of an imputation credit or Maori authority credit.

      (2) The contributor or scheme must provide to the Commissioner a statement in a form acceptable to the Commissioner showing the amount of retirement scheme contribution, the amount of RSCT relating to the contribution, and any other particulars required by the Commissioner.

      (3) The statement must be provided no later than the 20th of the month after the month in which the amount was withheld.

      Compare: 2004 No 35 s NEB 3(1)(b).

206 New section 48B inserted
  • (1) After section 48, the following is inserted:

    48B Reconciliation statement for retirement scheme contribution withholding tax
    • (1) If a retirement scheme contributor has made a retirement scheme contribution to a retirement savings scheme for a person in an income year, the retirement scheme contributor, or the retirement savings scheme acting on behalf of the retirement scheme contributor, must deliver to the Commissioner a reconciliation statement for the income year showing the information required by—

      • (a) subsection (2), relating to the person; and

      • (b) subsection (3), relating to the retirement scheme contributor.

      (2) The reconciliation statement must show the following information for the income year relating to the person referred to in subsection (1):

      • (a) the total amount of retirement scheme contribution withholding tax payable on retirement scheme contributions; and

      • (b) the total amount of imputation credits and Maori authority credits used in meeting the liability for retirement scheme contribution withholding tax; and

      • (c) the total amount of retirement scheme contribution withholding tax paid or payable other than by using imputation credits and Maori authority credits; and

      • (d) the amount of each retirement scheme contribution subject to retirement scheme contribution withholding tax; and

      • (e) the rate used to calculate the retirement scheme contribution withholding tax on the retirement scheme contribution; and

      • (f) the retirement scheme contribution withholding tax for the retirement scheme contribution; and

      • (g) the amount of imputation credits attached to the retirement scheme contribution; and

      • (h) the amount of imputation credits used to meet the liability for retirement scheme contribution withholding tax on the retirement scheme contribution; and

      • (i) the amount of Maori authority credits attached to the retirement scheme contribution; and

      • (j) the amount of Maori authority credits used to meet the liability for retirement scheme contribution withholding tax on the retirement scheme contribution; and

      • (k) the amount of retirement scheme contribution withholding tax remaining owing on the retirement scheme contribution after the use of imputation credits and Maori authority credits; and

      • (l) the amount of retirement scheme contribution withholding tax on the retirement scheme contribution paid other than by the use of imputation credits and Maori authority credits; and

      • (m) the tax file number, if a rate of less than 39% is used to calculate the retirement scheme contribution withholding tax on a retirement scheme contribution; and

      • (n) the amount of the imputation credits or Maori authority credits attached to the retirement scheme contribution that are not used to meet the liability for retirement scheme contribution withholding tax; and

      • (o) the total amount of non-resident withholding tax payable on retirement scheme contributions; and

      • (p) the amount of each retirement scheme contribution that is non-resident withholding income; and

      • (q) any other particulars the Commissioner may require.

      (3) The reconciliation statement must show the following information for the income year relating to the retirement scheme contributor referred to in subsection (1):

      • (a) the total amount of retirement scheme contributions for which retirement scheme contribution withholding tax is payable; and

      • (b) the total amount of retirement scheme contribution withholding tax payable on retirement scheme contributions; and

      • (c) the total amount of imputation credits used in meeting the liability for retirement scheme contribution withholding tax; and

      • (d) the total amount of Maori authority credits used in meeting the liability for retirement scheme contribution withholding tax; and

      • (e) the total amount of retirement scheme contribution withholding tax paid or payable other than by using imputation credits and Maori authority credits.

      (4) The reconciliation statement required by subsection (1) for an income year must be received by the Commissioner on or before the end of the second month following the end of the income year.

    (2) In section 48B(2), as inserted by subsection (1),—

    • (a) in paragraphs (a) to (f), (h), and (j) to (n), retirement scheme contribution withholding tax is replaced by RSCT in all places in which it appears:

    • (b) in paragraph (o), non-resident withholding tax is replaced by NRWT:

    • (c) in paragraph (p), non-resident withholding income is replaced by non-resident passive income.

    (3) In section 48B(3), as inserted by subsection (1), in paragraphs (a) to (e), retirement scheme contribution withholding tax is replaced by RSCT in all places in which it appears.

207 Portfolio tax rate entities and portfolio investor proxies to make returns, file annual reconciliation statement
  • (1) In section 57B(1), in the words before paragraph (a), section HL 22 or HL 23 of the Income Tax Act 2004 is replaced by section HL 23 or HL 24 of the Income Tax Act 2007.

    (2) Section 57B(1)(b) is replaced by the following:

    • (b) by the day that is the end of the month beginning from the end of the portfolio calculation period.

    (3) In section 57B(2), section HL 22 of the Income Tax Act 2004 is replaced by section HL 23 of the Income Tax Act 2007.

    (4) In section 57B(3), in the words before paragraph (a), section HL 23 of the Income Tax Act 2004 is replaced by section HL 24 of the Income Tax Act 2007.

    (5) Section 57B(3)(a)(ii) is replaced by the following:

    • (ii) by the day given by subsection (3B) for the portfolio investor exit period; and.

    (6) After section 57B(3), the following is inserted:

    • (7) A person who is required to perform responsibilities under subsection (3)(a) for a portfolio investor exit period must perform the responsibilities by the day that is—

      • (a) the end of the 1-month period beginning from the end of the portfolio investor exit period, if paragraphs (b) and (c) do not apply; or

      • (b) the 15 January following the end of the portfolio investor exit period, if the portfolio investor exit period ends in November; or

      • (c) the end of the month beginning from the end of the month in which the portfolio investor exit period ends, if the day given by paragraph (a) does not exist.

    (7) In section 57B(4)(a)(ii),—

    • (a) section HL 22 or HL 23 of the Income Tax Act 2004 is replaced with section HL 23 or HL 24 of the Income Tax Act 2007:

    • (b) section HL 21(5) is replaced with section HL 22(5).

    (8) In section 57B(4)(b), for the tax year is inserted after income tax.

    (9) After section 57B(6), the following is added:

    • (7) A person who is a portfolio tax rate entity or portfolio investor proxy and makes a payment of income tax under section HL 23B of the Income Tax Act 2004 for a period in an income year that is not included in a return required by subsection (3) must file a tax return for the period—

      • (a) in the prescribed form showing—

        • (i) the amount of the payment for the period; and

        • (ii) the information concerning the payment that would be required in a return under subsection (3); and

        • (iii) further information that the Commissioner considers relevant; and

      • (b) by the day that is—

        • (i) the end of the month beginning from the end of the month in which the period ends, if subparagraph (ii) does not apply; or

        • (ii) the 15 January following the end of the period, if the period ends in November.

    (10) In section 57B(7) as added by subsection (9), in the words before paragraph (a), section HL 23B of the Income Tax Act 2004 is replaced by section HL 25 of the Income Tax Act 2007.

208 Disclosure of interest in foreign company or foreign investment fund
  • (1) After section 61(1B), the following is inserted:

    • (1C) A portfolio tax rate entity that does not make payments of tax under section HL 22 of the Income Tax Act 2004 is required to make a disclosure under subsection (1) in the prescribed form by the due date for the entity's return under section 57B for the tax year.

    (2) In section 61(1C) as added by subsection (1), section HL 22 of the Income Tax Act 2004 is replaced by section HL 23 of the Income Tax Act 2007.

209 New sections 68D and 68E inserted
  • (1) Before section 69, the following is inserted:

    68D Statements in relation to research and development tax credits: single persons
    • (1) This section applies to a person who—

      • (a) is not a member of an internal software development group; and

      • (b) is not a partner in a partnership to which section 68E applies.

      (2) The person must furnish, in the form and electronic format prescribed by the Commissioner, a statement in relation to research and development tax credits under section LH 2 of the Income Tax Act 2007 that they claim for a tax year.

