Income Tax Act 2007

  • not the latest version

Reprint as at 6 January 2010

Income Tax Act 2007

Public Act2007 No 97
Date of assent1 November 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.

This Act is administered by the Inland Revenue Department


Contents

Business generally

Schemes for profit

Personal property

Land

Exclusions for residential land

Exclusions for business premises

Exclusions for farm land

Exclusion for investment land

Timber

Investments

Farming, forestry, or fishing

Environmental restoration

Minerals

Intellectual property

Transfer of business

Stolen property

Mutual associations

Partners and partnerships

Emissions units under Climate Change Response Act 2002

Land use

Financial instruments

Royalties

Finance leases

Hire purchase agreements

Income

What is a dividend?

What is not a dividend?

Calculation rules

Attributed repatriation calculation rules

[Repealed]

Prevention of double taxation

Returning share transfers

Employment income

Definitions

Attributed income

Restrictive covenants and exit inducement payments

Income protection insurance

Tax credits

Matching rules: revenue account property, prepayments, and deferred payments

Change to accounting practice

Goods and services tax (GST)

Finance leases

Avoidance and non-market transactions

Interest apportionment on thin capitalisation

Attributed controlled foreign company income

Foreign investment fund income

Withdrawals

Exclusions

Transfers to or from superannuation funds and superannuation schemes

Treatment of amounts when superannuation fund becomes superannuation scheme or vice versa

Treatment of distributions when superannuation fund wound up

Treatment of loans to members

Definitions

Introductory provision

Income from mining

Definitions

Income from business or trade-like activities

Income from holding property (excluding equity)

Income from equity

Employee or contractor income

Certain income of transitional resident

Income from living allowances, compensation, and government grants

Income of certain entities

Partners and partnerships

Income from certain activities

Goods and services tax

Fringe benefits

Introductory provisions

Fringe benefits

Exclusions and limitations

Definitions

Insurance

Petroleum mining

Mineral mining

Government grants

Government funding of film and television

Research and development

Superannuation and savings

Farming, forestry, or fishing

Emissions units under Climate Change Response Act 2002

Environmental restoration

Inflation-indexed instruments

Share-lending arrangements

Portfolio investment income

Minors’ beneficiary income

Transactions between companies in consolidated groups

Avoidance arrangements

Partners and partnerships

Taxes

Financing costs

Financial arrangements adjustments

Share-lending arrangements

Premises or land costs

Revenue account property

Bad debts

Research and development

Marketing

Theft and bribery

Pollution control

Repayments

Matching rules: revenue account property, prepayments, and deferred payments

Adjustments for leases that become finance leases

Change to accounting practice

Investment income

Exempt income

Use of motor vehicle under certain arrangements

Payments to spouses, civil union partners, or de facto partners

Avoidance and non-market transactions

Emissions units and liabilities under Climate Change Response Act 2002

Legal expenses

Introductory provisions

Actual records

Logbook

Mileage rates

Attributed controlled foreign company (CFC) loss

Foreign investment fund (FIF) loss

Farming

Aquaculture

Petroleum exploration expenditure

Petroleum development expenditure

Other expenditure

General provisions

Superannuation funds

Other entities

Partners and partnerships

Introductory provisions

Standard valuation

Low-turnover valuation

Low value trading stock

Disposal of business assets

Introductory provisions

Valuation of specified livestock

Herd scheme

National standard cost scheme

Other methods

Partnerships: cost price and national standard cost scheme

Definitions

Valuation of non-specified livestock

Valuation of high-priced livestock

Valuation of bloodstock

Introductory provision

Meaning of own

Meaning of depreciable property

How amounts of depreciation loss and depreciation recovery income are calculated

Methods

Amount of depreciation loss under diminishing value method or straight-line method

