Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Recharacterisation of certain transactions - Imputation groups of companies

FN 12: Company no longer eligible or entitled to membership

You could also call this:

“Company leaves tax credit sharing group when no longer eligible”

This law talks about what happens when a company can’t be part of an imputation group anymore. An imputation group is a group of companies that share tax credits.

If a company can’t be in the group anymore, or if it’s not allowed to be in the same group as the main company (called the nominated company), here’s what happens:

Usually, the company is treated as if it left the group at the start of the tax year when it became ineligible or not entitled to be in the group.

However, the company can tell the tax office (the Commissioner) that it wants to be treated as leaving the group on the actual day it became ineligible or not entitled. The company needs to do this within 30 days, but they can ask for more time if they need it.

If a company joins a group and then leaves in the same tax year, it’s treated as if it left on the day it joined, not at the start of the tax year.

The company can’t use this rule to avoid paying taxes. If they try to leave the group just to pay less tax, they’ll be treated as leaving at the start of the tax year when they became ineligible or not entitled.

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 It might be out of date or be missing some parts.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=DLM1516769.

Topics:

Money and consumer rights > Taxes

FN 11: Company choosing to leave imputation group, or

“How a company can choose to leave an imputation group”

FN 13: Imputation group with no nominated company, or

“What happens when an imputation group doesn't have a nominated company”

Part F Recharacterisation of certain transactions
Imputation groups of companies

FN 12Company no longer eligible or entitled to membership

This section applies when a company is no longer eligible to be part of an imputation group or, if it is not the nominated company, when it is no longer entitled to be part of the same imputation group as the nominated company.
Unless subsections (3) or (4) apply, the company is treated as no longer part of the imputation group from the start of the tax year in which the relevant event occurs, making it no longer—
eligible to be part of the imputation group; or
if it is not the nominated company, entitled to be part of the same imputation group as the nominated company.

Despite subsection (2), the company may notify the Commissioner that it is no longer to be treated as part of the imputation group from the date on which its eligibility or its entitlement ended. The company must provide the notice within 30 days after the date on which the company’s eligibility or entitlement ended, although the Commissioner may agree to extend this period if it is reasonable to do so in the circumstances.
Despite subsections (2) and (3), if a company leaves an imputation group in the same tax year in which it became part of the imputation group, the company is treated as leaving the group on the date when it became part of the imputation group, and not at the start of the tax year.
A notice under this section is not valid if it is made in connection with an arrangement entered into for a purpose of enabling the company to leave an imputation group so as to defeat the intent and application of the imputation rules. When this subsection applies, the company is treated as leaving the imputation group at the beginning of the tax year in which its eligibility or entitlement ended.

Compare

2004 No 35 s FDA 6(3), (4), (7), (8)

Notes

Section FN 12(5): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 27 February 2014, by section 75(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).