Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Treatment of tax losses - Meeting requirements for part-years

IP 2: Group companies’ common span

You could also call this:

“Rules for sharing tax losses between related companies”

This part of the law talks about how companies in a group can share their tax losses. It explains what a ‘common span’ is and how it works.

You need to understand that a ‘common span’ is the time when two companies, let’s call them Company A and Company B, are owned by the same people enough to be considered part of the same group.

If Company A and Company B have different end dates for their financial years, the common span is the part of Company B’s financial year when they are considered part of the same group. Sometimes, this period can be made longer if needed.

When working out how much of a tax loss can be shared, you need to remember that any amount of the loss that has already been used by any company in the group needs to be taken off first.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517781.

Topics:
Money and consumer rights > Taxes
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IP 1: When this subpart applies, or

“When rules about company ownership and tax losses are broken”

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IP 3: Ownership continuity breach: tax loss components of companies carried forward, or

“How company ownership changes affect the use of previous tax losses”

Part I Treatment of tax losses
Meeting requirements for part-years

IP 2Group companies’ common span

  1. In this subpart, the corresponding parts of company A’s income year and company B’s income year when the requirements for commonality of ownership under section IC 5(1)(a) (Company B using company A’s tax loss) are met is called the common span.

  2. If the income years of company A and company B do not end on the same date, the common span is that part of company B’s income year or income years in which the requirements for commonality are met. Section IC 10(2)(b) (When companies have different balance dates) may apply to extend the period.

  3. For the purposes of this subpart and the grouping of tax losses, the amount of a tax loss component is found after taking into account any amount of the tax loss component subtracted from the net income of any group company.

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