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Income Tax Act 2007

Taxation of certain entities - Mutual associations

HE 2: Classes of mutual transaction

You could also call this:

“Types of business dealings between an association and its members”

When an association does business with its members, or with its members and other people, it’s called a mutual transaction. This happens when the association includes this business in figuring out how much money it made or lost in a year.

A mutual transaction can be different things. It can be when the association borrows money from its members and then lends that money to a member. It can also be when the association lends money to its members.

If the association is a special type of group that helps producers (but not one that only makes money that doesn’t get taxed), a mutual transaction can also be when members pay a fee to the association or when they do business with farm products.

Remember, all of this is important for working out the association’s income and expenses for tax purposes.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517461.

Topics:
Money and consumer rights > Taxes Money and consumer rights > Banking and loans
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HE 1: Income and deductions of mutual associations, or

"How mutual associations handle income, deductions, and rebates"

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HE 3: Association rebates, or

"Money given back to members by their association"

Part H Taxation of certain entities
Mutual associations

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HE 2Classes of mutual transaction

  1. In this subpart, and sections CB 33, CB 34, and DV 19 (which relate to income and deductions relating to mutual transactions), a mutual transaction arises when an association—

  2. enters into a transaction with members of the association, or a transaction with members of the association and other persons; and
    1. the association takes the transaction into account in an income year in determining its net income or net loss under section BC 4 (Net income and net loss).

      1. For the purposes of subsection (1), a transaction between an association and its member includes 1 or more of the following:

      2. the borrowing by the association of money from 1 or more members, to the extent to which the money is applied as a loan to a member:
        1. the lending by the association of money to 1 or more members:
          1. for an association that is a statutory producer board other than a body that derives only exempt income—
            1. a levy paid by 1 or more members:
              1. a produce transaction.

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