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Income Tax Act 2007

Treatment of tax losses - General rules for tax losses

IA 7: Restrictions relating to ring-fenced tax losses

You could also call this:

“Special rules for some tax losses, like ring-fenced losses, that don't follow the usual tax rules”

The general rules for tax losses do not apply to you in certain situations. You need to follow special rules when you have a ring-fenced tax loss. These special rules are explained in sections like IA 5, IA 6, IA 9, and IA 10, and also in subpart IB.

The general rules also do not apply to investment funds with excess expenditure, except in certain cases under section DV 5 and section DV 7. You should look at these sections to see how they apply to you.

There are other situations where the general rules do not apply, such as attributed CFC net losses, FIF net losses, and net losses of mineral miners. In these cases, you need to follow the special rules in sections like IQ 2, IQ 4, and IQ 6 to IQ 9, and also in sections IS 1 to IS 4 and IS 6.

Additionally, the general rules do not apply to multi-rate PIEs that do not calculate and pay tax using the provisional tax calculation option under section HM 44. You need to understand these special rules to make sure you are following the correct tax rules.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517705.

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Part I Treatment of tax losses
General rules for tax losses

IA 7Restrictions relating to ring-fenced tax losses

  1. Sections IA 2 to IA 4 (the general rules) do not apply to an amount referred to in subsections (2) to (8).

  2. For the purposes of the application of sections IA 5, IA 6, IA 9, and IA 10, and subpart IB (Carrying forward companies’ loss balances: continuity of business activities), a ring-fenced tax loss under this section is treated as if it were a tax loss component.

  3. Repealed

  4. Repealed

  5. The general rules do not apply to excess expenditure of an investment fund under sections DV 5 and DV 7 (which relate to investment funds) except for—

  6. the amount under section DV 5(4)(a) that the fund must treat as a tax loss component under section IA 2(4)(a)(i); and
    1. the amount under section DV 7(2) that the fund chooses to treat as a tax loss component under section IA 2(4)(a)(ii).

      1. The general rules do not apply to an attributed CFC net loss except a surplus under section IQ 2(3) (Ring-fencing cap on attributed CFC net losses). The provisions that deal with this net loss, other than the surplus amount, are sections IQ 2, IQ 4, and IQ 6 to IQ 9 (which relate to foreign losses).

      2. The general rules do not apply to a FIF net loss except a surplus amount under section IQ 3(3) (Ring-fencing cap on FIF net losses). The provisions that deal with this net loss are sections IQ 3 and IQ 6 to IQ 9.

      3. The general rules do not apply to a net loss of a mineral miner to the extent to which the net loss relates to a permit area. The provisions that deal with these net losses are sections IS 1 to IS 4 and IS 6 (which relate to mineral miner's tax losses).

      4. Repealed

      5. Repealed

      6. The general rules do not apply to a multi-rate PIE's net loss when the PIE does not calculate and pay tax using the provisional tax calculation option under section HM 44 (Provisional tax calculation option).

      Compare
      Notes
      • Section IA 7(1B) heading: inserted (with effect on 1 April 2008), on , by section 59(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IA 7(1B): inserted (with effect on 1 April 2008), on , by section 59(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IA 7(1B): amended (with effect on 1 April 2020), on , by section 97(1) (and see section 97(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8)
      • Section IA 7(2) heading: repealed, on , pursuant to section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
      • Section IA 7(2): repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
      • Section IA 7(3) heading: repealed, on , pursuant to section 296(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7(3): repealed, on , by section 296(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7(5): amended (with effect on 1 April 2008), on , by section 296(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7(6): amended, on , by section 98 of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
      • Section IA 7(6): amended (with effect on 1 April 2008), on , by section 59(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IA 7(6): amended (with effect on 1 April 2008), on , by section 296(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7(7): amended (with effect on 1 April 2008 and applying for the 2008–09 income year and later income years beginning before 1 April 2011), on , by section 149(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section IA 7(7): amended (with effect on 1 April 2011 and applying for income years beginning on or after that date), on , by section 149(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section IA 7(7): amended, on , by section 94(1)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7(7): amended, on , by section 94(1)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7(7): amended, on , by section 94(1)(c) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7(8) heading: repealed, on , pursuant to section 143(1) (and see section 143(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 7(8): repealed, on , by section 143(1) (and see section 143(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 7(9) heading: repealed, on , pursuant to section 149(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14)..
      • Section IA 7(9): repealed, on , by section 149(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section IA 7(10) heading: substituted, on (applying for the 2010–11 and later income years), by section 296(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7(10): substituted, on (applying for the 2010–11 and later income years), by section 296(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 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).
      • Section IA 7 list of defined terms life insurer: repealed, on , by section 296(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms loss-attributing qualifying company: repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
      • Section IA 7 list of defined terms loss balance: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IA 7 list of defined terms mineral miner: inserted, on , by section 94(2)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7 list of defined terms mining company: repealed, on , by section 94(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7 list of defined terms mining permit area: repealed, on , by section 94(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7 list of defined terms multi-rate PIE: inserted, on , by section 296(6)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms new start grant: repealed, on , by section 149(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section IA 7 list of defined terms non-resident mining operator: repealed, on , by section 94(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7 list of defined terms petroleum mining company: repealed, on , by section 143(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 7 list of defined terms PIE: inserted, on , by section 296(6)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms policyholder net loss: repealed, on , by section 296(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms portfolio tax rate entity: repealed, on , by section 296(6)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms provisional tax: inserted, on , by section 296(6)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms resident mining operator: repealed, on , by section 94(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7 list of defined terms ring-fenced tax loss: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).