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New Zealand law explained for everyone

Income Tax Act 2007

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

EW 40: Consideration when person exits from rules: accrued obligation

You could also call this:

“Calculating what you owe when you leave a financial arrangement”

You are a party to a financial arrangement. This law applies when certain situations happen. These situations are: you stop living in New Zealand and you’re not involved in the arrangement for a business you run through a fixed place in New Zealand; or you don’t live in New Zealand and you stop being part of the arrangement for a business you run through a fixed place in New Zealand; or you start using the arrangement for personal or family reasons, making it an excepted financial arrangement as described in section EW 5(18) to (20). When one of these situations happens, and you have a duty to pay under the arrangement, the law treats you in a special way. It’s as if you were freed from your duty to pay just before the situation happened. Instead, it’s like you paid the market value of a contract to take on that duty 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=DLM1515331.

Topics:
Money and consumer rights > Taxes
Banking and loans > Banking and loans
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EW 41: Consideration when person enters rules: accrued entitlement, or

“How to calculate money owed to you when financial rules start applying”

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

EW 40Consideration when person exits from rules: accrued obligation

  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 obligation to pay consideration under the arrangement.

            1. The person is treated as having been relieved of the accrued obligation immediately before the situation arose and as having paid the market value that a contract to assume the obligation had at that time.

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