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Income Tax Act 2007

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

EW 61: Election to use spreading method

You could also call this:

“Option to switch from cash basis to spreading method for financial arrangements”

If you’re a cash basis person, you can choose to use a spreading method for your financial arrangements. However, you can’t choose this method in the same year that section EW 29 requires you to calculate a base price adjustment for the arrangement.

To make this choice, you need to calculate a cash basis adjustment as described in section EW 62(1). Once you choose to use a spreading method, you must use it for all your current financial arrangements and any new ones you enter into after that.

If you want to stop using the spreading method, you can do so by telling the Commissioner. You need to include this notice with your tax return, and submit it within the time frame specified in section 37 of the Tax Administration Act 1994. If you decide to stop using the spreading method, this change will apply to all new financial arrangements you enter into after the income year in which you give the notice.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515393.

Topics:
Money and consumer rights > Taxes
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EW 62: When and how calculation of cash basis adjustment required, or

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

EW 61Election to use spreading method

  1. A cash basis person may choose to use a spreading method, unless subsection (2) applies.

  2. A cash basis person may not choose to use a spreading method for a financial arrangement in the income year in which section EW 29 requires them to calculate a base price adjustment for the arrangement.

  3. The person makes the election by calculating a cash basis adjustment under section EW 62(1).

  4. The person must use a spreading method for—

  5. all financial arrangements to which the person is a party at the time of making the election; and
    1. all financial arrangements the person enters into after the income year in which they make the election.

      1. The person revokes the election by giving notice to the Commissioner with a return of income and within the time that the return must be filed under section 37 of the Tax Administration Act 1994.

      2. The revocation applies to all financial arrangements the person enters into after the income year in which the notice is given.

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