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Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules

EW 30: When calculation of base price adjustment not required

You could also call this:

“When you don't need to calculate base price adjustments for financial arrangements”

You don’t need to calculate a base price adjustment in certain situations. If you’re a cash basis person who stops being a New Zealand resident before the first day of the fourth income year after you became a resident, you don’t need to do this calculation for financial arrangements you were part of before becoming a resident and are still part of when you leave.

If you stop being a New Zealand resident, you don’t need to calculate a base price adjustment for financial arrangements related to a business you run through a fixed establishment in New Zealand.

You also don’t need to do this calculation if someone else takes over the remaining obligations of your financial arrangement through a legal defeasance. This applies on the date of the defeasance.

If your obligations under a financial arrangement are completely taken over by someone else (absolute legal defeasance), and some or all of the payment for this is delayed, you don’t need to calculate a base price adjustment.

Similarly, if you transfer all your rights under a financial arrangement to someone else (absolute assignment), and some or all of the payment for this is delayed, you don’t need to calculate a base price adjustment.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515302.

Topics:
Money and consumer rights > Taxes
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EW 29: When calculation of base price adjustment required, or

“When you need to work out the base price for a financial arrangement”

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EW 31: Base price adjustment formula, or

“How to calculate your profit or loss when a financial agreement ends”

Part E Timing and quantifying rules
Financial arrangements rules

EW 30When calculation of base price adjustment not required

  1. A cash basis person who ceases to be a New Zealand resident before the first day of the fourth income year following the income year in which they first became a New Zealand resident does not calculate a base price adjustment for a financial arrangement to which they—

  2. were a party before first becoming a New Zealand resident; and
    1. are a party on the date on which they cease to be a New Zealand resident.

      1. A party to a financial arrangement who ceases to be a New Zealand resident does not calculate a base price adjustment to the extent to which the arrangement relates to a business the party carries on through a fixed establishment in New Zealand.

      2. A party who has a right to receive money under a financial arrangement the obligations of which are the subject of a legal defeasance does not calculate a base price adjustment on the date of the defeasance if the defeasance requires another person to meet the remaining obligations of the arrangement.

      3. A party to a financial arrangement does not calculate a base price adjustment if—

      4. their obligations under the arrangement are the subject of an absolute legal defeasance; and
        1. some or all of the consideration for the defeasance is deferred.

          1. A party to a financial arrangement does not calculate a base price adjustment if—

          2. their rights under the arrangement are the subject of an absolute assignment; and
            1. some or all of the consideration for the assignment is deferred.

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