Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Recharacterisation of certain transactions - Consolidated groups of companies

FM 6: Some general rules for treatment of consolidated groups

You could also call this:

“Rules for treating consolidated groups as a single company for tax purposes”

When you’re part of a consolidated group for tax purposes, some special rules apply. These rules make it easier to deal with the group’s taxes as if it were just one company.

The tax office looks at the group’s income, losses, and tax credits as one big picture. They don’t look at each company separately. This means they add up all the money the group makes or loses together.

When thinking about the group’s shares or options to buy shares, you need to include all the shares from every company in the group.

If one company in the group pays a dividend to another company in the same group, it still counts for some tax rules. These rules are about imputation credits, dividends in consolidated groups, and reporting dividends to the tax office.

For international tax rules, the group is treated like it’s just one company. This makes things simpler.

There are also some special rules about how the group keeps track of its tax accounts and how it calculates income tax for certain purposes.

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 It might be out of date or be missing some parts.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=DLM1516636.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
Previous

FM 5: Liability when company leaves consolidated group, or

“Tax responsibilities when a company exits a consolidated group”

Next

FM 7: Treatment of amounts derived or expenditure incurred, or

“How consolidated group companies handle income and expenses”

Part F Recharacterisation of certain transactions
Consolidated groups of companies

FM 6Some general rules for treatment of consolidated groups

  1. For the purposes of the consolidation rules, the following amounts are determined on the basis of a single assessment:

  2. income, assessable income, net income, or taxable income of a consolidated group:
    1. a tax loss component, a tax loss, a loss balance, an attributed CFC net loss, or a FIF net loss of a consolidated group:
      1. tax payable by a consolidated group:
        1. a tax credit available to a consolidated group.

          1. For the purposes of applying the consolidation rules to particular provisions in this Act, the shares or options over shares of a consolidated group are treated as comprising all the shares or options over shares of the companies in the consolidated group at the relevant time.

          2. A dividend that 1 company that is part of a consolidated group pays to another group company continues to be taken into account for the purposes of—

          3. the imputation rules:
              1. sections FM 8(3)(c), GB 38, and OP 3 to OP 50 (which relate to dividends and consolidated groups):
                  1. section 74 of the Tax Administration Act 1994.

                    1. The international tax rules apply, modified as necessary, as if the consolidated group were a single company.

                    2. Sections OA 3 (General rules for maintaining memorandum accounts) and YA 2(7) (Meaning of income tax varied) apply for the purposes of section GB 38, subpart OP, and section 74 of the Tax Administration Act 1994 as if the references to the imputation rules were references to sections OP 3 to OP 50.

                    Compare
                    Notes
                    • Section FM 6(3)(b): repealed (with effect on 30 June 2009), on , by section 230(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                    • Section FM 6(3)(c): substituted (with effect on 30 June 2009), on , by section 230(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                    • Section FM 6(3)(c): amended, on , by section 106 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section FM 6(3)(c): amended (with effect on 1 July 2012), on (applying for income years beginning on or after 1 July 2012), by section 71(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                    • Section FM 6(3)(d): repealed, on (applying for income years beginning on or after that date), by section 66(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                    • Section FM 6(3)(e): substituted (with effect on 30 June 2009), on , by section 230(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                    • Section FM 6(5) heading: substituted (with effect on 30 June 2009), on , by section 230(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                    • Section FM 6(5): substituted (with effect on 30 June 2009), on , by section 230(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                    • Section FM 6 list of defined terms FDP account: repealed (with effect on 30 June 2009), on , by section 230(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                    • Section FM 6 list of defined terms FDP rules: repealed (with effect on 30 June 2009), on , by section 230(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).