      (3) The statement described in subsection (2) must be furnished to the Commissioner no later than—

      • (a) the day that is 30 days after the last day for furnishing a return of income for the relevant tax year under section 37; or

      • (b) the day that is 2 years after the last day for furnishing a return of income for the relevant tax year under section 37, if—

        • (i) that tax year is the 2008–09 or 2009–10 tax year; and

        • (ii) the person has not claimed, in a return of income for that tax year, research and development tax credits under section LH 2 of the Income Tax Act 2007.

      (4) A person is treated as complying with this section for the purposes of section LH 2(1)(d) of the Income Tax Act 2007 before the last day for furnishing a statement under subsection (3).

    68E Statements in relation to research and development tax credits: internal software development groups and partnerships
    • (1) This section applies to—

      • (a) an internal software development group:

      • (b) a partnership that chooses to apply this section.

      (2) The nominated member of an internal software development group or the partnership must furnish, in the electronic format prescribed by the Commissioner, a statement in relation to research and development tax credits under section LH 2 of the Income Tax Act 2007 that the members of the internal software development group or partners of the partnership claim for a tax year.

      (3) The statement described in subsection (2) must be furnished to the Commissioner no later than—

      • (a) the day that is—

        • (i) 30 days after the latest day for any member of the internal software group or for the partnership to furnish a return of income or joint return of income for the relevant tax year under section 37; or

        • (ii) such later day that the Commissioner may allow, if the Commissioner considers that a failure to meet the requirements of subparagraph (i) is a result of simple oversight; or

      • (b) the day that is 2 years after the latest day for any member of the internal software group or for the partnership to furnish a return of income or joint return of income for the relevant tax year under section 37, if—

        • (i) that tax year is the 2008–09 or 2009–10 tax year; and

        • (ii) no member or partner has claimed, in a return of income for that tax year, research and development tax credits under section LH 2 of the Income Tax Act 2007.

      (4) A member of an internal software development group and a partner in a partnership are treated as complying with this section for purposes of section LH 2(1)(d) of the Income Tax Act 2007 before the last day for furnishing a statement under subsection (3).

    (2) Subsection (1) applies for the 2008–09 and later income years.

210 Particulars to be included in income statement
  • (1) In section 80E(2)(ea), family support and family plus is replaced by Working for Families tax credits.

    (2) Subsection (1) applies for the 2007–08 and later income years.

211 What Commissioner must do on receipt of application
  • In section 80KD(2)(c),—

    • (a) in subparagraph (ii), family support is replaced by family tax credit:

    • (b) in subparagraph (iii), in-work payment is replaced by in-work tax credit:

    • (c) in subparagraph (vi), family tax credit is replaced by minimum family tax credit.

212 Payment by instalment of family support (without abatement)
  • (1) In the heading to section 80KK, family support is replaced by family tax credit, and in subsections (1), (2), (4), and (5), family support is replaced by family tax credit in all places in which it appears.

    (2) In section 80KK(3)(a)(ii), family assistance credit is replaced by WFF tax credit.

213 Payment of tax credit by chief executive
  • In section 80KN(1)(b) and (2), family assistance credit is replaced by WFF tax credit in all places in which it appears.

214 Determining family assistance credit
  • (1) In the heading to section 80KO, family assistance credit is replaced by WFF tax credit.

    (2) In section 80KO, family assistance credit is replaced by WFF tax credit.

    (3) In section 80KO(b), family support is replaced by family tax credit.

215 When entitlement to income-tested benefit ends
  • In section 80KP, in subsections (1) and (2), family support is replaced by family tax credit in all places in which it appears.

216 No authority to pay family assistance credit
  • (1) In the heading to section 80KQ, family assistance credit is replaced by WFF tax credit.

    (2) In section 80KQ(1), family assistance credit is replaced by WFF tax credit.

217 Request by chief executive to stop payment of family assistance credit
  • (1) In the heading to section 80KR, family assistance credit is replaced by WFF tax credit.

    (2) In section 80KR(1)(b), family assistance credit is replaced by WFF tax credit.

218 Payment of tax credit taken over by Commissioner
  • (1) In section 80KU(1)(b), family assistance credit, family tax credit, or family support is replaced by WFF tax credit, family tax credit, or minimum family tax credit.

    (2) In section 80KU(2), in-work payment is replaced by in-work tax credit.

219 Effect of extra instalment on entitlement to tax credit
  • (1) In section 80KW(1)(a), family assistance credit or family tax credit is replaced by WFF tax credit or minimum family tax credit.

    (2) Section 80KW(2)(b) is replaced by the following:

    • (b) when the person has received payments under section 80KI for the whole of a tax year in 27 instalments as described in subsection (1)(c)(i).

    (3) In section 80KW(4)(a)(i), family assistance credit is replaced by WFF tax credit.

    (4) In section 80KW(4)(a)(ii), family tax credit is replaced by minimum family tax credit.

    (5) Section 80KW(5)(b) is replaced by the following:

    • (b) when the person has received payments under section 80KN for the whole of a tax year in 53 instalments as described in subsection (1)(c)(ii).

    (6) In section 80KW(7)(a)(i), family assistance credit is replaced by WFF tax credit.

    (7) In section 80KW(7)(a)(ii), family tax credit is replaced by minimum family tax credit.

220 Officers to maintain secrecy
  • (1) Before section 81(4)(g), the following is inserted:

    • (fc) communicating to a person who is a member, employee, or agent, of the New Zealand Customs Service, information that—

      • (i) the person is authorised by the New Zealand Customs Service to receive; and

      • (ii) relates to a person who is liable to pay financial support under the Child Support Act 1991; and

      • (iii) the Commissioner considers is not undesirable to disclose and is reasonably necessary for the purposes specified in sections 280K and 280L of the Customs and Excise Act 1996:.

    (2) After section 81(4)(lb), the following is inserted:

    • (lc) communicating to a taxpayer whose return of income is being or has been prepared by another person as an agent of the taxpayer—

      • (i) whether the person is listed as a tax agent:

      • (ii) any decision of the Commissioner removing the person from the list of tax agents or refusing to list the person as a tax agent:.

221 Disclosure of information concerning actions of tax advisor
  • (1) The heading to section 81B is replaced by Disclosure of information concerning tax advisor or person acting as tax agent.

    (2) In section 81B, the following is added as subsection (2):

    • (2) Despite section 81, the Commissioner may supply information about a person to an association or group if—

      • (a) the person is, or purports to be, a member of the association or group as a person who is in a business of preparing tax returns for other people; and

      • (b) the members of the association or group are subject to—

        • (i) a professional code of conduct; and

        • (ii) a disciplinary process that enforces compliance with the code of conduct; and

      • (c) the information—

        • (i) is relevant to a decision of the Commissioner removing the person from the list of tax agents or refusing to list the person as a tax agent:

        • (ii) in the Commissioner's opinion, is or would be relevant to a decision referred to in subparagraph (i).

222 Disclosure of information for purposes of entitlement card
  • In section 83(2), family assistance credit is replaced by WFF tax credit.

223 Disclosure of information for family support double payment identification
  • (1) In section 84(1)(a) and (4), family assistance credit is replaced by WFF tax credit in all places in which it appears.

    (2) In section 84(6), the defined term family assistance credit is replaced by the following:

    WFF tax credit means an interim instalment of WFF tax credit.

224 Disclosure of information in relation to family income assistance
  • (1) In section 85G,—

    • (a) in the heading: family income assistance is replaced by Working for Families tax credits:

    • (b) in subsection (1)(a), family support credit is replaced by family tax credit.

    (2) In section 85G(1)(a) and (4)(a) and (b), family assistance credit is replaced by WFF tax credit in all places in which it appears.

    (3) In section 85G(6), the defined term family assistance credit is replaced by the following:

    WFF tax credit means an interim instalment of WFF tax credit.

    (4) Subsection (1) applies for the 2007–08 and later income years.

    (5) Subsections (2) and (3) apply for the 2008–09 and later income years.

225 Use of information supplied under section 85GA
  • In the heading to section 85GC, section 85GA is replaced by section 85GB.

