Plain language law

New Zealand law explained for everyone

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.

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 It might be out of date or be missing some parts.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=DLM1517461.

Topics:
Money and consumer rights > Taxes
Money and consumer rights > Banking and loans
Previous

HE 1: Income and deductions of mutual associations, or

“How mutual associations handle income, deductions, and rebates”

Next

HE 3: Association rebates, or

“Money given back to members by their association”

Part H Taxation of certain entities
Mutual associations

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.

              Compare