Taxation (Tax Administration and Remedial Matters) Act 2011

45 Apportionment of interest by excess debt entity
  • (1) In section FE 6(3)(a)(i), sections FE 14(2) is replaced by sections FE 3.

    (2) Section FE 6(3)(ac)(ii) to (iv) are replaced by the following:

    • (ii) the amount (the group finance cost) that is the total amount for the New Zealand group found by calculating for each member of the New Zealand group the total amount (the member finance cost) of the items total deduction and FRD for the member, if the group finance cost is $1,000,000 or less and subparagraph (i) does not apply; or

    • (iii) the amount found by multiplying the amount by which $2,000,000 exceeds the group finance cost by the ratio obtained by dividing the member finance cost for the excess debt entity by the group finance cost, if the group finance cost is more than $1,000,000 and less than $2,000,000 and subparagraph (i) does not apply; or

    • (iv) zero, if the group finance cost is $2,000,000 or more and subparagraph (i) does not apply:.

    (3) After section FE 6(3), the following is added:

    Alternative calculation
    • (4) If a company that is in the same wholly-owned group of companies as the excess debt entity has a deduction for interest under any of sections DB 6 to DB 8, the company may choose to be treated as deriving the income that the excess debt entity would otherwise, under subsection (2), be treated as deriving for the income year. The amount of income is not calculated using the formula in subsection (2) but is limited as set out in subsection (5).

    Limitation on election amount
    • (5) The amount of income for which the company may make the election under subsection (4) must not be more than the total amount of deductions that the company has for interest for the income year, having taken into account any other income that the company chooses to treat itself as deriving under subsection (4).

    (4) In section FE 6, in the list of defined terms, wholly owned group of companies is added.

    (5) Subsection (2) does not apply to a person and an income year in relation to a tax position taken by the person—

    • (a) in a return of income filed before the date on which the Taxation (Tax Administration and Remedial Matters) Bill is reported to the House of Representatives by the select committee considering the bill; and

    • (b) relating to the apportionment of interest expenditure; and

    (6) Subsection (3) applies for the 2008–09 and later income years.