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Income Tax Act 2007

Deductions - Expenditure specific to certain entities

DV 19: Association rebates

You could also call this:

“Tax deductions for associations giving rebates to members”

This section is about association rebates. When an association does business with a member and pays them a rebate, they can deduct some money from their taxes.

The association can deduct the smaller of two amounts:

  1. The total amount of rebates paid to members for business done with them that year, which affects the association’s income or loss.
  2. An amount calculated using a special formula.

The association can take this deduction in the same year they pay the rebate.

The formula to calculate the deduction is: income from member transactions minus (expenses from those transactions plus money given to members in cash).

If the association is a statutory producer board, they can choose to deduct the rebate in the year it’s paid or in the year the business with the member happened.

This deduction is allowed on top of other tax rules, but it can’t be used for capital expenses. Other tax limitations still apply.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514181.

Topics:
Money and consumer rights > Taxes
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Part D Deductions
Expenditure specific to certain entities

DV 19Association rebates

  1. This section applies when an association—

  2. enters into a mutual transaction with a member; and
    1. in relation to the transaction, pays an association rebate to a member.

      1. The association is allowed a deduction for the lesser of—

      2. the amount described in subsection (4); and
        1. the amount calculated using the formula in subsection (5).

          1. The deduction is allowed in the income year corresponding to the accounting year for which the association rebate is paid.

          2. The amount referred to in subsection (2)(a) is the total amount that the association pays as association rebates to members for those mutual transactions with members that arise in the income year and which the association takes into account in determining its net income or net loss. In the calculation of the total amount, it is irrelevant that the amount paid may be limited or reduced because a member of the association has a share or interest in the capital of the association.

          3. The amount is calculated using the formula—

            assessable income − (deductions + amount distributed).

            Where:

            • In the formula,—

            • assessable income is the total amount of the association’s assessable income attributable to mutual transactions with members:
              1. deductions are the total deductions that the association is allowed, other than under this section, that are attributable to the assessable income referred to in paragraph (a):
                1. amount distributed is the total amount that the association distributes to members in the income year through a cash distribution for which a determination is made under section OB 82(1)(a) (When and how co-operative company makes election).

                  1. When an association is a statutory producer board that pays an association rebate to a member—

                  2. the amount allowed as a deduction is the amount referred to in subsection (4):
                    1. the board may choose whether the rebate is a deduction in the income year in which the amount is paid, or in the income year in which the mutual transaction giving rise to the amount is made.

                      1. This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.

                      Compare
                      Notes
                      • Section DV 19(1): substituted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 25(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
                      • Section DV 19(1)(a): amended (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 20(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                      • Section DV 19(2)(a): amended (with effect on 1 April 2008), on , by section 156(1) (and see section 156(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                      • Section DV 19(3): substituted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 25(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
                      • Section DV 19(4): amended (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 20(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                      • Section DV 19(6)(a): amended (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 20(3)(a) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                      • Section DV 19(6)(b): amended (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 20(3)(b) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                      • Section DV 19 list of defined terms accounting year: inserted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 25(3) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).