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Income Tax Act 2007

Taxation of certain entities - Joint venturers, partners, and partnerships

HG 9: Disposal of short-term agreements for sale and purchase

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"Selling short-term agreements when leaving a partnership"

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When you are an exiting partner, you dispose of some or all of your interests in a partnership to an entering partner. This includes a short-term agreement for sale and purchase. The amount you get for the short-term agreement is not part of your income. You do not get a deduction for the short-term agreement. The entering partner is not allowed a deduction for the amount they pay you for the short-term agreement. For tax purposes, the entering partner is treated as if they originally acquired the short-term agreement. This rule does not apply if section HG 3(2) or section HG 3(1) applies.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1185085.

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Part HTaxation of certain entities
Joint venturers, partners, and partnerships

HG 9Disposal of short-term agreements for sale and purchase

  1. This section applies when an exiting partner disposes of some or all of their partner’s interests in a partnership to an entering partner, to the extent to which those interests include a short-term agreement for sale and purchase.

  2. The amount of consideration paid or payable to the exiting partner for the short-term agreement for sale and purchase is excluded income of the exiting partner.

  3. The exiting partner is denied any deduction in relation to the short-term agreement for sale and purchase, to the extent to which the entering partner is allowed a deduction because of subsection (5).

  4. The entering partner is denied any deduction for the amount of consideration paid or payable to the exiting partner for the short-term agreement for sale and purchase.

  5. For the purposes of calculating the income tax liability of an entering partner for the part of the income year after the disposal of the short-term agreement for sale and purchase occurs and later income years (the post-disposal periods), the entering partner is treated for the post-disposal periods as if they had originally acquired and held the short-term agreement for sale and purchase, not the exiting partner.

  6. This section does not apply for the partners of a small partnership if section HG 3(2) applies.

  7. This section does not apply for the partners of a partnership if section HG 3(1) applies.

Notes
  • Section HG 9: inserted, on , by section 19(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
  • Section HG 9 heading: amended (with effect on 1 April 2008), on , by section 275(1)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(1): amended, on , by section 82(1)(a) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 9(1): amended, on , by section 82(1)(b) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 9(1): amended, on , by section 138(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
  • Section HG 9(1): amended (with effect on 1 April 2008), on , by section 275(1)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(2): amended (with effect on 1 April 2008), on , by section 275(1)(c) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(3): amended (with effect on 1 April 2008), on , by section 275(1)(d) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(4): amended (with effect on 1 April 2008), on , by section 275(1)(e) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(5): amended (with effect on 1 April 2008), on , by section 275(1)(f) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(6): amended (with effect on 1 April 2008), on , by section 275(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(7) heading: replaced (with effect on 1 April 2008), on , by section 82(2) (and see section 82(4) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 9(7): replaced (with effect on 1 April 2008), on , by section 82(2) (and see section 82(4) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 9 list of defined terms amount: inserted, on , by section 82(3) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 9 list of defined terms disposal: repealed, on , by section 138(2)(a) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
  • Section HG 9 list of defined terms dispose: inserted, on , by section 138(2)(b) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
  • Section HG 9 list of defined terms exiting partner: inserted, on , by section 138(2)(b) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
  • Section HG 9 list of defined terms income year: inserted, on , by section 82(3) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 9 list of defined terms pay: inserted, on , by section 82(3) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 9 list of defined terms short-term agreement for sale and purchase: inserted (with effect on 1 April 2008), on , by section 275(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9 list of defined terms short-term agreement for the sale and purchase of property or services: repealed (with effect on 1 April 2008), on , by section 275(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).