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Income Tax Act 2007

Income - Income from business or trade-like activities - Exclusion for investment land

CB 34: Amounts derived by members from mutual associations

You could also call this:

“How rebates from mutual associations may count as income”

When an association gives you a rebate for a mutual transaction, you might need to count it as income. This happens if the payment for the transaction would normally be part of your taxable income.

The amount of the rebate that counts as your income is the same as the amount the association can deduct under section DV 19. This means you don’t have to count the whole rebate as income, just the part the association can deduct.

If you’re part of a mutual association and you get a rebate from a statutory producer board, you count it as income in the same year the producer board chooses to deduct it under section DV 19(7).

Generally, an amount is treated as paid to you when it’s put in your account or used for your benefit. But this doesn’t apply to the situation described in the previous paragraph.

An association rebate isn’t a dividend if it’s the kind of payment described earlier and isn’t more than what the association can deduct under section DV 19. If the association isn’t a company and the rebate is more than what they can deduct under section DV 19, that extra amount is your income.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512503.

Topics:
Money and consumer rights > Taxes
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“Income from mutual deals between an association and its members is taxable”

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Part C Income
Income from business or trade-like activities: Exclusion for investment land

CB 34Amounts derived by members from mutual associations

  1. This section applies when an association, in relation to a mutual transaction, pays an association rebate to a member in an income year in circumstances where a payment for the transaction would be taken into account in determining the taxable income of the member.

  2. The amount of the association rebate is income of the member in the income year but only to the extent of the amount of the association’s deduction under section DV 19 (Association rebates).

  3. If a statutory producer board pays an association rebate to a member that is a mutual association, the association is treated as deriving the amount in the income year in which the producer board chooses under section DV 19(7) to have the amount as the deduction.

  4. For the purposes of this section, an amount is treated as having been paid to a person when it is credited in account or dealt with in some way in their interest or on their behalf. Subsection (3) overrides this subsection.

  5. An association rebate—

  6. is not a dividend to the extent to which it is a payment of the kind described in subsection (2) and is no more than the amount of the deduction the association is allowed under section DV 19; and
    1. for an association that is not a company, and to the extent to which it is more than the amount of the deduction the association is allowed under section DV 19, is income of the member.

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