Income Tax Act 2007

Treatment of tax losses - Attributed controlled foreign company net losses and foreign investment fund net losses

IQ 7: When group membership lacking in loss period

You could also call this:

"What happens to your tax loss if you weren't part of a company group when the loss occurred"

If you are part of a company group, this rule applies to you. You have a tax loss that you can use in a future tax year under section IQ 6. You were not part of the group when the loss happened.

The amount of tax loss you can use is limited. You can use the amount you could have used if you were not in a group, under section IQ 2 or IQ 3. You can also use the amount you could have used if you grouped with other companies under section IQ 4.

When working out the amount, you must calculate your net income according to section FM 3. The loss period is the year the loss happened and the years until you use the loss. You can find more information about this in the Income Tax Act 2007.

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This page was last updated on 20 May 2025

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517816.

IQ 6: Pre-consolidation losses: general treatment, or

"What happens to a company's losses before it joins a group"

IQ 8: When group membership lacking in tax year of use, or

"How tax deductions work when a company joins a group with overseas investment losses"

Part ITreatment of tax losses
Attributed controlled foreign company net losses and foreign investment fund net losses

IQ 7When group membership lacking in loss period

This section applies if—
a company that is part of a consolidated group has a ring-fenced tax loss consisting of either an attributed CFC net loss or FIF net loss, or both, that is carried forward to a tax year and must be used under section IQ 6; and
the company was not part of the consolidated group in the earlier tax year in which the net loss arose; and
the company and 1 or more of the companies in the consolidated group do not meet the requirements for common ownership of section IC 5(1)(a) (Company B using company A’s tax loss) for the loss period.

The amount that may be subtracted from the net income of the consolidated group in the tax year under section ID 2(2) must be no more than the total of—
the amount of ring-fenced tax loss referred to in subsection (1) that the company could use to reduce its net income in the tax year under section IQ 2 or IQ 3 as applicable, if it were not in the tax year part of a consolidated group; and
the amount of ring-fenced tax loss referred to in subsection (1) that the company could group with other companies in the group under section IQ 4, determining—
1. the net income for each of the companies using the group’s calculation of each company’s net income; and
2. the maximum amount of tax loss to be made available, ignoring the consolidation of the companies and presuming all steps required under those sections were taken in order for them to apply.

In subsection (2), the amount of net income must be calculated in accordance with section FM 3 (Liability of consolidated groups and group companies).
In this section, the loss period means the tax year in which the ring-fenced tax loss arose and any tax years falling between that tax year and the tax year in which the amount is subtracted from net income.

Compare

2004 No 35 s IG 7(4)

Notes

Section IQ 7(1)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(1)(a) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(1)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(1)(b) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(2)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(2)(a)(i) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(2)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(2)(a)(ii) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(2)(b): amended, on 30 March 2025, by section 102 of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
Section IQ 7(2)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(2)(b)(i) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(2)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(2)(b)(ii) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).