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Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 11: Negative base price adjustment

You could also call this:

“Calculating tax deductions for financial arrangements with negative outcomes”

If you have a negative base price adjustment for a financial arrangement, you can get a deduction in certain situations.

You can get a deduction for the amount that comes from income you’ve already paid tax on in previous years. This income must have been from the same financial arrangement.

You can also get a deduction up to the amount you’ve forgiven yourself for the financial arrangement. This is called self-remission.

There’s another situation where you can get a deduction. This happens when a look-through company (LTC) stops being an LTC, or when a partnership breaks up. In this case, you can get a deduction for the amount you’re treated as having paid, or will have to pay, for the financial arrangement.

These rules override any general limits on deductions and add to the general permission to claim deductions.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513598.

Topics:
Money and consumer rights > Taxes
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Part D Deductions
Specific rules for expenditure types

DB 11Negative base price adjustment

  1. A person who has a negative base price adjustment under section EW 31(4) (Base price adjustment formula) is allowed a deduction for the expenditure to the extent to which it arises from assessable income, under section CC 3 (Financial arrangements), derived by the person under the financial arrangement in earlier income years.

  2. A person who has a negative base price adjustment under section EW 31(4) for a financial arrangement is allowed a deduction for an amount of the negative base price adjustment up to the maximum of their amount of self-remission for the financial arrangement.

  3. A person who has a negative base price adjustment under section EW 31(4) for a financial arrangement is allowed a deduction for an amount of the negative base price adjustment to the extent to which—

  4. section EW 47B (Cessation of LTCs and dissolution of partnerships) applies; and
    1. the amount is equal to or less than the consideration that they are treated as having paid, or that is or will be payable, by them for or under the relevant financial arrangement, under section EW 47B(2)(a).

      1. This section supplements the general permission and overrides all the general limitations.

      Compare
      Notes
      • Section DB 11(1B) heading: inserted (with effect on 1 April 2011 and applying for income years beginning on or after that date), on , by section 46(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section DB 11(1B): inserted (with effect on 1 April 2011 and applying for income years beginning on or after that date), on , by section 46(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section DB 11(1C) heading: inserted, on (with effect on 1 April 2011 and applying for income years beginning on or after that date), by section 44(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section DB 11(1C): inserted, on (with effect on 1 April 2011 and applying for income years beginning on or after that date), by section 44(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section DB 11 list of defined terms self-remission: inserted (with effect on 1 April 2011), on , by section 46(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).