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Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules - Consideration treated as paid to person

EW 36: Consideration when person exits from rules: accrued entitlement

You could also call this:

“Payment rights when you leave the financial arrangement rules”

If you’re involved in a financial arrangement, there are certain situations where you’re considered to have sold your right to be paid. This happens when you stop living in New Zealand and you’re not using the arrangement for a business you run here. It also applies if you live overseas and stop using the arrangement for a business you run in New Zealand. Lastly, it happens if you start using the arrangement for personal reasons, making it a special type of arrangement as described in [section EW 5(18) to (20)].

In these cases, if you were supposed to be paid under the arrangement, the law treats it as if you sold your right to be paid just before the situation happened. You’re considered to have been paid the market value of what you were owed at that time.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515322.

Topics:
Money and consumer rights > Taxes
Money and consumer rights > Banking and loans
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EW 35: Value relevant for non-financial arrangements rule, or

“How to calculate the value of property or services in non-financial arrangements”

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EW 37: Consideration when person enters rules: accrued obligation, or

“How to handle money you owe when your tax status changes”

Part E Timing and quantifying rules
Financial arrangements rules: Consideration treated as paid to person

EW 36Consideration when person exits from rules: accrued entitlement

  1. This section applies when—

  2. a person is a party to a financial arrangement; and
    1. 1 of the following situations arises:
      1. the person ceases to be resident in New Zealand and is not a party to the arrangement for the purpose of a business carried on by them through a fixed establishment in New Zealand; or
        1. the person, not resident in New Zealand, ceases to be a party to the arrangement for the purpose of a business carried on by them through a fixed establishment in New Zealand; or
          1. the person starts using the arrangement for a private or domestic purpose and so it becomes an excepted financial arrangement described in any of section EW 5(18) to (20); and
          2. at the time the situation arises, the person has an accrued entitlement to be paid consideration under the arrangement.

            1. The person is treated as having disposed of their accrued entitlement immediately before the situation arose and as having been paid the market value that the accrued entitlement had at that time.

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