Amount of depreciation loss under pool method

Depreciation rates

Improvements, items of low value, or items no longer used

Transfers of depreciable property: associated persons and certain amalgamations

Disposals and similar events

Interpretation provisions

Adjusted tax value

Definitions

Introductory provisions

Main income equalisation scheme

Application

Deposits and accounts

Interest

Deduction

Refunds: automatic

Refunds: on application

Refunds: general provisions

Tax credit

Definitions

Adverse event income equalisation scheme

Application

Deposits and accounts

Interest

Deduction

Refunds: automatic

Refunds: on application

Refunds: general provisions

Transfers

Definitions

Thinning operations income equalisation scheme

Application

Deposits and accounts

Interest

Deductions

Refunds: automatic

Refunds: on application

Refunds: general provisions, and tax credits

Definitions

Farming and forestry

Inflation-indexed instruments

Intellectual property

Land

Shareholder-employees

Farming and forestry

Films

Leases

Petroleum mining

Definitions

Superannuation contributions

Research, development, and resulting market development

Introductory provisions

Meaning of financial arrangement and excepted financial arrangement

Application of financial arrangements rules

Calculation and allocation of income and expenditure over financial arrangement’s term

Calculation and allocation of income and expenditure when rights and obligations under financial arrangement cease

Consideration

Consideration when financial arrangement involves property or services

Consideration treated as paid to person

Consideration treated as paid by person

Consideration when legal defeasance has occurred

Consideration when anti-avoidance provision applies

Income and deduction provisions specifically related to financial arrangements

Treatment of original share acquired under financial arrangement

One kind of avoidance

Application of financial arrangements rules to cash basis persons

EW 56 Natural person [Repealed]

Controlled foreign company (CFC) rules

When is a company a controlled foreign company?

Calculation of person’s control interest

Calculation of person’s income interest

Ten percent threshold and variations in income interest level

Calculation of attributed CFC income or loss

Attributable CFC amount and net attributable CFC income or loss

Calculation of branch equivalent income or loss

[Repealed]

Non-attributing active CFCs

Tests for non-attributing active CFCs

Non-attributing Australian CFCs

Change of residence of companies

Change of CFC’s balance date

Ownership measurement concession

Anti-avoidance rule: stapled stock

Foreign investment fund (FIF) rules

What is a foreign investment fund?

Attributing interests in FIFs

Calculation of FIF income or loss

Relationship with other provisions in Act

Changing calculation method

Cases of entry into and exit from FIF rules

Measurement of cost

Change of FIF’s balance date

Market value rules

Commissioner’s default assessment power

Introductory provisions

Premium loading

Mortality profit

Discontinuance profit

Policyholder income

Disposal of property

Non-resident life insurers

Life insurance

Petroleum mining

Livestock

Patent rights

Leases of land

Depreciation

Definitions

Accident insurance

Controlled foreign company and foreign investment fund rules

Old financial arrangements rules

Introductory provision

Debentures and shares

Leases

Finance leases

Hire purchase agreements

Introductory provisions

Exceptions for property transferred on death of person

Introductory provisions

Interest apportionment rules

Calculations

Debt percentage of New Zealand group

Debt percentage of worldwide group

New Zealand banking group

Determining membership of groups

New Zealand group

Worldwide group

New Zealand banking group

Measuring ownership interests in companies

Introductory provisions

[Repealed]

Interest apportionment rule

[Repealed]

Membership and debt percentages of foreign groups

[Repealed]

Introductory provisions

Calculating taxable income for consolidated group returns

Accounting generally

Accounting for particular property

Treatment of foreign dividends

[Repealed]

