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Income Tax Act 2007

Treatment of tax losses - General rules for tax losses

IA 4: Using loss balances carried forward to tax year

You could also call this:

“How to use past losses to reduce your current tax”

If you have a loss balance carried forward from a previous tax year, you need to use it in a specific way. First, you must subtract it from your net income for the current tax year. This means you reduce your taxable income by the amount of the loss. If there’s any loss balance left after doing this, you include it in your tax loss for the current year. This process helps you use your past losses to lower your current tax bill.

There are some other rules in sections IA 5 and IA 8 to IA 10 that might change how you use your loss balance. These rules are more important than the ones described here, so you need to check them too.

Remember, this is just a simple explanation of how to use your loss balance. Tax laws can be complicated, so if you’re not sure about anything, it’s a good idea to ask for help from someone who knows a lot about taxes.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517693.

Topics:
Money and consumer rights > Taxes
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IA 5: Restrictions on companies’ loss balances carried forward: continuity of ownership, or

“Companies must maintain 49% ownership to carry forward tax losses”

Part I Treatment of tax losses
General rules for tax losses

IA 4Using loss balances carried forward to tax year

  1. A person’s loss balance carried forward under section IA 3(4) to a tax year, must—

  2. first, be subtracted from their net income, so far as it extends, for the tax year; and
    1. secondly, to the extent of a remaining loss balance carried forward under section IA 2(2), be included in their tax loss for the tax year.

      1. Repealed

      2. Repealed

      3. Sections IA 5 and IA 8 to IA 10 override this section.

      Compare
      Notes
      • Section IA 4(1): amended, on , by section 142(1) (and see section 142(5) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 4(1)(b): amended, on , by section 142(2) (and see section 142(5) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 4(1)(b): amended (with effect on 1 April 2008), on , by section 56(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IA 4(1B) heading: repealed, on , pursuant to section 142(3) (and see section 142(5) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 4(1B): repealed, on , by section 142(3) (and see section 142(5) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 4(1C) heading: repealed, on , pursuant to section 142(3) (and see section 142(5) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 4(1C): repealed, on , by section 142(3) (and see section 142(5) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 4(2) heading: substituted (with effect on 1 April 2008), on , by section 56(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IA 4(2): substituted (with effect on 1 April 2008), on , by section 56(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IA 4 list of defined terms tax loss component: repealed, on , by section 142(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 4 list of defined terms unused specified activity net loss: repealed, on , by section 142(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).