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Income Tax Act 2007

Tax credits paid in cash - Adjustment of net income for family scheme

MB 3: When person carries on 1 or more businesses or investment activities

You could also call this:

“How your business and investment activities are treated for family scheme income”

If you carry on one or more businesses or investment activities in a year, these are called your family scheme activities. When figuring out your family scheme income for the year, any activity that would result in a loss if it was your only income and expenses is not counted. This means the income and expenses from that activity are ignored.

The person in charge of taxes (called the Commissioner) can decide to group two or more of your activities together if they think these activities are usually done together. When this happens, if you use something (like a tool or building) for more than one activity, you need to split up the costs for that item fairly between the different activities based on how much you use it for each one.

In this law, an investment activity includes just holding onto an investment without doing much with it, except for a special kind of investment called a variable principal debt instrument.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518463.

Topics:
Money and consumer rights > Taxes
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MB 2: Adjustment for period that is less or more than 1 year, or

“Adjusting your family income for periods shorter or longer than a year”

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MB 4: Family scheme income of major shareholders in close companies, or

“How income from owning a large part of a small company affects your family tax credits”

Part M Tax credits paid in cash
Adjustment of net income for family scheme

MB 3When person carries on 1 or more businesses or investment activities

  1. This section applies when a person carries on 1 or more businesses in the income year, or has or carries on 1 or more investment activities in the income year (each separate business or investment activity, a single family scheme activity).

  2. The income and deductions for a person's family scheme activity for an income year are ignored when calculating the person's family scheme income for the year if, treating the person as having only the income and deductions of that activity, the person would have a net loss for that year.

  3. For the purposes of applying subsection (2), and despite subsection (1), 2 or more family scheme activities may be treated as a single family scheme activity, if the Commissioner considers that the 2 or more activities are of the kind that are normally carried on in association with each other.

  4. For the purposes of applying subsection (2) as modified by subsection (3), deductions that relate to an asset used in carrying on 2 or more family scheme activities must be appropriately apportioned between the activities on the basis of the use of that asset in those 2 or more activities.

  5. In this section, investment activity includes passive holding of an investment asset, other than a variable principal debt instrument.

Notes
  • Section MB 3: substituted, on (applying for the 2011–12 and later income years), by section 93(1) of the Taxation (Budget Measures) Act 2010 (2010 No 27).