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Income Tax Act 2007

Treatment of tax losses - Grouping tax losses

IC 10: When companies have different balance dates

You could also call this:

“Rules for sharing tax losses between companies with different financial year-ends”

When two companies have different balance dates, there are special rules about how they can share tax losses. These rules apply when one company (let’s call it Company B) ends its income year after the other company (Company A).

For Company A to be able to share its tax loss with Company B, a few things need to happen:

First, Company A needs to keep the same owners or continue doing the same business activities. This needs to last until the end of Company B’s income year.

Second, both companies need to have the same owners. This shared ownership also needs to continue until the end of Company B’s income year.

These rules are important when working out tax losses for part of a year too.

If you want to know more about how companies can share tax losses, you can look at section IC 5. For information about keeping the same ownership or business activities, check section IC 2(1). To learn about companies having the same owners, see section IC 3 or IC 4. For details on calculating losses for part of a year, look at section IP 2(2).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517742.

Topics:
Money and consumer rights > Taxes
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Part I Treatment of tax losses
Grouping tax losses

IC 10When companies have different balance dates

  1. This section applies in a tax year when company A and company B do not have the same balance date.

  2. If company B’s income year ends after the last day of company A’s income year, for section IC 5 to apply to a tax loss in a corresponding tax year,—

  3. continuity of ownership in company A, or continuity of company A’s business activities, under section IC 2(1) must extend to the end of company B’s income year; and
    1. common ownership of company A and company B under section IC 3 or IC 4 must extend to the end of company B’s income year.

      1. This section applies for part-year calculations through section IP 2(2) (Group companies’ common span).

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      Notes
      • Section IC 10(2)(a): amended (with effect on 1 April 2020), on , by section 102(1) (and see section 102(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).