226 Where Commissioner accepts adjustment proposed by disputant
  • Section 89J, other than the heading, is replaced by the following:

    • (1) If the Commissioner accepts or is deemed to accept an adjustment proposed by a disputant, and section 89L does not apply, the Commissioner must include or take account of the adjustment in—

      • (a) a notice of assessment issued to the disputant; and

      • (b) any further notice of assessment or further amended assessment issued to the disputant.

    • (2) Despite subsection (1), the Commissioner may issue a notice of assessment or an amended assessment that does not include or take into account an adjustment that the Commissioner has accepted, or is deemed to have accepted, if the Commissioner considers that the disputant in relation to the adjustment—

      • (a) was fraudulent:

      • (b) wilfully misled the Commissioner.

227 Determinations relating to financial arrangements
  • (1) After section 90AC(1)(b), the following is inserted:

    • (bb) the method that may be applied to determine the income derived or expenditure incurred for a financial arrangement or class of financial arrangements under section EW 15B(5)(c) or EW 15D(2)(d) of the Income Tax Act 2004:.

    (2) In section 90AC(1)(bb), as inserted by subsection (1), section EW 15B(5)(c) or EW 15D(2)(d) of the Income Tax Act 2004 is replaced by section EW 15E(2)(d) or EW 15I(2)(c) of the Income Tax Act 2007.

228 Determination on type of interest in FIF and use of fair dividend rate method
  • (1) Section 91AAO(2) and (3) are replaced by the following:

    • (2) In making a determination, the Commissioner may take into account the following:

      • (a) the principle that the fair dividend rate method should not be used for an attributing interest in a FIF that is economically equivalent to a loan denominated in New Zealand dollars:

      • (b) the extent to which the assets of a FIF—

        • (i) are loans, fixed rate shares as defined in section LF 2 of the Income Tax Act 2004, or arrangements with a fixed economic return:

        • (ii) are denominated in New Zealand dollars:

        • (iii) have a value in New Zealand dollars that is substantially unaffected by variations in currency exchange rates:

      • (c) the compliance costs incurred by a person required to use the fair dividend rate method:

      • (d) arrangements affecting the assets of a FIF and interests held directly or indirectly in a FIF.

    • (3) A determination may be made for income years specified in the determination.

    • (3B) A determination does not apply for a person and an income year beginning before the date of the determination unless the person chooses that the determination apply for the income year.

    (2) Section 91AAO(2)(b)(i), as inserted by subsection (1), is replaced by the following:

    • (i) are loans, fixed-rate shares as defined in section LL 9 of the Income Tax Act 2007, or arrangements with a fixed economic return:.

    (3) Section 91AAO(5) is replaced by the following:

    • (5) The Commissioner must:

      • (a) notify the making of a determination in the Gazette within 30 days of the date of the determination; and

      • (b) publish the determination in a publication of the department as soon as possible.

229 New heading and section 91AAP inserted
  • [Repealed]

    Section 229: repealed (with effect from 19 December 2007), on 15 December 2008, by section 28 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

230 Taxation laws in respect of which binding rulings may be made
  • (1) In section 91C(1)(f), in the words before subparagraph (i), paragraphs (a) to (e) is replaced by paragraphs (a) to (eb).

    (2) In section 91C(1)(f)(i), paragraph (e) is replaced by paragraph (e) or (eb).

    (3) After section 91C(3), the following is added:

    • (4) Despite subsection (1), the Commissioner may not make a binding ruling on the following provisions and matters:

      • (a) whether a person meets the eligibility requirements in section LH 3 of the Income Tax Act 2007:

      • (b) whether expenditure or depreciation loss meets the requirements of the definition of eligible expenditure in section LH 4 of that Act:

      • (c) whether an activity meets the requirements of the definition of research and development activities in section LH 7 of that Act.

    (4) Subsections (1) and (2) apply for the 2005–06 and later income years.

    (5) Subsection (3) applies for the 2008–09 and later income years.

231 New section 98B inserted
  • (1) After section 98, the following is inserted:

    98B Assessment of retirement scheme contribution withholding tax
    • (1) The Commissioner may, for any person who is chargeable with retirement scheme contribution withholding tax under section NEB 2 of the Income Tax Act 2004, make an assessment of the amount of the retirement scheme contribution on which, in the Commissioner's judgment, retirement scheme contribution withholding tax ought to be imposed and an assessment of the amount of that tax.

      (2) The person is liable to pay the tax so assessed except to the extent that the person establishes in proceedings challenging the assessment that the assessment is excessive or that the person is not chargeable with the tax assessed.

      (3) Sections 109, 111, and 113 shall apply, so far as may be, with respect to an assessment made under subsection (1) of this section as if—

      • (a) in those sections, the term taxpayer included a person who is chargeable with retirement scheme contribution withholding tax; and

      • (b) in section 113, the term tax already assessed included retirement scheme contribution withholding tax already assessed under subsection (1) of this section.

      (4) An assessment made under this section shall be subject to challenge in the same manner as an assessment of income tax imposed under section BB 1 of the Income Tax Act 2004, and Part 8A of this Act shall apply accordingly.

    (2) Section 98B(1), as inserted by subsection (1), is replaced by the following:

    • (1) The Commissioner may, for any person who is chargeable with RSCT under section RH 2 of the Income Tax Act 2007, make an assessment of the amount of the retirement scheme contribution on which, in the Commissioner's judgment, RSCT ought to be imposed and an assessment of that tax.

    (3) Section 98B(3)(a) and (b), as inserted by subsection (1), is replaced by the following:

    • (a) in those sections, the term 'taxpayer' included a person who is chargeable with RSCT; and

    • (b) in section 113, the term tax already assessed included RSCT already assessed under subsection (1) of this section.

    (4) In section 98B(4), as inserted by subsection (1), Income Tax Act 2004 is replaced by Income Tax Act 2007.

232 Time bar for amendment of income tax assessment
  • (1) After section 108(1A), the following is inserted:

    • (1B) Despite subsection (1), the Commissioner may not amend an assessment so as to increase an amount of research and development tax credit under section LH 2 of the Income Tax Act 2007 if—

      • (a) a taxpayer furnishes an income tax return for the 2008–09 or a later tax year; and

      • (b) 2 years have passed from the end of the tax year in which the taxpayer provides the tax return; and

      • (c) the taxpayer has not issued a notice of proposed adjustment to the Commissioner for an amount of research and development tax credit for the relevant tax year within the relevant response period.

    (2) [Repealed]

    (3) [Repealed]

    (4) [Repealed]

    Section 232(2): repealed (with effect from 19 December 2007), on 15 December 2008, by section 28 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

    Section 232(3): repealed (with effect from 19 December 2007), on 15 December 2008, by section 28 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

    Section 232(4): repealed (with effect from 19 December 2007), on 15 December 2008, by section 28 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

233 Extension of time bars
  • (1) In section 108B(3)(d), section 108 is replaced by section 108(1).

    (2) Subsection (1) applies for the 2008–09 and later income years.

234 Commissioner may at any time amend assessments
  • (1) In section 113(1), section 89N is replaced by sections 89N and 113D.

    (2) Subsection (1) applies for the 2008–09 and later income years.

235 New section 113D inserted
  • (1) After section 113C, the following is inserted:

    113D Amended assessments for research and development tax credits
    • If a taxpayer has issued a notice of proposed adjustment for their claim for an amount of research and development tax credit under section LH 2 of the Income Tax Act 2007 within the relevant response period, the Commissioner may not amend an assessment so as to increase the amount of tax credit by more than the adjustment proposed in the notice of proposed adjustment.

    (2) Subsection (1) applies for the 2008–09 and later income years.

236 Residual income tax of new provisional taxpayer
  • (1) Section 120KC(1)(b) is replaced by the following:

    • (b) in 2 equal instalments on the interest instalment dates, for the corresponding year,—

      • (i) D and F, if section RC 9(9)(b)(i) applies; or

      • (ii) C and F, if section RC 9(9)(b)(ii) applies:.

    (2) Subsection (1) applies for the 2008–09 and later income years.

237 Heading to example replaced
  • The heading to the example after section 120KC is replaced by Example: Section 120KD.

