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Income Tax Act 2007

Income - Income from living allowances, foreign superannuation, compensation, and government grants

CF 2: Remission of specified suspensory loans

You could also call this:

“Tax treatment of forgiven government business loans”

You might receive a special kind of loan called a specified suspensory loan from a public authority for your business. If you do, there are some rules about how it’s treated for tax purposes.

If the public authority decides to forgive some of the loan (this is called remission), the amount they forgive becomes part of your income. You don’t have to count it all as income right away. Instead, you split it evenly over three years: the year it was forgiven and the next two years. But if you want, you can choose to count some or all of the forgiven amount as income earlier, as long as it’s within those three years.

If you stop running the business that the loan was for, any part of the forgiven amount that was supposed to count as income in future years gets moved to the year you stop the business. This means you might have to include more income in your tax return for that year.

Remember, these rules only apply to specified suspensory loans from public authorities, not regular loans from banks or other lenders.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512827.

Topics:
Money and consumer rights > Taxes
Money and consumer rights > Banking and loans
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Part C Income
Income from living allowances, foreign superannuation, compensation, and government grants

CF 2Remission of specified suspensory loans

  1. This section applies when a public authority—

  2. grants a loan to a person for a business that the person carries on; and
    1. designates the loan as a specified suspensory loan.

      1. An amount remitted on the specified suspensory loan is income of the person.

      2. The amount is allocated in equal parts to the income year of remission and the following 2 income years. However, the person may choose to allocate some or all of the amount in the following 2 income years to an earlier income year that is 1 of the 3 income years.

      3. If the person stops carrying on the business for which the specified suspensory loan was granted, an amount remitted that is allocated to a later income year is allocated to the income year in which the person stops carrying on the business.

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