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EW 22: Default method
or “How to use the default method when other methods don't apply to your financial arrangement”
You could also call this:

“Using alternative financial reporting methods with approval”

If you want to use a certain method for financial reporting purposes, but you don’t meet some specific requirements, you might still be allowed to use it. Even if you don’t comply with certain sections of the law, you can be treated as if you do comply if you follow these rules:

You must use the same method for each financial arrangement every year. This method should match the main reason why you entered into the financial arrangement. You can’t use it to avoid paying taxes.

The Commissioner of Inland Revenue needs to approve your use of this method. They can do this by sending you a notice or by making a special decision.

If you want to change your method, that’s okay as long as the Commissioner approves the change under certain conditions.

There’s a special rule that applies to IFRS reporting, which is mentioned in another section of the law.

Remember, these rules are about making sure you’re using the right methods for financial reporting, even if you don’t meet all the usual requirements.

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Next up: EW 24: Consistency of use of spreading method

or “Use the same spreading method for similar financial arrangements each year”
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Part E Timing and quantifying rules
Financial arrangements rules

EW 23Failure to use method for financial reporting purposes

  1. This section applies when a person would be allowed to use a method but for the fact that the person does not comply with whichever is relevant of sections EW 16(2)(d), EW 18(1)(f), EW 20(2)(f) and EW 21(f).

  2. The person is treated as complying with whichever is relevant of sections EW 16(2)(d), EW 18(1)(f), EW 20(2)(f) and EW 21(f) if the method that the person uses for each financial arrangement—

  3. is used for the financial arrangement, and each financial arrangement that is the same as, or similar to, the arrangements, for every income year over its term for the purposes of the financial arrangements rules; and
    1. appropriately reflects the dominant purpose for which the person entered into the financial arrangement; and
      1. is not used for the purpose of tax avoidance; and
        1. has been approved for use in circumstances applying to the person by the Commissioner, either by giving notice to the person or by making a determination under section 90AC(1)(f) of the Tax Administration Act 1994.

          1. A method complies with subsection (2)(a), even if it is a change from a previous method, as long as the Commissioner approves the change in method under the circumstances or conditions specified in a determination under section 90AC(1)(g) of the Tax Administration Act 1994.

          2. This section is modified by section EZ 32B (Transitional rule for IFRS reporting).

          Compare
          Notes
          • Section EW 23(1): amended (with effect on 1 April 2008), on , by section 143(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
          • Section EW 23(1): amended, on , by section 374(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
          • Section EW 23(2): amended (with effect on 1 April 2008), on , by section 143(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
          • Section EW 23(2): amended, on , by section 374(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
          • Section EW 23(4) heading: added, on , by section 374(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
          • Section EW 23(4): added, on , by section 374(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
          • Section EW 23 list of defined terms IFRS: inserted, on , by section 374(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).