238 Provisional tax instalments in transitional years
  • (1) In section 120KD(1), section 120KE(1) is replaced by section 120KE(1) or (3).

    (2) In section 120KD(2), the second sentence is replaced by The date interest starts is the day after the day on which payment of the instalment is due under section RC 21 of that Act.

    (3) Subsections (1) and (2) apply for the 2008–09 and later income years.

239 Heading to example replaced
  • The heading to the example after section 120KD is replaced by Example: Section 120KE.

240 Provisional tax and rules on use of money interest
  • (1) Section 120K(E(6) is replaced by the following:

    • (6) A taxpayer is not entitled to use of money interest for overpaid tax under section 120D until the later of—

      • (a) the day after the date—

        • (i) on which they notify the Commissioner under section RC 18(2); or

        • (ii) set out in section RC 18(3) (as the case may be):

      • (b) the day after their last ratio instalment date.

    (2) Subsection (1) applies for the 2008–09 and later income years.

241 Late filing penalties
  • (1) In the heading to section 139A, penalties is replaced by penalty for certain returns.

    (2) In section 139A(5), the words before paragraph (a) are replaced by the following:

    • (5) Except in the case of a late filing penalty resulting from an employer monthly schedule or from a tax return required under sections 16 to 18 of the Goods and Services Tax Act 1985, the Commissioner must, not less than 30 days before imposing a late filing penalty,—.

    (3) After section 139A(5), the following is added:

    • (6) In the case of a late filing penalty for failing to file an employer monthly schedule by the due date, the Commissioner must—

      • (a) give notice to the taxpayer that a late filing penalty will be payable for a further failure to file an employer monthly schedule on time, if the taxpayer has filed on time all employer monthly schedules due for filing in the period—

        • (i) beginning with the later of 1 April 1999 and the day 12 months before the due date; and

        • (ii) ending before the due date; or

      • (b) give notice to the taxpayer that the penalty is payable, if the taxpayer has not filed on time all employer monthly schedules due for filing in the period referred to in paragraph (a).

    (4) Subsections (1) and (3) apply for employer monthly schedules due on or after 1 April 1999.

    (5) Subsection (2) applies for a tax return required to be furnished under sections 16 to 18 of the Goods and Services Tax Act 1985 and due on or after 1 April 2008.

242 New section 139AAA inserted
  • (1) After section 139A, the following is inserted:

    139AAA Late filing penalty for GST returns
    • (1) This section applies to a tax return (a GST return) required to be furnished by a registered person under sections 16 to 18 of the Goods and Services Tax Act 1985.

      (2) A registered person is liable to pay a late filing penalty if—

      • (a) the registered person does not complete and provide a GST return by the due date for filing the GST return; and

      • (b) the registered person has failed to file on time a GST return due in the period—

        • (i) beginning with the later of 1 April 2008 and the day 12 months before the due date; and

        • (ii) ending before the due date; and

      • (c) the Commissioner notifies the registered person that the penalty is payable.

      (3) The late filing penalty for a GST return for a registered person is—

      • (a) $250, if on the due date for filing the GST return the registered person accounts for tax payable on an invoice basis or hybrid basis; or

      • (b) $50, if on the due date for filing the GST return the registered person accounts for tax payable on a payments basis.

      (4) The Commissioner must—

      • (a) give notice to the registered person that a late filing penalty will be payable for a further failure to file a GST return on time, if the registered person has filed on time all GST returns due for filing in the period—

        • (i) beginning with the later of 1 April 2008 and the day 12 months before the due date; and

        • (ii) ending before the due date; or

      • (b) give notice to the registered person that the penalty is payable, if the registered person has not filed on time all GST returns due for filing in the period referred to in paragraph (a).

    (2) Subsection (1) applies for a tax return required to be furnished under sections 16 to 18 of the Goods and Services Tax Act 1985 and due on or after 1 April 2008.

243 Late payment penalty
  • (1) Section 139B(1) to (3A) are replaced by the following:

    • (1) This section applies to a taxpayer if and to the extent that the taxpayer does not pay by the due date (the default date) an amount of tax (the unpaid tax), calculated by the taxpayer as payable or for which the taxpayer is assessed, and—

      • (a) the unpaid tax is provisional tax or a penalty relating to a failure to pay provisional tax:

      • (b) the taxpayer has failed to pay on time an amount of tax due for payment in the period—

        • (i) beginning with the later of 1 April 2008 and the day 2 years before the default date; and

        • (ii) ending before the default date:

      • (c) the taxpayer has paid on time all amounts of tax due for payment in the period referred to in paragraph (b) and—

        • (i) the Commissioner gives the taxpayer a notice setting a further date for payment of the unpaid tax; and

        • (ii) the taxpayer does not pay the unpaid tax before the date that is the earlier of the further date and the date that is 1 month after the date of the notice.

    • (2) The taxpayer is liable to pay a late payment penalty consisting of—

      • (a) an initial late payment penalty equal to the total of—

        • (i) 1% of the unpaid tax; and

        • (ii) 4% of the amount of tax to pay at the end of the sixth day after the day on which a penalty under subparagraph (i) is imposed; and

      • (b) an incremental late payment penalty equal to 1% of the amount of tax to pay determined on each day that falls 1 month after a day on which a penalty is imposed under—

        • (i) this subsection:

        • (ii) subsection (2A)(a) or (2B) as they were before the enactment of section 243 of the Taxation (Business Taxation and Remedial Matters) Act 2007.

    • (3) An initial late payment penalty is added to the unpaid tax to which it relates—

      • (a) on the day after the default date for the unpaid tax, if it is imposed under subsection (2)(a)(i):

      • (b) at the end of the sixth day after the day referred to in paragraph (a), if it is imposed under subsection (2)(a)(ii).

    (2) In section 139B(3B),—

    • (a) subsection (2A)(b) is replaced by subsection (2)(a)(ii):

    • (b) subsection (2A)(a) is replaced by subsection (2)(a)(i).

    (3) Subsections (1) and (2) apply for unpaid tax that on or after 1 April 2008 becomes due for payment.

244 Imposition of late payment penalties when financial relief sought
  • (1) In section 139BA(1),—

    • (a) section 139B(2A)(a) is replaced by section 139B(2)(a)(i):

    • (b) section 139B(2A)(b) is replaced by section 139B(2)(a)(ii).

    (2) Subsection (1) applies for unpaid tax that on or after 1 April 2008 becomes due for payment.

245 Late payment penalty and provisional tax
  • (1) In section 139C(2), in the definition of provisional tax payable, the following is inserted after paragraph (aa):

    • (ab) for an instalment date and a taxpayer to whom section RC 11 of the Income Tax Act 2007 applies, means the lesser of—

      • (i) the amount calculated under section RC 11 of that Act:

      • (ii) the amount calculated as payable under section RC 11 of that Act, if the GST ratio is substituted for a GST ratio which is calculated using the taxpayer's residual income tax for the tax year and taxable supplies for the corresponding income year:.

    (2) Subsection (1) applies for the 2008–09 and later income years.

246 Imputation penalty tax payable where end of year debit balance
  • (1) After section 140B(2), the following is added:

    • (3) The amount given by subsection (2) for the year ending 31 March 2010 is reduced by the amount of imputation penalty tax payable under section 140BB.

    (2) Subsection (1) applies for the 2008–09 and later income years.

247 New section 140BB inserted
  • (1) After section 140B, the following is inserted:

    140BB Imputation penalty tax payable in some circumstances
    • (1) This section applies when a company has an end of year debit balance under section OA 3(3) and (4) of the Income Tax Act 2007 for its imputation credit account as at 31 March 2010, if the company is treated, for the purposes of this section, as only having—

      • (a) credits and balances to the extent to which they arise from memorandum account debits, credits, and balances, refunds, tax, tax credits, transfers, withholdings, or other items dealt with, arising, or calculated using an old company tax rate; and

      • (b) debits and balances to the extent to which the company has, as provided by section OZ 8 of the Income Tax Act 2007, attached imputation credits in excess of the 30/70 imputation ratio or the 30/70 combined imputation and dividend withholding payment ratio.

