Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Expenditure specific to certain entities

DV 16: Consolidated groups: intra-group transactions

You could also call this:

“Rules for expenses and claims within company groups”

When you’re part of a group of companies that work together as one big company (called a consolidated group), there are special rules about money and things you can claim as expenses. These rules are there to make sure the group doesn’t claim the same expense more than once.

If you’re a company in a consolidated group, you can’t claim money back for things you spend on or lose through dealing with other companies in your group. It’s like the group is one big company, and you can’t claim expenses for things you do inside your own company. But there are two exceptions:

  1. You can claim expenses for buying things that you’re going to sell (this is called trading stock).
  2. You can claim expenses for some special property deals that are covered in sections FM 15 to FM 23.

There are also rules about claiming for wear and tear on things your company owns (this is called depreciation). You might be allowed to claim for some things, but not for others. One important thing to remember is that you can claim for interest on money you borrowed from outside your group.

These rules are very important and they overrule the usual permission for claiming expenses. So even if you’d normally be allowed to claim something, these special rules might say you can’t.

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 It might be out of date or be missing some parts.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

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514175.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
Previous

DV 15: Amalgamated companies: property passing on resident’s restricted amalgamation, or

“Rules for deductions when companies merge in a special way”

Next

DV 17: Consolidated groups: expenditure or loss incurred by group companies, or

“How companies in a group can share expenses and losses for tax purposes”

Part D Deductions
Expenditure specific to certain entities

DV 16Consolidated groups: intra-group transactions

  1. This section applies in relation to a consolidated group of companies for the purposes of section FM 10 (Expenditure: intra-group transactions).

  2. A company that is a part of a consolidated group of companies is denied a deduction for expenditure or loss incurred through a payment or disposal to, or transaction or arrangement with, another group company, and a deduction would not be allowed for the expenditure or loss if the group were 1 company, except to the extent to which the expenditure or loss arises—

  3. from the company’s acquisition of trading stock; or
    1. under sections FM 15 to FM 23 (which relate to accounting for particular property).

      1. A company that is part of a consolidated group is—

      2. allowed a deduction for expenditure or loss or an amount of depreciation loss:
        1. denied a deduction for expenditure or loss or amount of depreciation loss except to the extent to which the expenditure or loss is interest on money that the company has borrowed outside the consolidated group.

          1. This section overrides the general permission.

          Compare