Telecommunications Act 2001

Structural separation of Telecom - Taxation consequences of structural separation

69XR: Prepayments

You could also call this:

"Paying for things before they are used"

Illustration for Telecommunications Act 2001

When a company like Telecom separates, you need to understand how it affects tax. The Income Tax Act 2007 applies to Telecom. You can read about it on the Income Tax Act 2007 website. For tax purposes, Telecom is treated as having spent money on certain assets and liabilities. This is called the unexpired portion, which is calculated using section EA 3 of the Income Tax Act 2007. You can find more information on section EA 3. Telecom gets income from the unexpired portion under section CH 2 of the Income Tax Act 2007. After the separation, Telecom cannot claim a deduction for the unexpired portion under section DB 50. You can read about section DB 50 on the website. The other company, Chorus, can claim a deduction for the unexpired portion under section DB 50. Chorus is also affected by section EA 3 of the Income Tax Act 2007. You can find more information about the Income Tax Act 2007 online. In this context, expenditure means money spent by Telecom that they can claim a deduction for under the Income Tax Act 2007. You can learn more about the Income Tax Act 2007 on the website.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

This page was last updated on 8 October 2025

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM4187733.

Topics:

Money and consumer rights > TaxesBusiness > Industry rules

69XQ: Goods and Services Tax Act 1985, or

"A law about not paying tax when some assets are transferred"

69XS: Expenditure or loss incurred, and amounts derived, or

"Working out what a company can claim as expenses or income"

Part 2AStructural separation of Telecom
Taxation consequences of structural separation

69XRPrepayments

For the purposes of the Income Tax Act 2007,—
for the vesting year, the relevant Telecom company is treated as having an unexpired amount of expenditure under section EA 3 of that Act (the unexpired portion) for expenditure connected with the designated assets and liabilities, calculated by applying section EA 3(4) to (7) of that Act as if the day before the appointed day were the end of an income year:
the relevant Telecom company has, for the vesting year, income under section CH 2 of that Act for the unexpired portion described in paragraph (a):
for an income year starting after the appointed day, the relevant Telecom company is not allowed a deduction for the unexpired portion under section DB 50 of that Act, and no part of the unexpired portion is income under section CH 2 of that Act:
the relevant Chorus company has, for the vesting year, a deduction for the unexpired portion described in paragraph (a) under section DB 50 of that Act:
for the vesting year and any subsequent income year, section EA 3 of that Act applies to the relevant Chorus company as if that member had been allowed a deduction under that Act for expenditure to which paragraph (a) applies.

In this section, expenditure means expenditure that the relevant Telecom company has been allowed a deduction for under the Income Tax Act 2007 or an earlier Act, and that was not incurred on the items described in section EA 3(2) of that Act.

Notes

Section 69XR: inserted, on 30 November 2011 (being the date of separation day, and an Order in Council (SR 2011/302) having been made under section 36), by section 51 of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Act 2011 (2011 No 27).