Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill

  • enacted
29 Section DB 31 amended (Bad debts)
  • (1) Replace section DB 31(1)(a) with:

    • (a) the debt is a debt––

      • (i) written off as bad in the income year:

      • (ii) for which the debtor is released from making all remaining payments under the Insolvency Act 2006 excluding Part 5, subparts 1 and 2 of that Act, or under the Companies Act 1993, or under the laws of a country or territory other than New Zealand, and the person is required to calculate a base price adjustment by section EW 29 (When calculation of base price adjustment required) for the debt for the income year:

      • (iii) for which the debtor is a company that is released from making all remaining payments by a deed or agreement of composition, and the person is required to calculate a base price adjustment by section EW 29 for the debt for the income year; and.

    (2) In section DB 31(2)(a), replace the requirement with a requirement.

    (3) In section DB 31(3)(a), replace the requirement with a requirement.

    (4) In section DB 31(3)(d) replace subsection (5) does with subsections (4B) to (5) do.

    (5) In section DB 31(4)(a), replace the requirement of subsection (1)(a) with the requirement of subsection (1)(a)(i).

    (6) After section DB 31(4) insert:

    Face value
    • (4B) A person is allowed a deduction, under subsection (3), for a debt acquired for less than its face value, only to the extent of the consideration the person pays for acquiring the debt.

    Limited recourse
    • (4C) A person is allowed a deduction, under subsection (3), for a debt that a limited recourse arrangement relates to, only to the extent to which the amount of the debt, after applying subsection (4B), exceeds the consideration paid to the person under the limited-recourse arrangement in relation to that debt.

    Limited recourse: deduction when base price adjustment performed
    • (4D) If subsection (4C) applies for a debt (the debt), then the person is allowed a deduction, at the time that the person performs a base price adjustment for the relevant limited-recourse arrangement, equal to the positive amount calculated using the following formula:

       consideration paid to person – consideration paid by person. 
    Definition of items in formula
    • (4E) In the formula,––

      • (a) consideration paid to the person is the consideration paid to the person under the relevant limited-recourse arrangement in relation to the debt:

      • (b) consideration paid by the person is the consideration paid by the person under the relevant limited-recourse arrangement in relation to the debt.

    (7) After section DB 31(5), insert:

    A definition
    • (5B) In this section, limited-recourse arrangement means, in relation to a debt (the debt), an arrangement that is for the person's business of dealing in or holding financial arrangements, and that provides for payment or non-payment by the person, contingent upon—

      • (a) payment of some or all of the debt to the person:

      • (b) failure to make payment of some or all of the debt to the person.

    (8) In section DB 31, in the list of defined terms, insert arrangement and limited-recourse arrangement.

    (9) Subsections (1), (2), (3), and (5) apply for a debt that goes bad in the 2008–09 and later income years.