      (2) The company is liable for a special tax known as imputation penalty tax.

      (3) The amount of imputation penalty tax is 10% of the positive difference between zero and the end of year debit balance described in subsection (1).

    (2) Subsection (1) applies for the 2008–09 and later income years.

248 Dividend withholding payment penalty tax payable where end of year debit balance
  • (1) After section 140C(2), the following is added:

    • (3) The amount given by subsection (2) for the year ending 31 March 2010 is reduced by the amount of dividend withholding payment penalty tax payable under section 140CA.

    (2) Subsection (1) applies for the 2008–09 and later income years.

249 New section 140CA inserted
  • (1) After section 140C, the following is inserted:

    140CA FDP penalty tax payable in some circumstances
    • (1) This section applies when a company has an end of year debit balance under section OA 3(3) and (4) of the Income Tax Act 2007 for its FDP account as at 31 March 2010, if the company is treated, for the purposes of this section, as only having—

      • (a) credits and balances to the extent to which they arise from memorandum account debits, credits, and balances, refunds, tax, tax credits, transfers, withholdings, or other items dealt with, arising, or calculated using an old company tax rate; and

      • (b) debits and balances to the extent to which the company has, as provided by section OZ 8 of the Income Tax Act 2007, attached imputation credits in excess of the 30/70 FDP ratio or the 30/70 combined imputation and FDP ratio.

      (2) The company is liable to a special tax known as FDP penalty tax.

      (3) The amount of imputation penalty tax is 10% of the positive difference between zero and the end of year debit balance described in subsection (1).

    (2) Subsection (1) applies for the 2008–09 and later income years.

250 Tax shortfalls
  • (1) In section 141(7)(b), or a reduction in tax to pay is inserted after refund of tax.

    (2) In section 141(7), in the words after paragraph (c), or reduction, is inserted after increased refund,.

    (3) After section 141(7), the following is inserted:

    • (7B) The Commissioner may exercise the discretion under subsection (7) in relation to a taxpayer and an associated person having a different return period if—

      • (a) subsection (7) would apply to the taxpayer in the absence of this subsection if the associated person's return period were the same as the taxpayer's return period; and

      • (b) the taxpayer's return period affected by the adjustment referred to in subsection (7)(a) overlaps the associated person's return period affected by the adjustment referred to in subsection (7)(b); and

      • (c) the taxpayer's tax position is not an abusive tax position and does not involve evasion or a similar act.

    (4) After section 141(7B), the following is inserted:

    • (7C) Subsection (7D) applies if—

      • (a) the Commissioner makes an adjustment to a taxpayer's tax position (taxpayer A) for a tax credit under section LH 2 of the Income Tax Act 2007 relating to internal software development as that term is defined in section LH 17 of that Act; and

      • (b) the adjustment described in paragraph (a) results in a tax shortfall; and

      • (c) the Commissioner makes an adjustment to another taxpayer's tax position (taxpayer B) for a tax credit under section LH 2 of that Act relating to internal software development as defined in section LH 17 of that Act; and

      • (d) the adjustment described in paragraph (c) is for the same tax year as the adjustment described in paragraph (a); and

      • (e) for taxpayer B, an entitlement to an amount of refund or increased refund of tax (the refund amount) results from the adjustment described in paragraph (c); and

      • (f) for the period to which the adjustments described in paragraphs (a) and (c) relate, taxpayer A and taxpayer B are members of the same internal software development group, as that term is defined in section LH 17 of that Act; and

      • (g) the tax credits described in paragraphs (a) and (c) relate to expenditure or depreciation loss under subpart LH incurred while taxpayer A and taxpayer B are members of the same internal software development group, as that term is defined in section LH 17 of that Act.

    • (7D) If this subsection applies because of subsection (7C) of this Act, then, for the purposes of imposing a penalty, the Commissioner may treat an amount that is less than or equal to taxpayer B's refund amount, described in subsection (7C)(e), as an amount of tax paid by taxpayer A. Treating the amount as tax paid by taxpayer A for the purposes of imposing a penalty reduces taxpayer A's shortfall.

    (5) Subsections (1) to (3) apply for tax positions taken on or after 1 April 2008.

    (6) Subsection (4) applies for the 2008–09 and later income years.

251 Not taking reasonable care
  • (1) After section 141A(2), the following is inserted:

    • (2B) A taxpayer who, in taking a tax position, relies on an action or advice of a tax advisor engaged by the taxpayer, or by a company in the same group of companies as the taxpayer, takes reasonable care in relying on the action or advice except if the taxpayer—

      • (a) is the employer of the tax advisor:

      • (b) does not provide to the tax advisor adequate information relating to the tax position:

      • (c) does not provide to the tax advisor adequate instructions relating to the tax position:

      • (d) has reason to believe that the action or advice is incorrect:

      • (e) has previously, for a period ending less than 4 years before the beginning of the period to which the tax position relates, had a tax shortfall for the same type of tax arising from a corresponding tax position and does not take reasonable care to avoid the further tax shortfall.

    (2) Subsection (1) applies for tax positions taken on or after 1 April 2008.

252 Unacceptable tax position
  • (1) In section 141B(1B), numbers in a return is replaced by numbers used in, or for use in preparing, a return.

    (2) After section 141B(1B), the following is inserted:

    • (1C) A taxpayer does not take an unacceptable tax position if—

      • (a) the taxpayer adopts IFRSs for the purposes of financial reporting before the 2007–08 income year; and

      • (b) the taxpayer's tax position relates to a period—

        • (i) starting on and including the first day of the first income year for which a person adopts IFRSs for the purposes of financial reporting; and

        • (ii) finishing on and including the last day of the 2006–07 income year; and

      • (c) a tax shortfall for a return period in the period described in paragraph (b) arises from actual or potential accounting under IFRSs; and

      • (d) the tax shortfall is due to an application of IFRSs which, if viewed objectively, passes the standard of being about as likely as not to represent acceptable accounting practice under IFRSs; and

      • (e) the taxpayer has fully-disclosed the IFRS-related tax position.

    (3) Section 141B(2) is replaced by the following:

    • (2) A taxpayer is liable to pay a shortfall penalty if the taxpayer takes an unacceptable tax position in relation to income tax and the tax shortfall arising from the taxpayer's tax position is more than both—

      • (a) $50,000:

      • (b) 1 % of the taxpayer's total tax figure for the relevant return period.

    (4) Section 141B(3)(b) is replaced by the following:

    • (b) where the taxpayer has no tax to pay in respect of the return period, an amount equal to the product of—

      • (i) the net loss of the taxpayer in respect of the return period, ascertained in accordance with the provisions of the Income Tax Act 2007 and treated as having a positive value; and

      • (ii) the basic rate of income tax for companies in the relevant return period,—.

    (5) Subsections (3) and (4) apply for tax positions taken on or after 1 April 2008.

253 Abusive tax position
  • (1) Section 141D(4) is replaced by the following:

    • (4) This section applies to a taxpayer if the taxpayer has taken an unacceptable tax position.

    (2) Subsection (1) applies for tax positions taken on or after 1 April 2008.

254 Evasion or similar act
  • (1) After section 141E(2), the following is inserted:

    • (2B) No person shall be chargeable with a shortfall penalty under subsection (1)(b) for taking a tax position if the person is chargeable with a shortfall penalty under section 141ED for taking the tax position.

    (2) Subsection (1) applies for tax positions taken on or after 1 April 2008.

255 New section 141ED inserted
  • (1) After section 141EC, the following is inserted:

    141ED Not paying employer monthly schedule amount
    • (1) A taxpayer is liable to pay a shortfall penalty (referred to as a penalty for not paying employer monthly schedule amount) if—

      • (a) the taxpayer—

        • (i) completes an employer monthly schedule showing an amount of tax (the returned amount) payable by the taxpayer to the Commissioner for the return period; and

        • (ii) provides the employer monthly schedule to the Commissioner; and

        • (iii) fails to pay to the Commissioner by the due date an amount owing to the Commissioner (the unpaid amount) of the returned amount; and

      • (b) the Commissioner, after the due date for the returned amount, gives to the taxpayer a notice (the Commissioner's notice)—

        • (i) that the taxpayer is liable to pay a penalty for failing to pay the unpaid amount by the due date and how the penalty is calculated; and

        • (ii) of the circumstances in which further penalties will be imposed and how a further penalty will be calculated; and

        • (iii) of actions that the taxpayer may take to avoid the imposition of further penalties; and

      • (c) subsection (3) does not apply to the taxpayer.

