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Income Tax Act 2007

Avoidance and non-market transactions - Avoidance: specific

GB 48: Defined terms for sections GB 45 and GB 46

You could also call this:

“Explaining key terms used in specific tax law sections”

This part of the law explains some important terms used in sections GB 45 and GB 46.

When you’re part of an arrangement or it affects you, you’re called an “affected associate” of another person if you’re associated with them.

A “limited-recourse amount” is the total amount of money that a borrower might not have to pay back in a special kind of loan called a “limited-recourse loan”.

A “limited-recourse loan” is a special type of financial arrangement. It’s not an excepted financial arrangement. In this loan, someone (the lender) gives money to another person (the borrower). The loan has at least one of these features:

  1. The borrower might not have to pay back all or some of the money.
  2. The borrower doesn’t have to make any repayments for 10 years or more, except to avoid section GB 46.
  3. The repayment is only secured against assets used in the arrangement.

If the lender and borrower aren’t associated, the loan terms aren’t normal, and the lender either doesn’t usually give loans like this or isn’t from New Zealand.

If the lender and borrower are associated, the lender got the money under an arrangement with these same special features.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517056.

Topics:
Money and consumer rights > Taxes
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“Rules for calculating income, expenses, and property costs in group arrangements”

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GB 49: Arrangements involving returning share transfers, or

“Rules for handling non-standard share transfer arrangements”

Part G Avoidance and non-market transactions
Avoidance: specific

GB 48Defined terms for sections GB 45 and GB 46

  1. For an arrangement, a person is an affected associate of another person if each person is a party to the arrangement or is affected by the arrangement, and—

    1. the persons are associated persons.

      1. A limited-recourse amount, for a limited-recourse loan, means the total for the limited-recourse loan of the amounts for which the obligations of a borrower are affected in a way that is described in subsection (3)(c).

      2. A limited recourse loan means a financial arrangement that meets each of the following requirements:

      3. it is not an excepted financial arrangement:
        1. it involves the provision of money by a person (the lender) to another person (the borrower):
          1. it has 1 or more of the following effects, or an effect which is substantially similar:
            1. relieving the borrower from the obligation to repay all or some of the money, whether the relief is contingent or not:
              1. requiring the borrower to make no repayment for a period of 10 or more years from the date on which the loan is made, other than repayments for the purpose of defeating the intent and application of section GB 46:
                1. providing that the repayment of the money is in substance secured solely against assets that are employed in the arrangement:
                2. if the lender is not an associated person of the borrower, the lender provides the money on terms that are not arm’s length and the lender is either—
                  1. not a person who regularly provides money to persons on arm’s length terms under arrangements that do not meet the requirements of paragraphs (a) to (c); or
                    1. a person who is neither a New Zealand resident nor carrying on business in New Zealand through a fixed establishment in New Zealand:
                    2. if the lender is an associated person of the borrower, the lender obtains the money under an arrangement that meets the requirements of paragraphs (a) to (c).

                      Compare
                      Notes
                      • Section GB 48(1)(a): repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                      • Section GB 48(1)(b): substituted, on (applying for the 2010–11 and later income years), by section 242(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section GB 48(3)(d): amended, on (applying for the 2010–11 and later income years), by section 242(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section GB 48(3)(e): amended, on (applying for the 2010–11 and later income years), by section 242(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section GB 48 list of defined terms 1973 version provisions: repealed, on , by section 594 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section GB 48 list of defined terms 1988 version provisions: repealed, on , by section 594 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section GB 48 list of defined terms 1990 version provisions: repealed, on , by section 594 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section GB 48 list of defined terms LAQC: repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).