Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Recharacterisation of certain transactions - Interest apportionment on thin capitalisation - Debt percentage of New Zealand group

FE 16: Total group assets

You could also call this:

“How to calculate the total value of assets for a New Zealand group”

When calculating total group assets for a New Zealand group, you can use different methods to value the assets. These methods include:

  • The value shown in the group’s financial statements
  • The current net value of the assets
  • Market value for trading stock that’s valued this way for income tax purposes
  • Adjusted tax value for certain leased assets
  • A mix of financial statement values and current net values, if allowed

If you’re using net current value, you need to get the assets valued by an independent expert or by someone in your company who has the right experience and uses an approved method.

Some investments in foreign companies are not included in the total group assets, except in specific situations. These exceptions relate to things like outstanding loan balances or income from New Zealand sources.

If a member of the group is not based in New Zealand, their assets are only included if they’re used for business in New Zealand or to earn certain types of income from New Zealand.

Changes in asset values from transfers between group members and associated people are usually not included, but there are some exceptions to this rule.

The total group assets must be calculated using generally accepted accounting practices, except for certain specific values mentioned earlier.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516455.

Topics:
Money and consumer rights > Taxes
Previous

FE 15: Total group debt, or

“Calculating the total debt owed by a New Zealand group”

Next

FE 16B: Total group non-debt liabilities, or

“Calculating a group's total non-debt financial obligations”

Part F Recharacterisation of certain transactions
Interest apportionment on thin capitalisation: Debt percentage of New Zealand group

FE 16Total group assets

  1. In this subpart, for a New Zealand group, total group assets for an income year means the total assets of a natural person, or an excess debt entity, or another member of the New Zealand group, measured under the following paragraphs, as applicable or as the person or entity chooses:

  2. the value of the assets shown in the financial statements of the entity’s New Zealand group; or
    1. the net current value of the assets; or
      1. market value, for trading stock that is valued at market value in calculating the person or entity’s income tax liability for the income year, or that of a member of the group; or
        1. adjusted tax value of a personal property lease asset at the start of the income year, in the case of a specified lease or a finance lease that is not recognised as an asset under generally accepted accounting practice; or
          1. if allowed under generally accepted accounting practice, a combination of the financial statement values and net current values.

            1. For the purpose of subsection (1)(b) and (e), a net current value of an asset must be determined by a valuation of the asset by—

            2. an independent person who is an expert in the valuation of such assets:
              1. an employee, or other person associated with the excess debt entity, with experience in the valuation of assets and using a methodology, assumptions, and data, approved by a person qualified to give a valuation of the asset under paragraph (a).

                1. Subsection (1B) applies to an investment—

                2. of a person (the relevant person) who is—
                  1. the excess debt entity:
                    1. another member of the New Zealand group; and
                    2. that is an investment—
                      1. in a CFC in which the relevant person has an income interest:
                        1. in a FIF in which the relevant person has an interest meeting the requirements of section EX 35 (Exemption for interest for FIF resident in Australia) or for which the relevant person uses the attributable FIF income method:
                          1. of a trustee or natural person in a CFC through an income interest in the CFC of an associated person, if the associated person would be a member of the New Zealand group but for being an excess debt outbound company or being included in the New Zealand group of an excess debt outbound company:
                            1. of a trustee or natural person in a FIF, through an income interest of an associated person that meets the requirements of subparagraph (ii) for the FIF and the associated person as a relevant person, if the associated person would be a member of the New Zealand group but for being an excess debt outbound company or being included in the New Zealand group of an excess debt outbound company.

                            2. The value of the total group assets calculated and measured under this section does not include the value of an investment described in subsection (1BA), except—

                            3. to the extent to which—
                              1. the value of the investment represents the outstanding balances of financial arrangements to which section FE 13 applies:
                                1. the CFC or FIF derives income, other than non-resident passive income, that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable:
                                2. that the value of the total group assets is treated as being $1 if the value would otherwise be zero as a result of this subsection.