Membership of consolidated groups

Eligibility and restrictions

Nominated companies

Forming, joining, or leaving consolidated groups

When membership starts and stops

Introductory provisions

Treatment of shares, income, expenditure, and bad debts

Property passing to amalgamated company on amalgamation

Treatment of financial arrangements between amalgamating companies

Debentures

Leases

Relationship property

Estate property

Arrangements involving dividend stripping

Arrangements involving transfer pricing

Arrangements involving tax losses

Arrangements to defeat continuity provisions

Arrangements involving qualifying companies

Arrangements involving controlled foreign companies

Arrangements involving foreign investment funds

Arrangements involving film rights

Arrangements involving petroleum mining

Arrangements involving financial arrangements

Arrangements involving trust beneficiary income

Excessive remuneration

Arrangements involving repatriation of commercial bills

Attribution rule for income from personal services

Arrangements involving restrictive covenants

Arrangements involving fringe benefit tax

Arrangements involving depreciation loss

Arrangements involving imputation rules

Arrangements involving foreign dividends

Arrangements involving Maori authority credits

Arrangements involving tax credits for families

Arrangements involving money not at risk

Arrangements involving returning share transfers

Arrangements involving partners

Disposals of trading stock or similar property

Leases

Transfer pricing arrangements

Introductory provisions

Qualifying company status

Treatment of profits, dividends, and tax losses

Special tax matters for loss-attributing qualifying companies

Elections: qualifying companies

Elections: loss-attributing qualifying companies

Qualifying company election tax

Effective interests in qualifying companies

Introductory provisions

Trust income

Classification of trusts

Distributions from trusts

Tax treatment of amounts that beneficiaries derive from trusts

Tax treatment of trustee income

Settlors and their liabilities

Treatment of transition situations

Valuation of property, trading stock, and financial arrangements

Rate and payment of income tax

Introductory provisions

Particular cases

Absentees

Non-residents

Introductory provisions

Maori authority distributions

Changing status

Joint venturers

Partners and partnerships

Introductory provisions

Eligibility requirements: portfolio investment entities and foreign investment vehicles

Becoming and ceasing to be portfolio investment entity

Periods relevant to calculation of portfolio entity tax liability

Allocation of income in some cases

Calculating portfolio entity tax liability

Payment by portfolio tax rate entity of tax for tax year

Results for investors

Tax credits for entity

Treatment of losses for entity

Portfolio investor proxies

Partnerships and joint ventures

Funds

Airport operators

Transitional residents

RMBS special purpose vehicles

Introductory provisions

Requirements and methods

Introductory provisions

Tax loss components carried forward

Grouping part-year tax losses

Statements and notices

Tax credits for persons on low incomes

[Repealed]

Tax credits for children

Tax credits for transitional circumstances

Tax credits for housekeeping

Tax credits for absentees

Adjustments to certain tax credits

Tax credits for independent earners

Charitable and other public benefit gifts

Payroll donations

LH 3 Requirements [Repealed]

Amounts of credits

Use of credits in later tax years

Treatment of taxable distributions

Consolidated companies

Amalgamations of companies

Introductory provision

Use of credits

Supplementary dividend holding companies

Underlying foreign tax credits

Credits for certain non-resident investment companies

Credits for interest on home vendor mortgages

Credits for savings in special home ownership accounts

Calculating amount of credit

Family tax credit

In-work tax credit

Parental tax credit

Credit abatement

Tax credits for fund providers

Tax credits for employers

[Repealed]

Introductory provisions

Credits and debits

Opening balances

Shareholder continuity requirements

Treatment of credits and debits on resident’s restricted amalgamation

General provision

When companies amalgamate

Amalgamation of companies in consolidated groups

Maximum permitted ratios

Introductory provisions

Imputation credits

Imputation debits

Imputation credits attached to dividends

Further income tax

Imputation additional tax

Distributions of statutory producer boards and co-operative companies

Tables of credits and debits in memorandum accounts

Introductory provisions

FDP credits

FDP debits

FDP credits attached to dividends

Further income tax

Some definitions

Table O3: FDP credits

Table O4: FDP debits

Introductory provisions

CTR credits

CTR debits

CTR credits attached to dividends

Payment of FDP and refunds

Table O5: conduit tax relief credits

Table O6: conduit tax relief debits

Introductory provision

Companies with branch equivalent tax accounts

Introductory provisions

Branch equivalent tax credits

Branch equivalent tax debits

[Repealed]

Debit if credit balance at beginning of first affected income year

Persons with branch equivalent tax accounts

Introductory provisions

Branch equivalent tax credits

Branch equivalent tax debits

Table O7 branch equivalent tax credits

Table O8 branch equivalent tax debits

[Repealed]