      (2) Before giving to the taxpayer the first Commissioner's notice in relation to the returned amount, the Commissioner must give to the taxpayer a notice that a penalty may be imposed under this section if the unpaid amount is not paid.

      (3) A taxpayer is not liable to pay a penalty for not paying employer monthly schedule amount in relation to an unpaid amount if—

      • (a) the taxpayer is a receiver or liquidator—

        • (i) appointed after the end of the return period referred to in subsection (1)(a); and

        • (ii) having insufficient funds available to pay the unpaid amount:

      • (b) the taxpayer—

        • (i) agrees with the Commissioner, before the penalty date under subsection (4) for the due amount, to an instalment arrangement (the instalment arrangement), of the same type as an instalment arrangement referred to in section 177B, to pay the unpaid amount; and

        • (ii) pays the unpaid amount under the instalment arrangement.

      (4) A penalty payable for not paying employer monthly schedule amount in relation to an unpaid amount has a due date (the penalty date) that is—

      • (a) the date of the Commissioner's notice, if the penalty is the first penalty in relation to the returned amount; or

      • (b) one month after the penalty date for the preceding penalty, if paragraph (a) does not apply.

      (5) The amount of the penalty for not paying employer monthly schedule amount in relation to an unpaid amount is—

      • (a) 10% of the unpaid amount on the day before the penalty date, if the taxpayer—

        • (i) fails to agree to an instalment arrangement with the Commissioner before the day that is 1 month after the penalty date; and

        • (ii) fails to pay the unpaid amount before the day that is 1 month after the penalty date; or

      • (b) 10% of the unpaid amount on the day before the penalty date, if the taxpayer—

        • (i) agrees to an instalment arrangement with the Commissioner before the penalty date; and

        • (ii) fails to comply with the instalment arrangement before the day that is 1 month after the penalty date; or

      • (c) 5% of the unpaid amount on the day before the penalty date, if—

        • (i) the taxpayer pays the unpaid amount, or agrees to an instalment arrangement with the Commissioner, after the penalty date and before the day that is 1 month after the penalty date; and

        • (ii) paragraph (b) does not apply.

      (6) A taxpayer may be liable to pay more than 1 penalty for not paying employer monthly schedule amount arising from an employer monthly schedule.

      (7) The maximum amount of penalties under this section that may be imposed is 150% of the returned amount that is unpaid when the first penalty is imposed under this section.

      (8) If the penalty date for a penalty would, in the absence of this subsection, be a date in a month that does not exist in the month, the penalty date is the date of the last day in the month.

    (2) Subsection (1) applies for tax positions taken on or after 1 April 2008.

256 Reduction in penalty for voluntary disclosure of tax shortfall
  • (1) Section 141G(3)(a) is replaced by the following:

    • (a) for pre-notification disclosure is—

      • (i) 100%, if the shortfall penalty is for not taking reasonable care, for taking an unacceptable tax position, or for an unacceptable interpretation; or

      • (ii) 75%, if subparagraph (i) does not apply:.

    (2) Subsection (1) applies for voluntary disclosures made on or after 17 May 2007.

257 Reduction where temporary shortfall
  • (1) Section 141I(3) is replaced by the following:

    • (3) A tax shortfall is a temporary tax shortfall for the return period of a tax position if, when the Commissioner considers the assessment of a shortfall penalty, the Commissioner is satisfied that—

      • (a) the tax shortfall has been or will be, in an earlier or later return period, permanently reversed or corrected—

        • (i) before the end of the 4-year period beginning after the day on which the taxpayer took the tax position; and

        • (ii) with the effect that the taxpayer pays or returns for the relevant return periods the correct total amount of tax, not including penalties and interest, in respect of the tax position; and

        • (iii) as a result of actions taken by the taxpayer or by the operation of law or circumstances; and

      • (b) no tax shortfall will arise in a later return period in respect of a similar tax position; and

      • (c) no arrangement exists with the purpose or effect of creating for another return period a tax deferral or advantage related to the tax position.

    (2) Subsection (1) applies for tax positions taken on or after 1 April 2008.

258 Limitation on reduction of shortfall penalty
  • (1) Section 141J, other than the heading, is replaced by the following:

    • (1) This section applies to a shortfall penalty payable by a taxpayer if—

      • (a) the taxpayer makes a voluntary disclosure; and

      • (b) the shortfall penalty is payable in respect of a temporary tax shortfall; and

      • (c) the shortfall penalty would be reduced under section 141G or 141H in the absence of this section.

    • (2) The shortfall penalty is reduced by—

      • (a) 100%, if—

        • (i) the shortfall penalty is for not taking reasonable care, for taking an unacceptable tax position, or for taking a tax position involving an unacceptable interpretation of a tax law; and

        • (ii) the tax shortfall is voluntarily disclosed under section 141G before notification of a pending tax audit or investigation; or

      • (b) 75%, if paragraph (a) does not apply.

    • (3) A shortfall penalty to which this section applies is not reduced under any other section.

    (2) Subsection (1) applies for voluntary disclosures made on or after 17 May 2007.

259 Section 141KB repealed
  • (1) Section 141KB is repealed.

    (2) Subsection (1) applies for tax positions taken on or after 1 April 2008.

260 Due date for payment of late filing penalty
  • (1) In section 142(1), or a return required by sections 16 to 18 of the Goods and Services Tax Act 1985 is inserted after an employer monthly schedule.

    (2) After section 142(1A), the following is inserted:

    • (1B) The due date for the payment of a late filing penalty for a return required by sections 16 to 18 of the Goods and Services Tax Act 1985 for a taxable period is—

      • (a) the 28th day of the second month following the end of the taxable period, if paragraphs (b) and (c) do not apply; or

      • (b) the 15th day of February, if the month following the end of the taxable period is December; or

      • (c) the 7th day of June, if the month following the end of the taxable period is April.

    (3) Subsections (1) and (2) apply for a tax return required to be furnished under sections 16 to 18 of the Goods and Services Tax Act 1985 and due on or after 1 April 2008.

261 New due date for payment of tax that is not penalty
  • (1) Section 142A(1), (1B), and (2) are replaced by the following:

    • (1) This section applies if the Commissioner makes for a taxpayer—

      • (a) an assessment (the new assessment) of tax for which the taxpayer has not been assessed earlier:

      • (b) an amended assessment (the increased assessment)—

        • (i) of an amount of tax exceeding the amount for which the taxpayer is liable immediately before the increased assessment; and

        • (ii) made less than 30 days before, or on or after, the due date for the tax for which the taxpayer is liable immediately before the increased assessment.

    • (2) The Commissioner must—

      • (a) fix a date that is 30 or more days after the date of the notice of the assessment for the payment of—

        • (i) the tax under a new assessment:

        • (ii) the increase of tax under an increased assessment; and

      • (b) give notice of the date to the taxpayer in the notice of the assessment.

    (2) In section 142A(3),—

    • (a) in the words before paragraph (a), Subsections (1) and (2) d is replaced by Subsection (2) does:

    • (b) in paragraph (b), subsection (1) or is deleted.

    (3) Section 142A(4) is repealed.

262 Knowledge offences
  • (1) In section 143A(5)(f), 2006. is replaced by 2006: and the following is added:

    • (g) a deduction of retirement scheme contribution withholding tax.

    (2) Section 143A(5)(g), as inserted by subsection (1), is replaced by the following:

    • (g) an amount of RSCT withheld.

263 Imposition of civil and criminal penalties
  • (1) In section 149(2), , other than under section 141ED, is inserted after shortfall penalty.