                                  1. If the excess debt entity or another member of a New Zealand group is not resident in New Zealand, the assets of the entity or member are included in the calculation and measurement of total group assets under this section only to the extent to which the assets are for the entity or member to—

                                  2. carry on business in New Zealand through a fixed establishment in New Zealand:
                                    1. derive income, other than non-resident passive income, that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable.

                                      1. The value of the total group assets calculated and measured under this section does not include a change in the value of assets arising from a transfer of the assets or ownership interests between a member of the group and an associated person in or after the 2015–16 income year.

                                      2. A change referred to in subsection (1D) may be included in the value of the total group assets if—

                                      3. the change would have been permitted under generally accepted accounting practice in the absence of the transfer:
                                        1. the change—
                                          1. arises for a company that, with other companies, has its ownership or control acquired by a person (the purchaser) who is not an associated person of the former owner and that is restructured on being included in the purchaser's group (the group); and
                                            1. includes a change in value for the company's assets in New Zealand that is a reasonable proportion of the change in value of the group's total assets.

                                            2. The amount of total group assets must be calculated under generally accepted accounting practice, with the exception of the values referred to in subsection (1)(c) or (d).

                                            Compare
                                            Notes
                                            • Section FE 16(1BAA) heading: inserted, on , by section 30(1) (and see section 30(2) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                            • Section FE 16(1BAA): inserted, on , by section 30(1) (and see section 30(2) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                            • Section FE 16(1BA) heading: inserted, on (applying for the 2015–16 and later income years), by section 111(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                            • Section FE 16(1BA): inserted, on (applying for the 2015–16 and later income years), by section 111(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                            • Section FE 16(1B) heading: inserted (with effect on 30 June 2009), on , by section 216(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                            • Section FE 16(1B): inserted (with effect on 30 June 2009), on , by section 216(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                            • Section FE 16(1B): amended, on (applying for the 2015–16 and later income years), by section 111(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                            • Section FE 16(1B)(a)(ii): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 58(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                            • Section FE 16(1C) heading: inserted (with effect on 30 June 2009), on , by section 216(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                            • Section FE 16(1C): inserted (with effect on 30 June 2009), on , by section 216(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                            • Section FE 16(1C)(b): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 58(3) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                            • Section FE 16(1D) heading: inserted, on (applying for the 2015–16 and later income years), by section 111(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                            • Section FE 16(1D): inserted, on (applying for the 2015–16 and later income years), by section 111(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                            • Section FE 16(1E) heading: inserted, on (applying for the 2015–16 and later income years), by section 111(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                            • Section FE 16(1E): inserted, on (applying for the 2015–16 and later income years), by section 111(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                            • Section FE 16(1E)(b)(i): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                            • Section FE 16 list of defined terms associated person: inserted, on , by section 111(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                            • Section FE 16 list of defined terms attributable FIF income method: inserted (with effect on 1 July 2011), on , by section 58(4) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                            • Section FE 16 list of defined terms CFC: inserted (with effect on 30 June 2009), on , by section 216(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                            • Section FE 16 list of defined terms company: inserted, on , by section 111(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                            • Section FE 16 list of defined terms double tax agreement: inserted (with effect on 30 June 2009), on , by section 216(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                            • Section FE 16 list of defined terms excess debt outbound company: inserted, on , by section 111(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                            • Section FE 16 list of defined terms FIF: inserted (with effect on 1 July 2011), on , by section 58(4) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                            • Section FE 16 list of defined terms income interest: inserted (with effect on 30 June 2009), on , by section 216(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                            • Section FE 16 list of defined terms non-resident passive income: inserted (with effect on 1 July 2011), on , by section 58(4) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                            • Section FE 16 list of defined terms ownership interest: inserted, on , by section 111(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                            • Section FE 16 list of defined terms source in New Zealand: inserted (with effect on 30 June 2009), on , by section 216(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                            • Section FE 16 list of defined terms tax: inserted (with effect on 1 July 2011), on , by section 58(4) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                            • Section FE 16 list of defined terms total group assets: inserted, on , by section 111(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                            • Section FE 16 list of defined terms trustee: inserted, on , by section 111(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).