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Income Tax Act 2007

Taxation of certain entities - Mutual associations

HE 5: Association rebates paid by shares or credit

You could also call this:

“Rebates to members given as shares or reduced share payments”

When an association does business with its members, it might give back some money to them. This is called an association rebate. Sometimes, instead of giving cash, the association might give shares in the company or reduce what members owe on their shares. This can happen in two ways:

The association might give you new shares or add more value to the shares you already have.

The association might lower the amount you still need to pay for your shares.

When the association does this, it’s not treated as a bonus issue of shares. This means it’s handled differently for tax purposes.

This rule applies to all members who get this kind of rebate from their association.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517468.

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Part H Taxation of certain entities
Mutual associations

HE 5Association rebates paid by shares or credit

  1. This section applies when an association that enters into mutual transactions with members pays an association rebate to 1 or more members through—

  2. issuing fully or partly paid-up shares in the association; or
    1. providing credit for all or part of an amount unpaid on shares in the association.

      1. The amount, or the relevant part of it, is not treated as a bonus issue.

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