Table O9 person's equivalent tax credits

Table O10 person's equivalent tax debits

Introductory provisions

ASC credits

ASC debits

Table O11 ASC credits

Table O12 ASC debits

Introductory provision

Companies with policyholder credit accounts

Introductory provision

Policyholder credits of PCA company

Policyholder debits of PCA company

Persons with policyholder credit accounts

Introductory provisions

Policyholder credits of PCA person

Policyholder debits of PCA person

Table O13 policy holder credits

Table O14 policyholder debits

Table O15 person's policyholder credits

Table O16 person's policyholder debits

Introductory provision

Maori authority credits

Maori authority debits

Maori authority credits attached to distributions

Further income tax

Table O17 Maori authority credits

Table O18 Maori authority debits

Introductory provisions

Consolidated groups and imputation credit accounts

Introductory provisions

Imputation credits of consolidated imputation groups

Imputation debits of consolidated imputation groups

Table O19 imputation credits of consolidated imputation groups

Table O20 imputation debits of consolidated imputation groups

Consolidated groups and FDP accounts

Introductory provisions

FDP credits of consolidated FDP groups

FDP debits of consolidated FDP groups

Table O21 : credits of consolidated FDP groups

Table O22 : FDP debits of consolidated FDP groups

Consolidated groups and CTR credits

Introductory provisions

CTR credits of consolidated groups

CTR debits of consolidated groups

Consolidated groups’ FDP payments and refunds

Table O23 : conduit tax relief credits of consolidated groups

Table O24 : conduit tax relief debits of consolidated groups

Consolidated groups and branch equivalent tax accounts

Introductory provisions

Branch equivalent tax credits of consolidated BETA groups

Branch equivalent tax debits of consolidated BETA groups

[Repealed]

Debit if credit balance at beginning of first affected income year

Table O25 : branch equivalent tax credits of consolidated BETA groups

Table O26 : branch equivalent tax debits of consolidated BETA groups

[Repealed]

Consolidated groups and policyholder credit accounts

Introductory provision

Policyholder credits of consolidated groups

Policyholder debits of consolidated groups

Introductory provisions

Payment and withholding obligations

Payment dates

Refunds

Amalgamations

Regulations

Application of other provisions

Introductory provisions

Calculating provisional tax liability

Instalments of provisional tax

Requirements for using GST ratio

Transitional years

When persons start or stop paying GST, or change taxable periods

Treatment of groups of companies and amalgamated companies

Attribution rule for income from personal services

Credits

Disaster relief

[Repealed]

Early-payment discounts

Introductory provision

PAYE rules and PAYE income payments

Introductory provisions

Types of PAYE income payments

Calculating amounts of tax

Adjustments for certain PAYE income payments

Paying amounts of tax

Fringe benefit tax (FBT) rules and fringe benefits

Introductory provisions

Value of fringe benefits

Attributing fringe benefits to employees

Taxable value of fringe benefits

Options for payment of FBT

Employer’s superannuation contribution tax (ESCT) rules and employer’s superannuation contributions

Introductory provisions

Calculating amounts of tax

Tax on certain withdrawals from superannuation funds

Introductory provisions

Withholding obligations

Calculating amounts of tax

Paying amounts of tax

RWT exemption certificates

Introductory provisions

Withholding obligations

Calculating amounts of tax

Paying amounts of tax

Introductory provisions

[Repealed]

Obligation to make payments

[Repealed]

Calculation of payments

[Repealed]

Adjustments to payments

[Repealed]

Calculating amounts of tax

Introductory provision

Refunds for overpaid amounts

Use of refunds

Limits on refunds and transfers

ICA companies

Companies receiving foreign dividends

Maori authorities

Persons with policyholder credit accounts

Qualifying companies

Certain unit trusts and group investment funds

Introductory provision

PAYE intermediaries

Obligations and treatment of PAYE intermediaries

Employers’ responsibilities