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Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules - Consideration when anti-avoidance provision applies

EW 58: Financial arrangements, income, and expenditure relevant to criteria

You could also call this:

“Rules for calculating financial arrangements and related income or expenses”

When you have a financial arrangement, you need to do some calculations. These calculations are done for every financial arrangement you’re involved in, whether it follows the current or old financial rules.

There are two important things to remember about these calculations:

Firstly, if you only have a partial interest in an arrangement, you only include that part in your calculations.

Secondly, you don’t include arrangements or income and expenses in your calculations if they fall under certain special cases.

If you’re a beneficiary of a bare trust and the trustee is part of a financial arrangement, you’re treated as if you’re directly involved in that arrangement. This means you include your share of the arrangement and any income or expenses from it in your calculations.

If you’re a beneficiary of any other kind of trust (not a bare trust), and the trustee is part of a financial arrangement, you don’t include certain things in your calculations. You leave out the value of the arrangement if it produces trustee or beneficiary income under the trust rules. You also don’t include any income from the arrangement that is trustee or beneficiary income under the trust rules.

If you’re a trustee who’s part of a financial arrangement, you also don’t include certain things in your calculations. You leave out the value of the arrangement and any income from it if it produces trustee or beneficiary income under the trust rules. You also don’t include the value of the arrangement if it creates expenses, or any expenses that come from the arrangement.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515387.

Topics:
Money and consumer rights > Taxes
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“Thresholds for financial arrangements and their tax treatment”

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“Commissioner can decide you're not a cash basis person for tax purposes”

Part E Timing and quantifying rules
Financial arrangements rules: Consideration when anti-avoidance provision applies

EW 58Financial arrangements, income, and expenditure relevant to criteria

  1. The calculations required by section EW 57(1) to (3) are done for every financial arrangement to which the person is a party or, as the relevant subsection requires, to income and expenditure under such an arrangement, whether the financial arrangements rules or the old financial arrangements rules apply to the arrangement. Two qualifications are—

  2. the calculations include an arrangement, or income and expenditure, to which subsection (2) or (3) applies only to the extent of the person’s interest in it, as described in each subsection; and
    1. the calculations exclude the value of an arrangement, and income and expenditure, in which the person has the interest described in subsection (4) or (5).

      1. Repealed

      2. This subsection applies when the trustee of a bare trust is a party to a financial arrangement. A person who is a beneficiary of the bare trust—

      3. is treated as a party to the arrangement to the extent of the beneficiary’s share of the beneficial interest in the arrangement; and
        1. is treated as deriving income or incurring expenditure under the arrangement to the extent of the beneficiary’s share of the beneficial interest in the arrangement.

          1. This subsection applies when a person is a beneficiary of a trust, other than a bare trust, whose trustee is a party to a financial arrangement. The following are excluded from the calculations required by section EW 57(1) to (3):

          2. the value of the arrangement, if it produces trustee income or beneficiary income under the trust rules; and
            1. income under the arrangement that is trustee income or beneficiary income under the trust rules.

              1. This subsection applies when a person is a party to a financial arrangement as a trustee. The following are excluded from the calculations required by section EW 57(1) to (3):

              2. the value of the arrangement, if it produces trustee income or beneficiary income under the trust rules; and
                1. income under the arrangement that is trustee income or beneficiary income under the trust rules; and
                  1. the value of the arrangement, if expenditure is incurred under it; and
                    1. expenditure incurred under the arrangement.

                      Compare
                      Notes
                      • Section EW 58(1): amended, on , by section 12(1) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).
                      • Section EW 58(2) heading: repealed, on , by section 13(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
                      • Section EW 58(2): repealed, on , by section 13(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
                      • Section EW 58(3) heading: substituted, on , by section 12(2)(a) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).
                      • Section EW 58(3): amended, on , by section 12(2)(b) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).
                      • Section EW 58(4) heading: substituted, on , by section 12(3)(a) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).
                      • Section EW 58(4): amended, on , by section 12(3)(b) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).
                      • Section EW 58(5) heading: substituted, on , by section 12(4)(a) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).
                      • Section EW 58(5): amended, on , by section 12(4)(b) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).