    (2) In section 149(5), , other than under section 141ED, is inserted after shortfall penalty.

    (3) Subsections (1) and (2) apply for tax positions taken on or after 1 April 2008.

264 Remission for reasonable cause
  • In section 183A(1)(h), 2006. is replaced by 2006: and the following is added:

    • (i) a penalty for not paying employer monthly schedule amount imposed by section 141ED.

265 Remission consistent with collection of highest net revenue over time
  • In section 183D(1), after paragraph (bc), the following is inserted:

    • (bd) a penalty for not paying employer monthly schedule amount imposed by section 141ED; and.

266 Small amounts of penalties and interest not to be charged
  • In section 183F(1), after paragraph (ba), the following is inserted:

    • (bb) a taxpayer is not liable to pay a penalty for not paying employer monthly schedule amount if the unpaid amount on the day before the date of the Commissioner's notice under section 141ED(1)(b) is less than $100.

267 Power to make interim payments of family assistance credit
  • (1) In the heading to section 225A, family assistance credit is replaced by WFF tax credit.

    (2) In section 225A(2)(b)(iii), family assistance credit is replaced by WFF tax credit.

    (3) In section 225A(2)(b)(iv), family assistance credit is replaced by WFF tax credit.

268 New section 226B inserted
  • After section 226, the following is inserted:

    226B Business group amnesties
    • (1) The Commissioner may declare an amnesty (a business group amnesty) under this section in relation to a group of persons, each of whom carries on a type of activity as the person's main business (the affected business), if the Commissioner considers that declaring the amnesty is consistent with—

      • (a) protection of the integrity of the tax system; and

      • (b) collection over time of the highest net revenue that is practicable within the law.

      (2) The Commissioner, when declaring a business group amnesty, must announce the days that begin and end the period for which the business group amnesty is available.

      (3) The Commissioner may change a day that begins or ends the period for which a business group amnesty is available by an announcement made on or before the day.

      (4) A person is eligible to benefit from a business group amnesty if the person—

      • (a) is carrying on the affected business when the amnesty becomes available; and

      • (b) has carried on the affected business throughout the period of 3 income years ending before the income year in which the amnesty becomes available; and

      • (c) has not previously benefited from a business group amnesty; and

      • (d) has not been notified of a pending tax audit or investigation before the amnesty becomes available.

      (5) During the period for which a business group amnesty is available, a person may give a notice to the Commissioner in a form prescribed by the Commissioner—

      • (a) stating that the person wishes to benefit from the amnesty; and

      • (b) stating that the person is carrying on the affected business; and

      • (c) stating the period for which, and the place at which, the person has carried on the affected business as a business; and

      • (d) providing a statement of assets and liabilities for the income year ending before the income year in which the business group amnesty becomes available; and

      • (e) giving details of actions and omissions relating to the business that the person considers might give rise to an assessment, amended assessment, or prosecution if the person did not benefit from the amnesty; and

      • (f) providing any other information required by the Commissioner.

      (6) A person who is eligible under subsection (4) and gives a notice under subsection (5) is a person (an affected person) who benefits from the amnesty.

      (7) The Commissioner may, as if the business group amnesty were not declared,—

      • (a) investigate the financial affairs of an affected person for the period of—

        • (i) the income year ending before the income year in which the Commissioner declares the amnesty; and

        • (ii) the income year in which the Commissioner declares the amnesty; and

      • (b) make an assessment or amended assessment of the affected person for the income years referred to in paragraph (a).

      (8) After an affected person gives a notice under subsection (5), the Commissioner must not, in relation to income years before the income years referred to in subsection (7)(a),—

      • (a) begin an investigation of the income and deductions of the affected person relating to the affected business:

      • (b) make an assessment or amended assessment of the affected person based on figures for income and deductions relating to the affected business that differ from the figures for income and deductions relating to the affected business included by the affected person in a return of income provided before the date of the notice under subsection (5), except if subsection (10) applies.

      (9) After an affected person gives a notice under subsection (5), the Commissioner must not begin under this or another Act a prosecution of the affected person for an action or omission before or in giving the notice if—

      • (a) the affected person provides information relating to the action or omission to the Commissioner; and

      • (b) subsection (10) does not apply.

      (10) The Commissioner may make an assessment, make an amended assessment, or bring a prosecution, that would otherwise be contrary to subsection (8) or (9), if the assessment or prosecution arises from an investigation of which the person is given notice, and that the Commissioner begins, before the affected person gives the notice under subsection (5).

      (11) The Commissioner must report in writing to the Minister on the results of a business group amnesty in a report accompanying a report under section 141L.

      (12) The Minister must lay a copy of the report before the House of Representatives at the same time as the report under section 141L.

Part 3
Amendments to other Acts and Regulations

Estate and Gift Duties Act 1968

269 Exemption for gifts to charities and certain bodies
  • (1) In section 73(2)(l) of the Estate and Gift Duties Act 1968, 1996. is replaced by 1996: and the following is added:

    • (m) any gift to the trustee of the Tokelau International Trust Fund, as defined in section OB 1 of the Income Tax Act 2004, for the purposes of that trust.

    (2) Section 73(2)(m), as inserted by subsection (1), is replaced by the following:

    • (m) any gift to the trustee of the Tokelau International Trust Fund, as defined in section YA 1 of the Income Tax Act 2007, for the purposes of that trust.

    (3) In section 73(2)(m) of the Estate and Gift Duties Act 1968, trust. is replaced by trust: and the following is added:

    • (n) any gift to the trustee of the Niue International Trust Fund, as defined in section OB 1 of the Income Tax Act 2004, for the purposes of that trust.

    (4) Section 73(2)(n), as inserted by subsection (3), is replaced by the following:

    • (n) any gift to the trustee of the Niue International Trust Fund, as defined in section YA 1 of the Income Tax Act 2007, for the purposes of that trust.

Goods and Services Tax Act 1985

270 Goods and Services Tax Act 1985
  • Sections 271 to 279 amend the Goods and Services Tax Act 1985.

271 Interpretation
  • (1) This section amends section 2(1).

    (2) In the definition of tax invoice, section 24 is replaced by sections 24 and 24BA.

272 Value of supply of goods and services
  • (1) In section 10(7), as amended by section YA 2 and schedule 21 of the Income Tax Act 2004, sections CX 23 is replaced by sections CX 18.

    (2) In section 10(7), as amended by section ZA 2 and schedule 49 of the Income Tax Act 2007, sections CX 27 is replaced by sections CX 20.

273 Zero-rating of goods
  • (1) After section 11(1)(e), the following is inserted:

    • (eb) subject to subsection (4), the goods supplied—

      • (i) are supplied to a recipient who is a non-resident; and

      • (ii) have been entered for export under the Customs and Excise Act 1996 by the supplier or will be entered for export by the supplier in the course of or as a condition of making the supply; and

      • (iii) are exported by the recipient; and

      • (iv) are not intended by the recipient for later importation into New Zealand for use other than in making taxable supplies or exempt supplies, with the absence of such an intention being confirmed by the recipient in a document retained by the supplier; and

      • (v) are not used or altered by the recipient before being exported, except to the extent necessary to prepare the goods for export; and

      • (vi) leave New Zealand under an arrangement agreed by the supplier and the recipient at or before the time of the supply; and

      • (vii) do not leave New Zealand in the possession of a passenger or crew member of an aircraft or ship; or

    (2) In section 11(1)(l(i) are replaced by the following:

    • (l) the goods supplied are consumable stores intended for use on—

      • (i) an aircraft on a flight, or going, to a destination outside New Zealand; or

      • (ii) a fishing ship outside, or going outside, New Zealand fisheries waters; or

      • (iib) a ship, other than a pleasure craft, carrying consumable stores to a foreign-going ship or to a fishing ship that meets the requirements in subparagraph (ii); or.

    (3) In section 11(4),—

    • (a) If subsection (1)(d) or (1)(e) applies and the goods are not exported by the supplier is replaced by If subsection (1) (d), (e), or (eb) applies and the person required to export the goods does not do so:

    • (b) subsection (1)(d) and (1)(e) is replaced by subsection (1)(d), (e), and (eb).

    (4) In section 11(9), in the definition of consumable stores, paragraph (a), intend to consume is replaced by have available to consume.

    (5) In section 11(9), the definition of foreign-going ship is replaced by the following:

    foreign-going ship means a ship on a voyage, or going, to a destination outside New Zealand, other than a pleasure craft or a fishing ship.

274 Zero-rating of services
  • In section 11A(1)(m)(i), section 11(1)(a) to (e) is replaced by section 11(1)(a) to (eb).

275 Special returns
  • (1) In section 17(1), in the words before the paragraphs, , on or before the 28th day of the month following the month within which the sale was made, is omitted.

    (2) After section 17(1), the following is inserted:

    • (1B) A return that a person is required to furnish to the Commissioner under subsection (1) must be furnished on or before—

      • (a) the 28th of the month following the end of the month in which the relevant sale was made, if paragraphs (b) or (c) do not apply; or

      • (b) the 15th day of January, if November is the month in which the relevant sale was made; or

      • (c) the 7th day of May, if March is the month in which the relevant sale was made.

    (3) Subsections (1) and (2) apply for taxable periods ending on or after 30 November 2007.

276 Calculation of tax payable
  • In section 20(2)(a), sections 24 and 25 is replaced by sections 24, 24BA, and 25.

277 New section 24BA inserted
  • After section 24, the following is inserted:

    24BA Shared tax invoices
    • (1) A shared invoice is a tax invoice, if the invoice contains the following particulars:

      • (a) the words tax invoice in a prominent place:

      • (b) the name and registration number of the principal supplier:

      • (c) the name and address of the recipient:

      • (d) the date upon which the tax invoice is issued:

      • (e) a description of the goods and services supplied:

      • (f) the consideration for the supply, inclusive of tax charged, and—

        • (i) the tax charged, and the consideration for the supply, excluding tax charged; or

        • (ii) where the amount of tax charged is the tax fraction of the consideration, a statement that the consideration includes a charge in respect of the tax.

      (2) A tax invoice under this section is treated as provided by each supplier.

      (3) Where a tax invoice to which this section applies has been issued in respect of a supply, the principal supplier must maintain sufficient records to enable the name, address, and registration number, if any, of the supply's supplier to be ascertained.

      (4) For the purposes of this section,—

      principal supplier means, for a shared invoice,—

      • (a) the supplier responsible for issuing the invoice, unless paragraph (b) applies:

      • (b) the representative member of a group of companies for the purposes of section 55

      shared invoice means a single invoice for goods and services (other than goods deemed to be supplied pursuant to section 5(2)) supplied by 2 or more suppliers, if the suppliers use a single invoice because they—

      • (a) have statutory obligations which make it practical to use a single invoice:

      • (b) are part of the same group of companies for the purposes of section 55.

278 Relief from tax where new start grant made
  • (1) In section 48A(3)(a), section CX 41B(4) or EW 47B(4) of the Income Tax Act 2004 is replaced by section CX 48(4) or EW 46(4) of the Income Tax Act 2007.

    (2) In section 48A(3), in the words after paragraph (c), section CX 41B(4) and (5) or section EW 47B(4) and (5) of the Income Tax Act 2004 is replaced by section CX 48(4) and or EW 46(4) and (5) of the Income Tax Act 2007.

279 Group of companies
  • (1) Section 55(1) is replaced by the following:

    • (1) For the purposes of this Act, 2 or more companies (the companies) are eligible to be a group of companies at a time if,—

      • (a) at the time and under section IG 1 of the Income Tax Act 2004, the companies—

        • (i) are a group of companies:

        • (ii) are part of a group of companies:

        • (iii) would be a group of companies or part of a group of companies but for 1 or more of the companies being a portfolio tax rate entity; and

      • (b) the companies,—

        • (i) at the time, are each a registered person:

        • (ii) in a 12-month period that includes the time, make a total value of taxable supplies to persons other than the companies that is at least 75% of the total value of all supplies made in that period by the companies to persons other than the companies.

    (2) In section 55(1)(a), as inserted by subsection (1), section IG 1 of the Income Tax Act 2004 is replaced by section IC 3 of the Income Tax Act 2007.

Income Tax Act 1994

280 Income Tax Act 1994
  • Sections 281 to 288 amend the Income Tax Act 1994.

281 Public and local authorities' exempt income
  • Section CB 3(b)(ii)(A) is replaced by the following:

    • (A) any council-controlled organisation, other than a council-controlled organisation operating a hospital as a charitable activity on behalf of the local authority:.

282 Non-profit bodies' and charities' exempt income
  • (1) In section CB 4(1)(n), trust. is replaced by trust: and the following is added:

    • (o) any amount derived by the trustee of the Tokelau International Trust Fund.

    (2) In section CB 4(1)(o), Fund. is replaced by Fund: and the following is added:

    • (p) any amount derived by the trustee of the Niue International Trust Fund.

    (3) Section CB 4(3)(a) and (b) are replaced by the following:

    • (a) a council-controlled organisation, other than a council controlled organisation operating a hospital as a charitable activity:

    • (b) a local authority in respect of income derived 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.

    (4) Subsection (1) applies for the 1999–2000 and later income years.

    (5) Subsection (2) applies for the 2003–04 and later income years.

283 Other exempt income
  • (1) In section CB 9(i), grant. is replaced by grant: and the following is added:

    • (j) any amount derived as a distribution from the trustee of the Tokelau International Trust Fund.

    (2) In section CB 9(j), Fund. is replaced by Fund: and the following is added:

    • (k) any amount derived as a distribution from the trustee of the Niue International Trust Fund.

    (3) Subsection (1) applies for the 1999–2000 and later income years.

    (4) Subsection (2) applies for the 2003–04 and later income years.

284 What constitutes an interest in a foreign investment fund
  • (1) After section CG 15(2), the following is inserted:

    • (2B) If a person is treated under section CG 23(7) to (8) as disposing of or acquiring rights in an income year, the disposal or acquisition is ignored for the purposes of subsection (2)(d).

    (2) Subsection (1) applies for the 1995–96 and later income years.

285 Companies required to maintain imputation credit account
  • In section ME 1(2)(i), section 24 is replaced by section 266.

286 Use of credit to reduce dividend withholding payment, or use of debit to satisfy income tax liability
  • (1) After section MF 5(5), the following is inserted:

    • (5B) An election made in respect of a company (the first company) by the first company or any other company under section MF 5(4) for an income year is invalid to the extent that the total of all those elections and any other elections in respect of the first company under section MF 10(4) for the year is greater than an amount calculated for the first company for the year using the formula in section MF 4(1)(a) (but treating item e as nil).

    • (5C) An amount of election that is invalid under subsection (5B)—

      • (a) is not recorded as a credit in the branch equivalent tax account of the company that makes the election:

      • (b) is not an amount of debit balance in respect of which the election is made:

      • (c) does not relate to the election.

    (2) Subsection (1) applies for a person for the 1997–98 and later income years, unless the person has, for the relevant income year, taken a tax position in a return of income furnished to the Commissioner before 17 May 2007 that ignores the existence of subsection (1).

    (3) If subsection (1) does not apply to a person for an income year because of subsection (2), the person may treat subsection (1) as not existing.

287 Use of consolidated group credit to reduce dividend withholding payment or use of group or individual debit to satisfy income tax liability
  • (1) After section MF 10(4), the following is inserted:

    • (4B) An election made in respect of a consolidated group under section MF 10(3) by any company described in section MF 10(3)(a) to (c) for an income year is invalid to the extent that the total of all those elections is greater than an amount calculated for the consolidated group for the year using the formula in section MF 8(2)(a) (but treating item e as nil).

    • (4C) An election made in respect of a company (the first company) by any consolidated group under section MF 10(4) for an income year is invalid to the extent that the total of all those elections and any other elections in respect of the first company under section MF 5(4) for the year is greater than an amount calculated for the first company for the year using the f